Intrusion Inc (INTZ) 2023 Q3 法說會逐字稿

Welcome to Intrusion's Inc Third Quarter 2023 Earnings Confrence Call and Webcast. (Operator Instructions) Please note, this confrence is being recorded. An audio replay of the conference will be available to 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.

歡迎參加 Intrusion's Inc 2023 年第三季財報電話會議和網路廣播。 （操作員說明）請注意，本次會議正在錄製中。在此次電話會議後的幾個小時內，該公司的網站將提供會議的音訊重播。我現在想把電話轉給投資者關係部的喬許·卡羅爾。

Thanks you and welcome. Joining me today are Anthony Scott, Chief Executive Officer; Kimberly Pinson, Chief Financial Officer. This call is being webcast and will be archived on the Investor Relations section of our website.

謝謝你並歡迎。今天加入我的是執行長 Anthony Scott；金伯利‧平森，財務長。此次電話會議正在網路上直播，並將存檔在我們網站的投資者關係部分。

Before I turn the call over to Tony, I'd like to remind everyone that the statements made during this conference call relating to the company's expected future performance, future business prospects and 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.

在我將電話轉給托尼之前，我想提醒大家，本次電話會議期間發表的有關公司預期未來業績、未來業務前景以及未來事件或計劃的聲明可能包括根據《公司章程》定義的前瞻性聲明。 1995 年私人證券訴訟改革法案。請參閱我們向SEC 提交的文件，以了解有關可能導致我們的實際結果與今天電話會議中描述的預測存在重大差異的具體風險因素的更多資​​訊。

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 and the results of the new information or future events. In addition to US. 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, I'll now turn the call over to Tony for a few opening remarks

我們在本次電話會議中做出的任何前瞻性陳述均基於我們截至目前認為的信息，我們不承擔更新這些陳述以及新信息或未來事件的結果的義務。除了美國。 GAAP 報告中，我們報告某些不符合公認會計原則的財務指標。在電話會議期間，如果我們認為非 GAAP 衡量標準對投資者有用，或者我們認為這將有助於投資者更好地了解我們的業績或業務趨勢，我們可能會使用非 GAAP 衡量標準。現在，我將把電話轉給托尼，讓他做一些開場白

Thank you, Josh, and good afternoon, and thank you all for joining us today. In today's call, I'll cover our high-level third-quarter financial results and provide an update on our product offerings, traction in the marketplace. Our pipeline, our recently announced securities purchase agreement through a private offering and other highlights from the third quarter, as well as some visibility into the fourth quarter and beyond.

謝謝喬希，下午好，謝謝大家今天加入我們。在今天的電話會議中，我將介紹我們第三季的高水準財務業績，並提供有關我們產品供應和市場吸引力的最新資訊。我們的管道、我們最近宣布的透過私募發行的證券購買協議以及第三季的其他亮點，以及第四季度及以後的一些可見性。

Overall, Q3 was one of the busiest and challenging quarters. We saw a significant increase in orders in the company's history, with increased bookings, including the finalizing of the major $5 million award, as we previously announced, and an increasing number of new customer POCs in our pipeline, and our product development teams delivering exciting new capabilities. And all of that with the painful backdrop of trying to raise capital in one of the most challenging capital market environments in memory.

總體而言，第三季是最繁忙和最具挑戰性的季度之一。我們看到公司歷史上的訂單顯著增加，預訂量增加，包括最終確定了我們之前宣布的500 萬美元重大獎項，我們的管道中的新客戶POC 數量不斷增加，我們的產品開發團隊提供了令人興奮的成果新的能力。所有這一切都是在我們記憶中最具挑戰性的資本市場環境之一中試圖籌集資金的痛苦背景下發生的。

Let me start with bookings and a view of our pipeline. In early October, we announced that we've been awarded a $5 million deal with a large telecommunications provider to provide Intrusion shield support for its data centers. The implementation plan includes a phased production rollout, beginning now in the fourth quarter of 2023, that builds upon a successful pilot that actually started in the first quarter of 2023. The terms of the award allow for further expansion of the use of shield, with the possibility of generating additional revenue after the completion of the initial set of projects.

讓我從預訂和我們的管道視圖開始。 10 月初，我們宣布與一家大型電信提供商簽訂了價值 500 萬美元的合同，為其資料中心提供入侵防護支援。該實施計劃包括從 2023 年第四季度開始分階段生產，該試點建立在 2023 年第一季度實際啟動的成功試點的基礎上。該合約條款允許進一步擴大盾牌的使用，在完成最初的一組項目後產生額外收入的可能性。

The customer has already requested an accelerated rollout, which will result in earlier revenue recognition than originally contemplated. We expect to make a public joint announcement on the scope and nature of the agreement with this customer in Q4 or early 2024. During the quarter, Intrusion also booked four other new shield contracts. In aggregate, these are relatively small initially in terms of ARR.

客戶已經請求加速推出，這將導致比最初預期更早的收入確認。我們預計將在第四季度或 2024 年初就與該客戶的協議範圍和性質發布聯合公告。在本季度，Intrusion 還預訂了另外四份新的盾牌合約。總的來說，就 ARR 而言，這些最初相對較小。

However, two of these new customers have the potential for additional revenue growth during 2024. When we signed two new reseller agreements in Q3, in our previously announced partnerships with SEIC, NetGate, First Advisory Health Services and others, remain strong and are leading to new opportunities to showcase our technology and generate new business. Our pipeline is robust, and we are focused on converting existing POVs and POCs to revenue-generating customers.

