SDCH - Earnings call transcript Q2 2024

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Operator

Good afternoon, and welcome to the SideChannel Fiscal Year 2024 Q2 Financial Results Update. [Operator Instructions] It's now my pleasure to turn the floor over to your host, Side Channel's CEO, Brian Haugli. Brian, the floor is yours.

Brian Haugli

Thank you so much. Good afternoon, everybody. of today Haugli Ryan our Brian Polk. is SideChannel by joined CFO, This

our Hopefully, morning. quarter chance today, second So released XX-Q. that. went to I everybody out this read a had

volatility areas. been are Just about highlight company aspects our There's key in we aspects and how structure to on go lot want quite questions want we're what we're of over and are what and stock looking really are touch of. going as do. in I executing company kind confident uplisting, just a the our the doing. of the financial We're price, direction. But an to proud what Enclave to of on we're for plan. company, Ryan a what's couple the where a is And some looking, we OTC to will where of look, listed with of very plans overall, number

I of up for release think the and were our Q being allow success highlighting going pure future set and prioritized flow growth. to to for Q, to cash said positive on that. the -- the wanted We out we not company. prioritize cash press us We morning, the this positive show flow being today set and our of components for of the

not multiple profitability. because we're at to be we not the current look for to category to the type being you show massive years of any shareholders right of in same run raise, to, mean do believe remove don't we're really looking compared time is and shareholders, value now most are We from that the right growth. losses for companies at not dilute when sake I trying

and focus our and has being revenue a increase generate positive, being to debt been stance free. flow as Our maintaining cash continuing profitability, on

And I keeps kind executing a I to and makes what school are an be think going things. it for but those. do as me, on said going and that We good I business what, hitting of we Ryan on are know doing reminding those things, allow We're us is those We be those. not sound, we to think were a and old works you us, just it's go-forward ensure success. it model. and it's for what's successful to for But really works successful think,

important. really that's So

a that we company. the hear from think I we're of folks, from traders that fit we to OTC and don't as supposed plan lot market from we don't to. feedback just -- retail back an mold do of brokers, what And

to holders the We prioritize just and getting are legacy not going new doing can clients that so and exit. into an a make raise stock, money

produce You We true right? for is something to Star are value. doing path don't again, And to advance tell companies here legit going We're is North building repeat. long-term a OTC not story I a -- capital, a story profitability. have a believe raise capital, that is companies, OTC The normal most raise story, listed tell business the that. for to model that is

ago further that on haven't is else taking second. on standard doing don't a the structure cap there just anyone in us. went as with on approach. market same that that OTC market, X planned We this do with touch in at With doing that public never and company. and to I've out we're very I Look into plan I'll services years the when We bringing what that. company. successful out Enclave set fit a we don't out

executing we're different doing significantly we're are on. in what We what and

what we're I shows are. I it, why companies what to playbook not kind think we getting are shows not bed team Our we It's are just of they our to it. keep because financials because that asked doing. OTC-listed show want of other following marketing it, the our put

We are it. And our recognize clients different.

what this -- recognizes I'm I'm anybody to it's just we're not team building one and lead. be it company don't be for I and it's to like to Our what else. want excited very

never that we going envisioned company a looks a else what looking run in like market I like. So were to everybody public

asking that Everybody So to positive that's to I an the to to continually read knows give up, online to the just want I issue big put feedback keeps good and coming criticism of folks kudos want bed. that that good I us, questions. board. kind and give

everybody hub. about what glad I'm you querying asking and to investors hello on So questions doing. we're that guys keep

you. thank So

read I everything there. You put you out guys know

matter to they continue us large are. feedback always for in are they looking please how do their So or how no that, small with from shareholders, positions

your opinion doing, want what we're questions sure do hear and understand your And it. to about you why on So we make matters. executing we're

better let's number We honestly. Ryan We've for start-ups. actually just inside of can intelligence, base we're So we new and market of community what of talk had great, about now client use into turned vulnerability and There really of really let's seems on Enclave. talk financials discovery. for doing, about fit going at have how or good to number deployments Enclave to a asset deployments. be had the of have successful a present is start-up proof the success been Services concepts to But that the that. a POCs touch

