Welcome to Intrusion, Inc.'s Third Quarter 2024 Earnings Conference Call and Webcast. [Operator Instructions]. Please note, this conference 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 relating 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.

Well, thank you, Josh, and good afternoon, and thank you all for joining us today. Our third quarter results reflect another quarter of improved performance as we delivered our second consecutive quarter of sequential revenue improvement, which marks an important milestone in our continuing journey towards sustainable growth and profitability. As I noted in our strategic update call last month, we signed an additional 7 new Shield logos during the third quarter, bringing our total new logo count year-to-date to 18. I'm also pleased to report that we've continued to experience near 0 churn with our Shield customers. And as I previously noted, we were able to expand 2 contracts with existing logos as a result of the positive experiences that these customers have had using our technology. So we continue to remain excited about the strong momentum that we have been experiencing for our suite of Shield technology solutions. And as we deploy our solutions to these new customers over the coming quarters, we anticipate that we will experience further improvements to our financial results that will help us achieve our growth and profitability goals. As I noted on our call in October, we're also continuing to see strong demand for our products in both the Philippines and the broader Asia Pacific region. As a result of the increased presence of our technology in the region and the positive reputation of our solutions with these customers, our pipeline is growing with additional high-quality opportunities that we expect to close in both the fourth quarter and in the first half of 2025. On the domestic front, we are engaged in several exciting POCs with large enterprise customers, which we also expect will turn into bookings in the fourth quarter and beyond. As you've been hearing me say for some time,…

Thanks, Tony. In the third quarter of 2024, revenues were $1.5 million, an increase of 3% sequentially and 2% when compared to the prior year period. A key area of growth that we would like to highlight this quarter is the increase in Shield revenue of $0.1 million or 49% sequentially over the second quarter of 2024. As you may recall, our Shield revenues declined in the June 2024 quarter as a result of the loss of a large early intrusion Shield customer that had implemented a highly customized and nonstandard configuration of the product. The loss of revenues 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 Tony previously mentioned. Consulting revenue in the third quarter totaled $1.1 million, a decrease of $0.1 million sequentially and flat on a year-over-year basis. The sequential decrease in consulting revenue was related to a reduction in task order-related services. Gross profit margin was 77% for the third quarter of 2024 compared to 76% in the June quarter and 78% in the third quarter of 2023. The gross profit margin will vary depending on product mix. Our gross profit increased slightly during the quarter as a result of product mix with Shield revenues representing 30% of our revenues in the third quarter of 2024. Operating expenses in the third quarter of 2024 totaled $3.2 million, an increase of $0.1 million sequentially and a decrease of $0.6 million when compared to the third quarter of 2023. The increase in operating expenses during the quarter was primarily driven by salary increases given to nonexecutives. The decrease on a year-over-year basis was driven by reduced legal defense costs associated with matters that are now fully settled, decreased spending on contract labor and lower costs associated with software support services. As we move forward, we will continue to remain diligent with not only our spending decisions, but also our investments that will ensure future growth. The net loss from operating activities for the third quarter of 2024 was $2 million, which is in line with the June 2024 quarter and represents a $0.7 million or 24% improvement on a year-over-year basis. The improvement over the prior year period was driven by lower operating expenses. The net loss for the third quarter of 2024 was $2.1 million. On a year-over-year basis, net loss improved by $1.1 million from a loss of $3.2 million in the third quarter of 2023. The improved net loss relates to both lower operating expenses and reduced interest charges of $0.5 million related to the Steererville notes. As you may recall, we converted $9.5 million of debt to equity in March of this year. From a liquidity perspective, on September 30, we had cash and cash equivalents of $1.1 million. I'd like to now turn the call back over to Tony for a few closing comments. Tony?

Thanks, Kim. While we are encouraged by these results, we are definitely not satisfied, and our team is continuing to remain focused on improving our products and our financial results, which will create a share price that will deliver meaningful value for our stakeholders. As I noted throughout the call, we've experienced a lot of great momentum over the past few quarters from a customer win and a pipeline standpoint, all of which gives us confidence that we are on the right path forward. We're excited about the future here at Intrusion, and we look forward to providing additional updates on our progress during our fourth quarter earnings call. This concludes our prepared remarks, and I'll now turn the call over to the operator for Q&A.