然而，其中兩位新客戶有可能在2024 年實現額外的收入成長。當我們在第三季簽署兩項新的經銷商協議時，我們先前宣布的與SEIC、NetGate、First Advisory Health Services 等的合作夥伴關係仍然強勁，並正在導致展示我們的技術和創造新業務的新機會。我們的管道很強大，我們專注於將現有的 POV 和 POC 轉化為創收客戶。

A bit more on that topic in a few minutes. Finally, with growing evidence of traction in the marketplace for Intrusion's Shield technology, we'll once again explore more strategic technology partner relationships. We've heard over and over again that intrusion technology is unique, but the big technology players have routinely looked for evidence of customer adoption. We believe that in the next two quarters, we can begin to show those proof points and revenue that the larger technology players have been seeking.

幾分鐘後將進一步討論該主題。最後，隨著越來越多的證據表明 Intrusion Shield 技術在市場上的吸引力，我們將再次探索更具策略性的技術合作夥伴關係。我們一再聽說入侵技術是獨一無二的，但大型技術參與者通常會尋找客戶採用的證據。我們相信，在接下來的兩個季度，我們可以開始展示大型科技公司一直在尋求的證據和收入。

Turning to our product development efforts, I'm pleased to report that our product development teams have continued to deliver exciting new capabilities. We have released for general availability version 19.2 of our Shield software, which has many improvements over prior versions, including enhancements to reporting, additional threat monitoring capabilities. Improvements to our renderer software, and significant changes to Shield's management interface.

談到我們的產品開發工作，我很高興地向大家報告，我們的產品開發團隊繼續提供令人興奮的新功能。我們已經發布了 Shield 軟體的通用版本 19.2，該版本比之前的版本有許多改進，包括報告增強、額外的威脅監控功能。我們的渲染器軟體得到了改進，並對 Shield 的管理介面進行了重大更改。

We've also completed our integration of Shield technology to the PFSense firewall and are beginning to introduce that to customers. And we've introduced a cloud dashboard, which will allow customers to consolidate reporting across multiple instances of our Shield technology. One of the most exciting developments from a product perspective is our beta release of Shield on a small platform. This is a form factor hardware device, which we are testing in a POC with a large Starlink customer. If successful, this could pave the way for a new market opportunity for Shield with this and other Starlink customers, which is a fast-growing service, and it serves customers in previously hard-to-reach and underserved locations around the world. This small form factor device can also be relevant in many other applications beyond Starlink.

我們還完成了 Shield 技術與 PFSense 防火牆的集成，並開始向客戶介紹。我們還推出了雲端儀表板，使客戶能夠跨我們的 Shield 技術的多個實例整合報告。從產品角度來看，最令人興奮的開發之一是我們在小型平台上發布的 Shield 測試版。這是一種外形尺寸的硬體設備，我們正在與 Starlink 大客戶一起在 POC 中對其進行測試。如果成功，這可能會為Shield 與該星鏈客戶以及其他Starlink 客戶帶來新的市場機會鋪平道路，這是一項快速增長的服務，為世界各地以前難以到達和服務不足的地區的客戶提供服務。這種小型設備還可以與星鏈以外的許多其他應用相關。

Now, onto our financials. As you will hear from Kim later and in more detail, total revenue for the third quarter was $1.5 million, which was relatively flat on a sequential basis. Shield revenues for the third quarter were $0.4 million, in line with the previous quarter, as we did not recognize any revenue in the quarter from new bookings.

現在，談談我們的財務狀況。正如您稍後會從 Kim 那裡聽到的更詳細的信息，第三季度的總收入為 150 萬美元，與上一季相比相對持平。第三季的 Shield 收入為 40 萬美元，與上一季持平，因為我們在本季沒有確認任何來自新預訂的收入。

Going forward, we expect some lumpiness in revenue due to the timing of deployment, activation of our technology, and when we can recognize revenue. Year to date, shield has represented 27% of revenue for the year and will continue to be a bigger percentage of overall revenue over time. Turning now to our consulting business, our third quarter consulting revenues were flat sequentially. With the absence of an approved federal budget and the conditions that surround the current continuing resolution, many new spend decisions have been delayed.

展望未來，由於部署時間、技術啟動以及我們何時可以確認收入，我們預期收入會出現一些波動。今年迄今為止，Shield 已佔全年收入的 27%，隨著時間的推移，它將繼續在總收入中佔據更大的比例。現在轉向我們的諮詢業務，我們第三季的諮詢收入環比持平。由於缺乏批准的聯邦預算以及當前持續決議的條件，許多新的支出決定被推遲。

The potential government shutdown could further impact our ability to get timely renewals of some longstanding contracts. But absent the uncertainty of when a federal budget will get approved, I remain optimistic about the demand for our products and services. And expect growth in the future from our government customers. Apart from our government customers, we do believe that we will see some positive future growth in our consulting business as well, which is evident by the addition of a well-known customer in the travel and leisure industry that we signed in the second quarter.

潛在的政府關閉可能會進一步影響我們及時續約一些長期合約的能力。但由於聯邦預算何時​​獲得批准存在不確定性，我對我們的產品和服務的需求仍然樂觀。並期待我們的政府客戶未來的成長。除了我們的政府客戶之外，我們確實相信我們的諮詢業務未來也會出現一些積極的增長，這一點從我們在第二季度簽署的旅遊和休閒行業知名客戶的增加就可以看出。

Finally, as we renew many of these consulting contracts in 2024, we do see opportunities for rate increases and other revenue-generating enhancements to existing contracts. As I've previously indicated in various Q&A sessions, I informally stay in touch with many former colleagues and notable CIOs and CISOs across a wide spectrum of industries. Among other things, these conversations help me understand the general sentiment and the consensus opinion of these important individuals. As it relates to trends, spending concerns related to cyber security.

最後，隨著我們在 2024 年續簽許多此類諮詢合同，我們確實看到了費率上漲和現有合約的其他創收增強的機會。正如我之前在各種問答環節中指出的那樣，我與許多前同事以及各行各業的著名 CIO 和 CISO 保持著非正式的聯繫。除此之外，這些對話幫助我了解這些重要人物的整體情緒和共識。由於它與趨勢相關，因此支出問題與網路安全相關。

During the last quarter, I heard that as a result of the current economic environment that will be earning. A large majority of companies have been going through some form of flattening or reductions in growth when it comes to their cyber security teams and their budgets. Meanwhile, the bad guys continued to proliferate and launch all kinds of new and leave for a cash.