We large market also good organizations for manufacturing as well. fit a have

we're good of what and doing that's their client. where to Zero an In I segmentation out affordable Enclave an large deployment Nick, Enclave. underpinning us And on a that that's a to to fact, client fit. We're that great meet doing recent incredible from on roll client, that CTO a have adopting seeing which a that lot in manufacturing with we the and of allows agent micro a way. sector out new to success it's able product we for fit. that mean interest Kudos simple, segmentation. managed floor as concept need believe manufacturing our and our very Enclave Trust seeing have we micro to easily was of hardware we're a start it user And to as to ,low-cost,

some good I Federal interest We from federal replace to IC. client David came of aspects can out within that means and do and think of that with Defense. like We have look government clients of of to we agencies agency myself, again, recently paid the of an of and DoD the a and product them. also U.S. and we're act some concept the to all right started specifically the Enclave segmentation believe proof that the interest environment just their a the and networking. meet this Nick, Department DoD needs just seeing multi-month use incredible And inside and legacy

And for with So do is being looked the player at we and confident how real we're are able they're to space. looking feel what structured we're Enclave a familiar for. in that with as -- we're someone what these very this organizations happy in

needs X coming that world. very of going services going clients, in and just the Bitcoin new had business issues. continue a as of on worked continues We at the the We We've in for mining some of new previously really grow. to the client, other largest acquired board. had operations mining side The Bitcoin world. government solved we're at an within we're that know we to for So to make is to federal to needs this strides the also meet we push be opportunities to for continue how space to feel sales those Enclave in development but solve largest good those about issue because clients the the look can and great X actually the operations those

underlying deliver and Our to advisory go this their establish to services to digital ability into and really space assets for like our protect protect companies know governance and their this infrastructure. and

globally. their I is, manufacturing of have large Major experience to the need them a cybersecurity And a not of X other just looking it's a large the for space deliver to to also to slew a yes, also manufacturing very brand quality floor that a just client. from that operations. and cybersecurity, actually build Both they've to their aspects to that's a that, -- about and again clients from standpoint, highlight interested they're is and kind on capability very ones, turned happy looked out the within segment SideChannel technical that other able needed. am it their but bolster the to think obviously, environment operation the and as program, of leadership standpoint, and it governance technical are maybe and we're clients and but from a interesting also and again, win overarching then been of posture hotel number very SideChannel. the I shows getting We've expect

want don't to -- the security they is there have or requirements their where or lot burden they have be company the CIO a to the just to And to don't manage And well-informed, a where and or IT well-intended also able be that they're elements We leadership. the that's SideChannel. should bandwidth of of addressing. just maybe turning time cyber hold clients

and been at, these or do longer. we're conversations clients Ryan should story message more more when on being impressed stay have more as our we are in further And and to having clients. seeing in us last very does there. been XX-Q, sales brands and we're it's And pointed and ourselves upstream larger the I'm logos, I an what excited people our has why our investor. average really -- so. will, be do, for We've the looking of rates our getting can and a our And reflected SideChannel the value with what we're by and even the So there's further quarter out pushing clients. clients. continually contract about what established team pipeline we that retention great well, our

see, what as with hope as you're you that that the value that's that's in investing long-term that play investing experience really that well. investors and see and and clients, that they in where You're we

some with over there, to updates that, some I then turn will it go to we'll and for Q&A. Ryan So

Ryan Polk

Okay. you, Brian. Thank

big second I operations, balance in March a At the $XXX,XXX. cash had $XXX,XXX. flow story XXXX, It of $XXX,XXX is, in was It the to an quarter that and cash. of results. we first our from just increased December is was flow the XX, quarter end reported cash we've at over increase cash So think

we can has from increase a cash sustainably to slight of So operations be quarter. generating point been flow ours a where each a get of to focal $XX,XXX point

the There'll some we we this Now be to There'll as go quarters where through work working to our to expect flow quarter-over-quarter grow to have issues do and reached we seasonality, more we're our we some going positive where in quarters of some cash. there than from some X let's expect cash is expenses. that -- be quarter on where we've of But that just some we quarters have next. do capital moment, cash flow,, volatility. some have, say, timing be not we negative

of reduce across-the-board in And last lot so take every we been effort disciplined and how million this our approach we takes for an commitment a our to And We're year expenses. $X.X operations how leadership operating has our takes really than did and -- on it expenses opportunities. on ways to and company year. leader being we that pace in to a manage less us area, operating a be identified focus spending it's every

the partnership that good and So results. work their to team appreciate and I financial I really get value with achieving

