Intrusion Inc.’s Q4 Earnings Call: Break-Even Delays, Sales Cycle Shifts, and Contract Uncertainty Clash With Prior Guidance

Date of Call: Mar 24, 2026

Financials Results

• Revenue: Q4: $1.5M, down 25% sequentially and down 12% YOY; Full year 2025: $7.1M, up 23% YOY
• EPS: Q4: Net loss of $0.14 per share; Full year 2025: Net loss of $0.46 per share, a $1.3M increase from prior year
• Gross Margin: Q4: 74%, slightly down from prior year period; Full year 2025: 76%, down approximately 93 basis points versus 2024

Business Commentary:

Revenue Decline Due to Government Contract Delay:

• Intrusion Inc.’s fourth-quarter revenue decreased by 12% year-over-year, and there was a 25% sequential decline compared to the prior quarter.
• The decline was caused by a delayed timing of an expected contract extension with the U.S. Department of War, impacted by government shutdown and procurement constraints.

Critical Infrastructure and Growth Strategy:

• The company's total revenue for 2025 was $7.1 million, up 23% year-over-year.
• Growth was driven by the contract expansion with the U.S. Department of War, and the company is focusing on expanding the critical infrastructure solution to other regions in 2026.

Shield Cloud Expansion:

• Shield revenues in the fourth quarter were $0.4 million, compared to $0.5 million in the prior quarter and $0.3 million in the prior year quarter.
• The company expanded customer access by launching Shield Cloud on AWS Marketplace and Microsoft’s Azure platform, aiming to enhance customer pipeline and drive future revenue growth.

Sales and Marketing Investment:

• Fourth-quarter operating expenses increased by $0.8 million year-over-year, primarily due to higher sales and marketing expenses.
• The company is investing in sales and marketing to strengthen its business and achieve sustainable growth and long-term profitability.

AI Trends and Cybersecurity Risk:

• The company views the emergence of AI as a tailwind for the cybersecurity industry, despite concerns about increased cyber threats.
• AI has reduced the cost, expertise, and time required for sophisticated attacks, increasing the need for cybersecurity solutions like Intrusion's.

Sentiment Analysis:

Overall Tone: Positive

• CEO stated 'we remain optimistic and excited about what we can do together in 2026,' highlighted 'meaningful progress,' and expressed confidence in sales efforts and new hires to drive sustainable growth and long-term profitability.

Q&A:

• Question from Scott Buck (H.C. Wainwright): Can you provide a little more granularity on the unit economics of the POSSE program? What is the average contract value and what do the sales cycles look like?
  Response: Contract values range from a few thousand to tens of thousands of dollars depending on bandwidth; sales cycle involves a pilot/demo with a loaned unit, typically resulting in quick adoption due to demonstrated threat blocking.

• Question from Scott Buck (H.C. Wainwright): Did you say that had you not had the delay from the government contract during the quarter, you would have seen sequential revenue growth from the third quarter?
  Response: Yes, management confirmed that without the contract delay, they would have shown quarter-on-quarter revenue growth.

• Question from Scott Buck (H.C. Wainwright): Is the increased sales and marketing expense the new run rate? Can we expect further investment in sales in 2026?
  Response: Sales and marketing investment will continue, with the Q1 spend approximating the run rate but expecting increases; cost efficiencies elsewhere will offset increases.

• Question from Ed Wu (Ascendiant Capital): Did I hear you right that you said for the delayed contract that some of your expenses have already flown through the PNL already?
  Response: Yes, expenses for the delayed contract are already recognized, but revenue will be recognized in a subsequent quarter, resulting in high margin recognition when it comes through.

• Question from Ed Wu (Ascendiant Capital): Have you seen any lengthening of sales cycles or concerns from CIOs?
  Response: Beyond government, no real change; concern is dwell time for threats is getting shorter, which plays to Intrusion's real-time detection strength.

• Question from Howard Brous (Wellington Shield): Can you give a general sense of the critical infrastructure customer? Is it expandable?
  Response: Customer is very happy; solution protects water infrastructure in Asia PAC and is expandable to other islands and domestic facilities under Homeland Security, with revenue opportunity multiplied.