在上個季度，我聽說由於當前的經濟環境，該公司將會獲利。大多數公司的網路安全團隊和預算都經歷了某種形式的成長放緩或下降。與此同時，壞人不斷擴散並推出各種新產品並為了賺錢而離開。

This has put a significant amount of pressure on CIOs and CISOs to keep up with both technology and staffing needs with more limited availability of new resources. We believe that this provides intrusion with a significant opportunity to step in, help fill the gaps these companies currently have in their technology stack and in their cybersecurity teams. And we can help provide them with the needed capability to identify, deflect, and eliminate any cyber threats that they may encounter.

這給 CIO 和 CISO 帶來了巨大的壓力，他們需要在可用的新資源更有限的情況下滿足技術和人員需求。我們相信，這為入侵提供了重要的介入機會，有助於填補這些公司目前在技術堆疊和網路安全團隊中的空白。我們可以幫助他們提供識別、轉移和消除他們可能遇到的任何網路威脅所需的能力。

When I joined Intrusion in late 2021, we were faced with a daunting array of legal issues, and we've provided regular updates on our progress in terms of resolving these issues. I'm pleased to announce that during the third quarter, we were able to successfully conclude the last of these. And with the SEC investigation now behind us, this resolves all of the outstanding legal issues that we've been dealing with for the past two years, and our team can now fully focus on growing our business.

當我於 2021 年底加入 Intrusion 時，我們面臨一系列令人畏懼的法律問題，我們定期更新解決這些問題的進展。我很高興地宣布，在第三季度，我們成功完成了最後一項任務。隨著 SEC 調查的結束，我們過去兩年一直在處理的所有懸而未決的法律問題都得到了解決，我們的團隊現在可以完全專注於發展我們的業務。

Finally, let me spend a few minutes on our fundraising efforts. As you may have seen in our filings, after careful consideration, we decided to pull our S-1 registration with the SEC to sell up to $8.5 million in stock and warrants in a public offer. It became evident that market conditions were very unfriendly, and were being severely and negatively impacted by short sellers, among other factors.

最後，讓我花幾分鐘談談我們的募款工作。正如您可能在我們的文件中看到的那樣，經過仔細考慮，我們決定撤銷在 SEC 的 S-1 註冊，以便在公開發行中出售高達 850 萬美元的股票和認股權證。很明顯，市場狀況非常不友好，並且受到賣空者等因素的嚴重負面影響。

However, in place of the S-1 registration and offering, we announced on November 8, 2023, that we entered into a securities purchase agreement. In which we sold to purchasers in a private offering, an aggregate of $4.4 million shares of our common stock. Each of which is coupled with a warrant to purchase two shares of common stock and an aggregate offering price of $0.60 per share, both market price at the time.

然而，我們於 2023 年 11 月 8 日宣布簽訂了證券購買協議，以取代 S-1 註冊和發行。我們以私募方式向買家出售了總計 440 萬美元的普通股。每張認股權證均附有購買兩股普通股的認股權證，總發行價為每股 0.60 美元，均為當時的市價。

The offering resulted in net proceeds to Intrusion of approximately $2.4 million. The company intends to use the net proceeds from the offering for working capital, general corporate purposes, and the potential partial repayment of outstanding indebtedness to Streeterville Capital, LLC.

此次發行為 Intrusion 帶來了約 240 萬美元的淨收益。該公司打算將此次發行的淨收益用於營運資金、一般公司用途，以及可能償還 Streeterville Capital, LLC 的部分未償債務。

The private offering was participated in by myself, members of our executive team, board of directors, and existing shareholders, which we believe demonstrates the confidence that both our organization and loyal shareholders have in our unique technology.

我自己、我們的執行團隊成員、董事會和現有股東參與了這次私募，我們相信這顯示了我們的組織和忠實的股東對我們獨特技術的信心。

The offering also marks an important step for Intrusion as we continue to focus on ensuring we have the funds we need to propel our growth and focus on satisfying our customers' needs with cost-effective cybersecurity solutions for their enterprise. Now, I'd like to turn the call over to Kim for a more detailed review of our third quarter financials. Kim?

此次發行也標誌著 Intrusion 邁出了重要的一步，因為我們將繼續專注於確保擁有推動成長所需的資金，並專注於透過為客戶提供經濟高效的企業網路安全解決方案來滿足客戶的需求。現在，我想將電話轉給 Kim，讓他更詳細地審查我們第三季的財務狀況。金？

Thanks, Tony. Revenues for the third quarter of 2023 were $1.5 million, with both shield and consulting revenues flat compared to the previous quarter. Third quarter shield revenue totaled $400,000. We do expect to see shield revenues begin to ramp with some of the recent wins that have been announced.

謝謝，托尼。 2023 年第三季的營收為 150 萬美元，屏蔽和諮詢收入與上一季相比持平。第三季Shield 收入總計40 萬美元。我們確實預計盾牌收入將隨著最近宣布的一些勝利而開始增加。

New bookings in much of our pipeline consist predominantly of shield appliance product sales, or revenues recognition is dependent on an implementation and customer acceptance timeline. Consulting revenue in the third quarter totaled $1 million. As Tony mentioned earlier, the current continuing resolution and threat of a government shutdown has hindered the timing of new contract awards. We have a relatively strong consulting pipeline that once the budget uncertainty is resolved will result in growth.