[Operator Instructions]. The first question comes from Scott Buck with H.C. Wainwright.

Tony, can you remind us when that large Shield client started to exit? Just trying to figure out when that gets anniversaried here in '25, whether it's the first quarter or the second quarter.

I think -- and Kim can correct me if I'm wrong, but I think the last revenue we got from that initial Shield client was in the second quarter of this past year. So it was fully exhausted by them.

Yes. No, it was...

... during the first quarter...

It was the first quarter.

Yes, first quarter.

Okay. So theoretically, that should help the growth -- the revenue growth optics as you anniversary that then?

Yes. Yes, exactly.

Perfect. That's helpful. And then I was wondering if you could give us any color on what kind of size you're seeing with some of these new Shield logos. I recognize that in most cases, you probably start small and build within. But just kind of curious, who are these businesses that you're signing?

Well, they're still all over the map. I guess what I'm encouraged by is, as I kind of mentioned on the call, as our reputation in the Asia Pac region has continued to be a factor. We're getting more and more peer-to-peer referrals and we're getting the opportunity to bid on bigger, more important deals and so on. And then I think as I mentioned on our strategic call, this big DoD contract that we have, we're expecting to -- or hoping, I should say, to try to replicate that in other regions around the world. So -- and I think we can do that because of these enterprise features that we've been building into the product over the last 2 years that now start to resonate with larger customers. So that's kind of the deal. Even on the smaller deals that we signed, we've got a couple of MSPs who have been running the product for a year and now feel very comfortable having gone through a couple of upgrades and other experiences to recommend to their other clients. So, so far, nobody is saying I want less. There's some great signs that people want more.

Good. That's very helpful. And then the last thing, just curious if there's any read-through from the election results, whether there's potential there to help with the government business or at least federal government budgeting. But curious to hear your thoughts.

Yes. We don't think we're going to be impacted in any significant way because of politics. What we always run in fear of, I guess, is some long continuing resolution that kind of hobbles things along for a while. And it's still a little too early to tell what that's going to look like. I mean your guess is as good as mine. But I guess the good thing about being in the cybersecurity business is the bad guys don't really care who's in office, and they just keep doing their thing, and that creates a market for our solutions. So I'm not expecting them to go away or stop doing what they're doing.

[Operator Instructions]. The next question comes from Ed Woo with Ascendiant Capital.

Now obviously, election integrity is very big in the U.S. as it is around the world. And the Philippine election is a great win for you guys. Have you seen any increased opportunities in the U.S. to bring your product as a solution for the election integrity?

We've certainly gotten some inquiries, but I don't have any solid signed business at this particular point. I think as everybody has noticed, the the claims of election fraud this time around were way lower than they've been in the last couple of cycles. And so we'll see long term what that really means. But I think it's a concern for any government organization anywhere in the world, the capability for somebody to try to hack in and mess with a campaign or full around with the results. Those opportunities are going to be there for a long time. And we think we've got a good solution that can help defend against that.

Great. And then just going back to the prior question in terms of now the elections are over, have you seen these Chief Information Officers saying that now the election is behind us, they can kind of focus on 2025 and out their capital spending plans?

I think it's too early to know that. I'm actually attending a big exposition here in Southern California in the next couple of days where we're going to be talking to a couple of hundred managed service providers and so on. So I expect to get some read as a result of those conversations. But right now, I think it's probably a little too early to make any kind of specific comment on that.

[Operator Instructions]. Okay. We currently have no questions in queue. I'll turn the call back over to your host, Mr. Tony Scott, for closing remarks.

Well, thanks, everyone, for taking the time to listen to our call today. As I said on the call, we're committed to working hard to achieve our revenue and profitability goals in 2025. And I'm still pretty excited. I remain excited. Some of these big wins certainly help us create more visibility and enhance our reputation. So we're really looking forward to what the next couple of quarters can bring, and I appreciate everyone's support. It's been a long, hard road for many of us. And I also want to thank our team who's stuck with us. We've had not only near 0 churn from a customer standpoint, but we've had near 0 churn from a talent perspective. And it's our highly focused super employees who keep this engine running and keep us alive every single day. So I appreciate everything that everyone is doing. I think we've got a great future in front of us and look forward to the next call we can have together. Thanks.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.