• Question from Howard Brous (Wellington Shield): You install this in a school, and it’s in every classroom... How are you marketing this?
  Response: Marketing through events, to sheriff's departments, and school administrators; solution is inexpensive and can be funded by PTAs; reception has been outstanding.

• Question from James Green (Analyst): Is the current technology easily interfaced with emerging technologies like humanoid robots and autonomous cars?
  Response: Yes, technology can attach to any network form (wired, wireless, cloud) and is flexible for future bandwidth needs, well prepared for the future.

• Question from James Green (Analyst): Since there are local agentic things running on private networks, can your technology deal with the agentic element internally?
  Response: Yes, technology monitors network traffic for any activity, including AI-related call homes, providing early detection; it does not perform remediation but points to problematic devices.

• Question from Jerry Uffner (Usio, Inc.): In what quarter do you expect to have break-even operations?
  Response: Break-even timing depends on new critical infrastructure contracts; management is disappointed not to be break-even sooner but is optimistic 2026 is the year, with expectations to land more contracts than in 2025.

Contradiction Point 1

Break-Even Timeline and Financial Outlook

The projected timeline for achieving break-even operations shifts between quarters, moving from a specific near-term goal to an optimistic but uncertain 2026 target.

Jerry Uffner (Usio, Inc.) - Jerry Uffner (Usio, Inc.)

2025Q4: The company is optimistic about landing more contracts and aims for 2026 to be the year of achieving break-even, though delays could occur. - Tony Scott(CEO)

In which quarter do you anticipate achieving break-even operations? - Howard Brous (Wellington Shields)

2025Q2: The goal is to reach cash flow breakeven or positive EBITDA in the near term. - Tony Scott(CEO)

Contradiction Point 2

Sales Cycle & Investment Strategy

Contradiction on sales cycle duration for a key partner and corresponding investment needs.

What are the key factors driving revenue growth in the current quarter? - Scott Buck (H.C. Wainwright)

2025Q4: The sales cycle involves a pilot program where a unit is loaned for 1–10 days... Adoption has been high, and the program is now scaling... - Tony Scott(CEO)

Can you provide more details on the unit economics of the POSSE program, including the average contract value for sheriff’s department deployments and the sales cycle dynamics with PortNexus? - Edward Woo (Ascendiant Capital)

20251112-2025 Q3: The sales cycle is notably short, with strong demand from school administrators. - Anthony Scott(CEO)

Contradiction Point 3

Nature and Impact of the Delayed Government Contract

Contradiction on whether the delayed contract's expenses have already been recognized.

Ed Wu (Ascendiant Capital) - Ed Wu (Ascendiant Capital)

2025Q4: All associated expenses for the delayed contract have been recognized in operating expenses, but the revenue cannot be recognized until the contract is extended. - Tony Scott(CEO)

Have expenses related to the delayed contract already been recognized in the P&L? - Scott Christian Buck (H.C. Wainwright & Co, LLC)

2025Q2: More similar contracts are expected in the coming years. - Anthony E. Scott(CEO)

Contradiction Point 4

Visibility and Strategy for Critical Infrastructure Sales Cycles

Contradiction on the expected sales cycle length for major infrastructure sectors.

Ed Wu (Ascendiant Capital) - Ed Wu (Ascendiant Capital)

2025Q4: Beyond the government sector, no significant changes in sales cycles. - Tony Scott(CEO)

Have you observed any delays or lengthening in the sales cycle pipeline for commercial customers? - Edward Moon Woo (Ascendiant Capital Markets LLC)

2025Q2: For larger critical infrastructure sectors (communications, utilities), the sales cycle will be longer due to the size of institutions and potential testing phases... - Anthony E. Scott(CEO)

Contradiction Point 5

Revenue Growth Expectations

Expectations for sequential revenue growth conflict between quarters.

Scott Buck (H.C. Wainwright) - Scott Buck (H.C. Wainwright)

2025Q4: The company expected to report growth both quarter-over-quarter and year-over-year, beyond the year-over-year increase already achieved. - Tony Scott(CEO)

Would you have seen sequential revenue growth from Q3 without the government contract delay during the quarter? - Walter Shankar (Mays Partners)

2025Q1: Acceleration is expected from a combination of factors... The company anticipates significant increases in bookings and revenue recognition in the second half of the year. - Tony Scott(CEO)