我們大部分管道中的新預訂主要包括屏蔽設備產品銷售，或收入確認取決於實施和客戶接受時間表。第三季諮詢收入總計100萬美元。正如托尼之前提到的，當前持續的解決方案和政府關閉的威脅阻礙了新合約授予的時間。我們擁有相對強大的諮詢管道，一旦預算不確定性得到解決，就會帶來成長。

Revenues for the nine months ended September 30, 2023, totaled $4.2 million, a decline of $1.8 million, or 30%, when compared to the same 2022 period. The decline is a result of decreased consulting revenues of $2.1 million related primarily to the loss of a contract in the fourth quarter of 2022, in which Intrusion's prime sponsor chose not to renew the final option year of a contract.

截至 2023 年 9 月 30 日的九個月收入總計 420 萬美元，比 2022 年同期減少 180 萬美元，即 30%。下降的原因是諮詢收入減少了 210 萬美元，這主要與 2022 年第四季度的合約損失有關，其中 Intrusion 的主要贊助商選擇不續約合約的最後一個選項年。

This loss was partially offset by increased shield revenues of $0.3 million. As disclosed in prior quarters, while the loss of this one consulting contract significantly impacted Intrusion's top-line revenue, the gross margin on this contract was 14%, and as a result, had a marginal impact on profitability. Gross profit margin was 78% for the third quarter of 2023, compared to 54% in the third quarter of 2022.

這一損失被增加的 30 萬美元盾牌收入部分抵消。正如前幾季所揭露的，雖然這份顧問合約的損失對 Intrusion 的營收產生了重大影響，但該合約的毛利率為 14%，因此對獲利能力的影響很小。 2023年第三季的毛利率為78%，而2022年第三季的毛利率為54%。

The increase in gross profit margin in the current quarter is the result of our product mixed with shield revenues representing a higher percentage of revenue, and the loss of the low margin consulting contract, as previously mentioned. shield revenues currently represent 29% of our revenues. As you may recall from our first quarter earnings call, in late March of this year, we implemented cost reduction measures we estimated would result in cash savings of approximately $1.5 million per quarter on a go-forward basis.

本季毛利率的成長是由於我們的產品混合屏蔽收入佔收入的比例較高，以及前面提到的低利潤諮詢合約的損失。目前，Shield 收入占我們收入的 29%。您可能還記得今年 3 月下旬的第一季財報電話會議，我們實施了成本削減措施，預計未來每季將節省約 150 萬美元的現金。

As a reminder, these measures included the voluntary reduction in the salaries of certain of our executive officers for a six-month period, reduction of some full-time positions, and a reduction in the use of contractors. Many of the reductions were in research and development, which impacted the number and frequency of product releases. I am pleased to report that combined cost reduction savings for Q2 and Q3 totals $3.1 million, operating expenses in the third quarter of 2023 total $3.8 million, a decrease of $0.2 million sequentially from the second quarter of 2023.

提醒一下，這些措施包括在六個月內自願減少某些高階主管的薪資、減少一些全職職位以及減少承包商的使用。許多減少是在研發方面，這影響了產品發布的數量和頻率。我很高興地報告，第二季和第三季的綜合成本削減節省總計 310 萬美元，2023 年第三季的營運費用總計 380 萬美元，比 2023 年第二季連續減少 20 萬美元。

As a reminder, as we grow our customer base and increase revenues, we may choose to accelerate our product development in future periods, which will result in increased spending. We will and are continuing to evaluate each spending decision while also making prudent investments in our long-term profitable growth.

提醒一下，隨著我們擴大客戶群並增加收入，我們可能會選擇在未來加快產品開發，這將導致支出增加。我們將並將繼續評估每項支出決策，同時對我們的長期獲利成長進行審慎投資。

Net loss for the third quarter of 2023 was 3.2 million, or $0.14 per share in line with our loss of 3.1 million or $0.15 per share for the second quarter of 2023. When compared to the same periods in 2022 earnings per share showed marginal improvement of $0.01 per share from a loss of $0.15 per share for the 2022 quarter. Q3 2022 was benefited by the recording of the employee retention tax credit refund of $2 million, which reduced the net loss per share by $0.10 in each of the three and nine month periods. And net loss per share for the nine months period 2023 was $0.51 per share compared to $0.57 per share for the same period in the prior year.

2023 年第三季的淨虧損為320 萬美元，即每股0.14 美元，與2023 年第二季的淨虧損310 萬美元，即每股0.15 美元一致。與2022 年同期相比，每股盈餘略有改善2022 年季度每股虧損 0.15 美元，每股虧損 0.01 美元。 2022 年第三季受益於 200 萬美元的員工保留稅收抵免退款記錄，這使三個月和九個月期間的每股淨虧損減少了 0.10 美元。 2023 年 9 個月期間的每股淨虧損為每股 0.51 美元，去年同期為每股 0.57 美元。

Turning to the balance sheet, on September 30, we had cash and cash equivalents of $0.2 million, down from $3 million at year end. We've taken steps to improve our liquidity and strengthen our cash position. In August, we filed an S-1 registration statement, which was subsequently amended to raise up to $8.5 million. As Tony mentioned, earlier, we withdrew the S-1 on October 2, primarily due to the deal terms not being advantageous to the Company.

轉向資產負債表，截至 9 月 30 日，我們的現金和現金等價物為 20 萬美元，低於年底的 300 萬美元。我們已採取措施改善流動性並增強現金狀況。 8 月，我們提交了 S-1 註冊聲明，隨後進行了修改，籌集了最多 850 萬美元。正如托尼之前提到的，我們在 10 月 2 日撤回了 S-1，主要是因為交易條款對公司不利。

Alternatively, we completed a private offering on November 8, that resulted in net proceeds of approximately $2.4 million. Also in October, we entered into two separate exchange agreements with Streeterville Capital. Our debt lender, where we agreed to exchange in aggregate $350,000 of principal for approximately one-million shares of our common stock. The number of shares in the exchange was determined using at market pricing.

