Sidechannel Inc

Greetings. Welcome to the SideChannel Fiscal Year 2025 Q3 Financial Results Update Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Brian Hooghly, CEO at SideChannel. Brian, you may begin.

Thank you. Good afternoon, everyone. Thank you for joining us today. I'm excited to talk about where SideChannel is headed and the momentum we're building. While our CFO, Ryan, will walk you through the details of the quarter, I want to focus on the strategic direction that's driving our growth. First, Enclave continues to gain traction as a go-to zero-trust network platform for organizations that need secure segmentation, asset visibility, and controlled access. We've expanded our footprint within the Department of Defense, now serving two agencies, and actively pursuing both expansion of current clients and new opportunities across the DOD and other regulated sectors. Onclave is proving to be a differentiator for us, and we're doubling down on that momentum. To support that, we're increasing our investment in marketing and sales, building more awareness, driving top-of-funnel engagement, and creating more opportunities for our team to convert into long-term client relationships. But at the same time, we remain committed to our vCISO services, which continue to be a cornerstone of our business. This offering allows us to deliver trusted strategic cybersecurity leadership to organizations that need it most, and it often serves as the entry point for deeper client engagements. Finally, I'm thrilled about our new Insider Threat Service, launched recently at DEF CON 33 and led by our Vice President, Lauren Trujillo. This program is already generating interest, helping clients identify and mitigate internal risks before they become major incidents. By integrating Enclave into this service, we're offering a unique and powerful solution that aligns with today's most pressing security challenges. We have the right solutions, the right team, and the right strategy in place to continue delivering value to our clients and to our shareholders. I'm confident in the path forward and excited about what's ahead for SideChannel. Thank you, and I'm going to turn it over to Ryan for more of a financial review.

Thank you, Brian. I am Ryan Polk, Chief Financial Officer of SideChannel. For the quarter into June 30, 2025, our third quarter, SideChannel recorded revenues of $1.8 million, representing a 3.8% decrease compared to Q3 of the prior year, largely attributable to a net decline in our B-CISO services Our gross margin of 47% was slightly lower than last year's 48.9%, reflecting both reduced employee utilization and increased revenue from third-party software and services, which carry a lower gross margin. These headwinds were partially counterbalanced by higher margin enclave software adoption rates. Operating expenses total $1.1 million for the quarter, up from the prior year slightly, driven by increased selling and marketing expenses to support Enclave. As a result, our operating loss for the quarter was $261,000. For the nine months into June 30, 2025, SideChannel achieved total revenues of $5.6 million, up 1.3% over the comparable year. one year ago with a stable year-over-year gross margin of 47.5%. Our revenue from cybersecurity software and services portfolio grew 22.8% year-over-year, offsetting the previously mentioned decrease in vCISO services revenue. And this shift reflects both the change in our service offering and the successful transition that we've had for our clients into our broader cybersecurity program. We continue to carefully steward our cash position. I mentioned earlier an operating loss for the quarter, but at quarter end, cash and cash equivalents and short-term investments stood at $1.2 million, down just $46,000 from the beginning of our fiscal year, which was October 1, 2024. We have zero debt, no outstanding debt, and our minimal cash burn over the last nine months suggests that no additional capital is needed to support our operations. Looking ahead, we, management, remain focused on driving growth in our core cybersecurity software, particularly Enclave. While expanding our service offerings, we are committed to judiciously investing in our selling and marketing infrastructure to support the growth of our proprietary software product, Enclave. Thank you for joining our fiscal year 25 third quarter call. And with that, we will turn it over now to questions.