另外，我們在 11 月 8 日完成了私募發行，淨收益約 240 萬美元。同樣在 10 月份，我們與 Streeterville Capital 簽訂了兩項單獨的交換協議。我們的債務貸款人，我們同意用總計 35 萬美元的本金交換約 100 萬股普通股。交易所的股票數量是根據市場定價來決定的。

While this exchange did not result in bringing in additional capital. It is a positive step forward in deleveraging the company. We believe that these combined efforts will provide us with the liquidity needed for operations as we execute our plan to grow the business.

雖然這次交換並沒有帶來額外的資本。這是公司去槓桿化過程中邁出的積極一步。我們相信，這些共同努力將為我們執行業務成長計畫時提供營運所需的流動性。

Before I conclude, I'd like to address our Nasdaq listing compliance. In April, we received a letter from Nasdaq, indicating that we had failed to meet Nasdaq market value of listed securities or MVLS, standard of $35 million minimum required for continued listing on the Nasdaq capital market. We were provided an initial period of 180 calendar days to regain compliance. On October 26, we received a letter from Nasdaq informing us that our shares had failed to comply with the MVLS required for continued listing on the Nasdaq capital market, and as a result, our shares are subject to delisting.

在結束之前，我想談談我們的納斯達克上市合規性問題。 4月份，我們收到納斯達克的一封信，表明我們未能達到納斯達克上市證券市值或MVLS，即繼續在納斯達克資本市場上市所需的最低3500萬美元的標準。我們獲得了 180 個日曆日的初始期限來恢復合規性。 10月26日，我們收到納斯達克的來信，通知我們的股票未能符合在納斯達克資本市場繼續上市所需的MVLS，因此我們的股票將被退市。

We have filed an appeal with Nasdaq, which has stayed the delisting of our common stock from the Nasdaq Capital Market pending a Nasdaq Listing Qualifications Hearing Panel's decision. There can be no assurance that the panel will grant our request for continued listing. However, we intend to present a plan to regain compliance to the panel that includes a discussion of the events that we believe will enable us to regain compliance. The panel hearing is scheduled for February 1. Until that hearing, Intrusion stock will remain listed on Nasdaq.

我們已向納斯達克提出上訴，納斯達克暫緩我們的普通股從納斯達克資本市場退市，等待納斯達克上市資格聽證小組的決定。無法保證專家小組會批准我們繼續上市的請求。然而，我們打算向專家小組提出一項重新合規的計劃，其中包括對我們認為將使我們能夠重新合規的事件進行討論。小組聽證會定於 2 月 1 日舉行。在聽證會之前，Intrusion 股票將繼續在納斯達克上市。

I'd like to now turn the call back over to Tony for a few closing comments. Tony?

我現在想把電話轉回給托尼，請他發表幾句結束語。托尼？

Thanks, Kim. To conclude, I think we're continuing to see encouraging signs of growing interest in our shield family of products, and that gives us confidence that we are heading in the right direction as we continue to focus on satisfying our customers' needs with cost-effective cybersecurity solutions for their enterprise.

謝謝，金。總而言之，我認為我們繼續看到人們對我們的Shield 系列產品越來越感興趣的令人鼓舞的跡象，這讓我們相信我們正在朝著正確的方向前進，因為我們繼續專注於以成本滿足客戶的需求 -為其企業提供有效的網路安全解決方案。

I look forward to sharing the next steps in our journey with all of you, and I want to personally thank our investors and financial partners for their continued patience and support as we execute our strategy. This concludes our prepared remarks, and I'll now turn the call over to the operator for Q&A.

我期待與大家分享我們旅程的下一步，我個人要感謝我們的投資者和金融合作夥伴在我們執行策略時給予我們的持續耐心和支持。我們準備好的演講到此結束，現在我將把電話轉給接線生進行問答。

Thank you. (Operator Instructions) Our first question is from Scott Buck with H.C. Wainwright. Your line is now open.

謝謝。 （操作員說明）我們的第一個問題來自 Scott Buck 和 H.C.溫賴特。您的線路現已開通。

Hi, good afternoon, guys. Thanks for taking my questions. Tony, I'm curious on the $5 million shield agreements with the large-scale telecommunications company. Can you give us a little more color around that contract? I mean, what is the duration and really what is the cadence and how that should ramp over time?

嗨，大家下午好。感謝您回答我的問題。東尼，我對與大型電信公司簽訂的 500 萬美元保護協議感到好奇。您能否為我們提供有關該合約的更多資訊？我的意思是，持續時間是多少，節奏到底是多少，以及隨著時間的推移，節奏應該如何改變？

Yeah, great question. So the award contemplates a full rollout in three years, but the revenue will come over a period of five years. So what you'll see is over the next ensuing quarters as we deploy into their data centers, revenue that we recognize as we fully ramp up to the full order. And then as I indicated, they've already indicated to us two things that they want to accelerate the rollout, which we're in the process of working out with them, which will result in revenue recognition sooner than our original contemplated plan.

是的，很好的問題。因此，該獎項計劃在三年內全面推出，但收入將在五年內實現。因此，您將看到的是，在接下來的幾個季度中，當我們部署到他們的資料中心時，我們會在完全達到完整訂單時確認收入。然後，正如我所指出的，他們已經向我們表明了兩件事，他們希望加快推出速度，我們正在與他們一起解決這些問題，這將比我們最初設想的計劃更快地確認收入。

And then there's also an opportunity for expanded use of shield and beyond the initial data centers. So we think it's a very positive development. As I said on the call, we expect to have a more public visibility of this, more than likely right after the first of the year, a more sort of public announcement and so on.

此外，還有機會擴大屏蔽的使用範圍並超越最初的資料中心。所以我們認為這是一個非常積極的發展。正如我在電話會議上所說，我們期望對此有更多的公眾關注，很可能在今年年初之後，進行更多形式的公開宣布等等。

That's helpful. And would that public announcement provide the actual customer name?

這很有幫助。該公告是否會提供實際的客戶名稱？

Yes.

是的。

Essentially?

本質上？

Yes.

是的。

Okay, super. That's great. And then I want to ask about the $2.5 million or so that you guys just raised. Is that purely to, you know, kind of keep the lights on right now? Or is there actually some projects that you can put that capital towards that, could potentially accelerate shield sales? I mean, there are more special marketing programs, et cetera. that you're looking at?

好吧，超級。那太棒了。然後我想問一下你們剛剛籌集的 250 萬美元左右。你知道，這純粹是為了讓燈保持亮著嗎？或者實際上是否有一些項目可以讓您投入資金，從而有可能加速防護罩的銷售？我的意思是，還有更多特殊的行銷計劃等等。你正在看什麼？

So we'll spend the money for general corporate purposes. As we've said, that will include marketing and continued engineering development because I think I've mentioned on prior calls, we've got at least a three-year road map of things that we want to do with the shield family of products.

因此，我們會將這筆錢用於一般企業用途。正如我們所說，這將包括行銷和持續的工程開發，因為我想我在先前的電話中已經提到過，我們已經制定了至少三年的路線圖，說明我們希望使用 Shield 系列產品進行哪些工作。

And so we'll continue on that road map as well. But Kim and I are both focused on not letting our spend get out of our revenue. So as we get revenue in from some of these deals, we'll make the best decisions we can in terms of how that money I could best be used.

因此，我們也將繼續執行該路線圖。但金和我都專注於不讓我們的支出超出我們的收入。因此，當我們從其中一些交易中獲得收入時，我們將就如何最好地使用這筆錢做出最佳決定。

Great. That's helpful. And then just the last question for me quickly. If you could give us a little more color on the macro environment and whether or not, and we talked about the government side, but on the commercial side, whether or not the level of economic uncertainty is causing a hesitation in people to pull the trigger on really any new software.

偉大的。這很有幫助。然後很快就問我最後一個問題。您能否給我們更多關於宏觀環境的資訊以及是否，我們討論了政府方面，但在商業方面，經濟不確定性的程度是否導致人們在扣動扳機方面猶豫不決在任何新軟體上。

Yeah, the sentiment I'm getting from my colleagues and friends in the industry is they've enjoyed many years in a row of increased budgets and increased staffing and so on. And while you're getting some increases, two things are happening. The rate of those increases is leveled off sharply. And then just the availability of people has meant that they're not able to staff to the level that they had hoped or even planned in many cases.

是的，我從業內的同事和朋友那裡得到的感覺是，他們多年來一直享受著連續增加預算和增加人員等。當你的收入增加時，有兩件事正在發生。這些成長率急劇趨於平穩。然後，人員的可用性就意味著他們在許多情況下無法達到他們希望甚至計劃的水平。

And so that, those two factors mean that, A, you've got to be more efficient with the resources that you have, the dollars and the people. And generally, that means more automation, more leverage of technology. In some cases, it also means a focus on reducing the number of different solutions that you have in favor of solutions that are highly effective. And I think it's a truism in the industry that, you know, there are some solutions that people think are valuable, but it's hard to prove.

因此，這兩個因素意味著，A，你必須更有效地利用你擁有的資源、美元和人員。一般來說，這意味著更多的自動化、更多的技術利用。在某些情況下，這也意味著要專注於減少現有的不同解決方案的數量，以支援高效的解決方案。我認為業界有一個不言而喻的事實，那就是，有些解決方案人們認為很有價值，但很難證明。

And in the case of Intrusion technology, we can show proof every single day of the things that we're blocking or alerting CISO staffs to. So I think that's a high value proposition for our success.

就入侵技術而言，我們每天都可以展示我們正在阻止或向 CISO 員工發出警報的事情的證據。所以我認為這對我們的成功來說是一個很高的價值主張。

Great. I appreciate the time, guys. Thank you very much.

偉大的。我很珍惜這段時光，夥伴們。非常感謝。

Thanks, Scott.

謝謝，斯科特。

(Operator Instructions) Our next question is from Michael Ruben felt with mid-Atlantic builders. Your line is now open.

（操作員說明）我們的下一個問題來自邁克爾·魯本（Michael Ruben）與大西洋中部建築商的交流。您的線路現已開通。

Hi there, Tony, and hi there, team. I wanted to say a couple quick things. Congratulations on your cost controls. They're certainly admirable and obviously excited about some of the great news on the Shield technology. Tony, you just made a comment about being able to show the value of the product every single day. Can you talk a little bit about sort of the adoption rates once you get to showcase the product?

你好，托尼，你好，團隊。我想說幾句話。恭喜您的成本控制。他們當然對 Shield 技術的一些好消息感到欽佩和興奮。東尼，你剛剛發表了關於每天都能展示產品價值的評論。能談談展示產品後的採用率嗎？

You know, what percentage of those people who are trying it or adopting it? I guess that's question number one. And question number two is sort of, you know, as we look at this cost reductions and obviously the higher margin Shield product becoming a bigger and bigger piece of the sort of the revenue mix, can you speak a little bit about what point do you think maybe you look at the future and you start to look at when you're going to be cash flow positive? Is there any sense of what that looks like and feels like yet?

你知道，嘗試或採用它的人佔多大比例？我想這是第一個問題。第二個問題是，你知道，當我們看到成本降低以及顯然更高利潤的盾牌產品成為收入組合中越來越大的一部分時，你能談談你的觀點是什麼嗎？想一想，也許你展望未來，並開始考慮什麼時候你的現金流會變成正值？是否有任何感覺它看起來像什麼感覺？

Yeah, let me talk about our process to adoption. So typically, the challenge that we've had is getting a foot in the door to try to get somebody to try our product. It's often confused with other firewall technology and so on. So historically, we've had to spend a fair amount of time explaining, how our technology is different from traditional firewalls and how we actually work really, really well with whatever firewall technology is out there.

是的，讓我談談我們的收養過程。通常，我們面臨的挑戰是嘗試讓人們嘗試我們的產品。它經常與其他防火牆技術等混淆。因此，從歷史上看，我們不得不花費大量時間來解釋我們的技術與傳統防火牆有何不同，以及我們如何真正非常好地使用現有的防火牆技術。

And once we get past that and can get to a proof of concept or a proof of value situation where the customer can actually see in real life what our product does, it usually goes really well from there. You know, in a typical POV or POC, we let our product run for a week or sometimes 10 days and we show the customer all of the things that Shield either blocked in the case of it being active or if it's in passive or observed mode, what we would have blocked had we been in enforced mode.

一旦我們克服了這一點，並且能夠進行概念驗證或價值證明，讓客戶可以在現實生活中實際看到我們的產品的功能，那麼事情通常會進展順利。您知道，在典型的 POV 或 POC 中，我們讓產品運行一周或有時 10 天，並向客戶展示 Shield 在主動模式或被動或觀察模式下阻止的所有內容，如果我們處於強制模式，我們會阻止什麼。

And as our CTO likes to say, when shown that data, the typical customer, you know, their muscles tighten up and they get their eyes wide open and they're shocked by the things that are either leaking in through the firewall or, in many cases, call homes that are taking place from infected devices or infected technology inside their firewall that are calling out to command and control servers somewhere on the Internet.

正如我們的首席技術官喜歡說的那樣，當顯示這些數據時，典型的客戶，你知道，他們的肌肉會收緊，他們會睜大眼睛，他們對通過防火牆洩漏的東西感到震驚，或者在許多情況下，透過防火牆內受感染的設備或受感染的技術呼叫家庭，這些設備或技術正在呼叫互聯網上某處的命令和控制伺服器。

And once we show that data, then it's just a conversation about, generally speaking how many of these do I need and where do I place them in my network and so on. So we have a pretty high conversion rate once we get to that point. So I'm not worried at all about that aspect. I'm just, at this point, we've got to make more noise in the marketplace. We've got to get more at-bats. You know, we need to have, just greater awareness of what our capability is. And that's, I think going to be our challenge.

一旦我們展示了這些數據，那麼這只是一個對話，一般來說，我需要多少這些數據，以及我將它們放置在我的網路中的什麼位置等等。因此，一旦達到這一點，我們的轉換率就相當高了。所以我一點也不擔心這方面。我只是，在這一點上，我們必須在市場上發出更多的聲音。我們必須獲得更多的擊球數。你知道，我們需要對我們的能力有更多的認識。我認為這將是我們的挑戰。

As you probably know, cybersecurity technology companies spend billions and billions of dollars a year in advertising and billboards and trade shows and all the rest of it. And making a dent in that is a little bit hard, for a little company like Intrusion at this point. So our strategy is to use partners, use the channel, use managed service providers and others who can immediately see the value and act as force multipliers for us in the marketplace.

您可能知道，網路安全技術公司每年在廣告、廣告看板、貿易展覽以及其他所有方面花費數十億美元。對於像 Intrusion 這樣的小公司來說，要在這一點上取得進展有點困難。因此，我們的策略是利用合作夥伴、利用管道、利用託管服務提供者和其他能夠立即看到價值並為我們在市場上發揮力量倍增器的人。

In terms of cash flow positive, I don't want to make any predictions at this particular point. I think it's all, you know, dependent on how quickly we can ramp revenue. I think you may have seen in the market, there's some pretty big companies that are cybersecurity companies that even at real high valuations aren't cash flow positive yet.

就現金流量為正而言，我不想在此時做出任何預測。我認為這一切都取決於我們增加收入的速度。我想你可能已經在市場上看到，有一些相當大的網路安全公司，即使估值很高，現金流也不是正數。

And, you know, while I would love to join them in the high revenue space, I think it's all speculative at this point in terms of when and how we might get to that particular point. So I don't want to make any predictions. We'll get there as quickly as we can, you know, is all I can tell you at this point.

而且，你知道，雖然我很想加入他們的高收入領域，但我認為目前就我們何時以及如何達到這一特定點而言，這都是猜測。所以我不想做任何預測。我們會盡快到達那裡，你知道，這是我現在能告訴你的。

Thank you very much.

非常感謝。

Our next question is from Ed Woo with Ascendant Capital. Your line is now open.

我們的下一個問題來自 Ascendant Capital 的 Ed Woo。您的線路現已開通。

Yeah, thank you for taking my question. I was saying the best advertisement you could get is, you know, massive data breach or massive hacking going on. There was a couple of big high profile ones out on the West Coast. You hear some of these big Las Vegas casinos and there's rumors that they actually paid a significant amount of money.

是的，謝謝你回答我的問題。我是說你能得到的最好的廣告是，你知道，大規模的資料外洩或大規模的駭客攻擊正在發生。西海岸有幾家備受矚目的大型酒店。你聽說過一些拉斯維加斯的大型賭場，有傳言說他們實際上支付了一大筆錢。

Have you seen a noticeable rash in high profile hacking type events? And how does that impact your business when, companies are getting these high-profile hacks that are very public?

您是否在備受矚目的黑客類型事件中看到過明顯的皮疹？當公司遭受這些公開的高調駭客攻擊時，這會對您的業務產生什麼影響？

Yeah, I think it's, I think it's a case, Ed, where whenever there's a big fire, people start to pay a lot more attention to whether their, you know, smoke alarm is working effectively or not. And so we certainly get a lot more calls when there's publicity around a big event.

是的，我認為這是一個例子，艾德，每當發生大火時，人們就會開始更加關注他們的煙霧警報器是否有效運作。因此，當大型活動進行宣傳時，我們肯定會接到更多的電話。

And I can speak from experience, you know, in all the businesses I've worked in, when one of your competitors is hacked, the first thing that your own board asks is, hey, how are we different than those guys and are we better protected? And everybody wants some reassurance that they're not going to be the next victim.

我可以根據經驗說話，你知道，在我工作過的所有企業中，當你的一個競爭對手被黑客攻擊時，你自己的董事會問的第一件事是，嘿，我們與那些人有什麼不同？得到更好的保護？每個人都希望得到一些保證，確保自己不會成為下一個受害者。

The reality today is that the bad guys are inventing and reinventing their technology. All the time and they're very nimble and they're very quick. And so I can't foresee the day when there won't be hacks in the future. Our mission is to stay as best we can, one step ahead and protect as best we can. But I think you're going to continue to see these, for the foreseeable future, at least.

今天的現實是，壞人正在發明並重新發明他們的技術。一直以來，他們都非常靈活，而且速度非常快。所以我無法預見未來不會出現駭客攻擊的那一天。我們的使命是盡我們所能，領先一步並盡我們所能提供保護。但我認為至少在可預見的未來，你會繼續看到這些。

And I think that bodes well for, intrusion because some of our work with our government customers lets us see the most advanced threats and the newest things that are being tried by the bad guys. And then we can build that into our commercial product, into shield and protect against those, you know, very quickly. So I think it all bodes well for us for the future.

我認為這對入侵來說是個好兆頭，因為我們與政府客戶的一些合作讓我們看到了最先進的威脅以及壞人正在嘗試的最新事物。然後我們可以將其構建到我們的商業產品中，成為盾牌並防止這些，你知道，很快。所以我認為這對我們的未來來說是個好兆頭。

Great. Well, thanks for answering my questions. And I wish you guys good luck. Thank you.

偉大的。嗯，謝謝你回答我的問題。我祝你們好運。謝謝。

Thank you.

謝謝。

Thank you, Ed. Our next question is from James Green. Your line is now open for.

謝謝你，艾德。我們的下一個問題來自詹姆斯·格林。您的線路現已開放。

Hi, Tony. I had a question about the mobile app and its development and when we'll see it leave beta.

嗨，托尼。我對行動應用程式及其開發以及我們何時看到它離開測試版有疑問。

So right now we have iOS, Windows, and Android. The Android and Windows are in development. The Android and Windows are feature complete. And we're demoing with customers. We'll be doing constant upgrades to those products over time. So we'll have to see how that goes with customers.

現在我們有 iOS、Windows 和 Android。 Android 和 Windows 正在開發中。 Android 和 Windows 功能齊全。我們正在向客戶進行演示。隨著時間的推移，我們將持續對這些產品進行升級。所以我們必須看看客戶的反應如何。

But it's part of our broader vision for-- for a much broader set of coverage, you know, in terms of covering all of the places that matter, whether it's in the data center, whether it's in the cloud, or whether it's in the endpoint. And so, I think you'll see, further developments from us in all of those spaces over the next several engineering cycles.

但這是我們更廣泛願景的一部分 - 更廣泛的覆蓋範圍，你知道，就覆蓋所有重要的地方而言，無論是在資料中心，無論是在雲端中，還是在端點。因此，我認為您會在接下來的幾個工程週期中看到我們在所有這些領域的進一步發展。

Will the Shield family of products eventually be rolling out where ordinary consumers will have access to it? I believe previously you had mentioned that you were focused on, you know, commercial interests. And I was wondering if the technology will reach regular consumer base eventually.

Shield 系列產品最終會推出到一般消費者可以使用的地方嗎？我相信您之前曾提到您專注於商業利益。我想知道這項技術最終是否會普及到一般消費者群體。

Well, right now the Android is available for consumers, but it's not the full featured product we have in our, well, we have available today. It's not, what's available in the Android store is not the same product. But I think our target market is still enterprise small, medium business even, and it's probably not the consumer market at the end of the day.

嗯，現在 Android 已經可供消費者使用，但它不是我們今天提供的全功能產品。事實並非如此，Android 商店中提供的產品不是同一產品。但我認為我們的目標市場仍然是中小企業，甚至是中小型企業，最終可能不是消費者市場。

That's just a different demand, it's a different selling model. It's a different cost model, and really aimed at different needs at the end of the day. So I currently don't see us getting into that space at the moment.

這只是不同的需求，不同的銷售模式。這是一種不同的成本模型，並且最終確實針對不同的需求。所以我目前不認為我們會進入這個領域。

Okay. And previously you had been talking about a plug-in for integration with PFSense and NetGate. And I was wondering whether you guys stood with that plug-in development.

好的。之前您一直在談論與 PFSense 和 NetGate 整合的插件。我想知道你們是否支援插件開發。

Plug-in work is done, and we're piloting with customers right now.

插件工作已經完成，我們現在正在與客戶一起進行試點。

All right. Thank you so much for your time.

好的。非常感謝您的參與。

There are no further questions at this time, so I'll pass the conference back to the management team for any closing remarks.

目前沒有其他問題，因此我會將會議轉交管理團隊進行總結發言。

Well, thank you, everyone. I want to say especially thank you to our investors who participated with us on the management team and our board in investing in this latest round. As I mentioned, it's a not a very pretty environment out there, and so I really appreciate everyone stepping up and helping get us the runway we need to deliver in this exciting set of products that we've been developing.

嗯，謝謝大家。我想特別感謝我們的投資者，他們與我們的管理團隊和董事會一起參與了最新一輪的投資。正如我所提到的，這不是一個非常漂亮的環境，所以我真的很感謝每個人挺身而出，幫助我們在我們一直在開發的這一系列令人興奮的產品中提供所需的跑道。

And I look forward to our next call with all of you. Appreciate the support and the time. And if we don't talk, have a happy holiday season, and we'll see you in the new year.

我期待著與大家的下一次通話。感謝您的支持和時間。如果我們不說話，那就祝你假期愉快，我們新年再見。

That concludes today's conference call. Thank you for your participation. You may now disconnect your line.

今天的電話會議到此結束。感謝您的參與。現在您可以斷開線路。