XX% lot that A months sorry, this that a back up like a with of revenue ago, that revenue We're with relationship can call the generated or the XX% Again, -- year. and we retained generated year We're think a the of means percent X we've been that our -- XX we clients ago, I we able of from say at we are with in company. the lot are work times, We for longer. improving XX-ish we in year we we're retain And that fiscal not current statistics. we with to what that project X in -- what company, we XX.X% clients revenue -- that we that I working have worked of XX.X% to had revenue. on is retention. of success

strategy of our a need revenue to X Brian's good additional and by we're our job add profile. services ways the improve cybersecurity engagements, following to to their is increasing And products So executing that vCISO risk of Brian's that doing clients our we're that doing retention. strategy,

what that its client people that channel attracts sell revenue. its ancillary attention sell the that in risk. to of side grows people It services base that companies As do, and reduce are we cybersecurity software,

catalog partnerships we which of those that and allows that But increase the in we're selective partnership are X We to us we to those of line invitations delivering our clients. every take. accept X time our items

that our retention So line. we're in of seeing benefit the

retention. traditional increase service besides our revenue revenue us that's helping have revenue and consulting just We

One is you're lag quarters. go the software to revenue little next X we line though of our the the margin that less to bit expect seeing We and we as the prior profitable that And the services us on services. to downsides is that have of reverse of that third-party traditional do margin in year. typically that than a gross through

to any things delivery team us -- We with that better us margin. first will see the And half reason why have our be for used that focused service seeing trend some revenue change. that than are line, improve margin that gross on think revenue would margin the think will the on We we -- you're margin. don't is gross second we half

-- that to we're is plus year, March months XX X or We ago. the change year going a the think year for to reason X trend the why any that I just for -- other. XX.X% XX% are drastically don't see compared under revenue plus ended We way

And a flow cash so a positive trajectory, operation committed we've good feel a got quarter-over-quarter a to team we basis. committed that's achieving on like

ahead cybersecurity of sort bad weaken is service posture the might clients. customer cornerstone the focusing to our staying just our doing that be of on that to of any And all guys attempts and the of

it So for Brian, to and comments with guess, up to over, my moderator that, I I'm wrap pass Q&A. the back

Operator

at floor no to would like questions Brian [Operator for queue this back now the Haugli And Instructions] there remarks. turn I to closing time. are in

Brian Haugli

prior to quick a we check. any the wanted did conference to call Ryan, we questions Just written-in that get cover.

Ryan Polk

I question And Brian, Richard did get in this that is Good. coming live. do Richard, is we apologize, a queue from at your question Rider. time. line

Unknown Analyst

size what are after? wondering contracts going you was I

Brian Haugli

side, about value that and down Thanks, I'll services help after talk contracts been. product. what me But our on services we're and contract has Richard. going target break Ryan, market this really annual you our the can the between

the services has really enterprise. been side, On to mid-market small

for kind with the -- from We building outside XXXX of what need we the security the seen really have we start and and programs sit the downstream out go on there. and high just Fortune seen have leadership, end governance do really

largest $X revenue. So currently, in our clients are billion

smallest million start-ups. are Our clients $XX VC-backed

really We are of targeting space. kind everybody that in

what trying say, in, as clients will and that have are and I we But the on do dependent we that's they're budget to $XXX,XXX, cycle hit per Now about kind have, is the of just clients. I spending engineering. and us And Ryan the the spend the value we delivery. that more is well on with are year highly why they're to want average allowed spending allowed. going to our CISO -- contract of talk we sometimes that can where $XXX,XXX as do

of cybersecurity grow, generally and a couple but things like that of going products, other what positioning want sell services, kind software sell in program top when see are monitoring, to that contracts, inside really testing going to revenue. recognize to services not if where just client want able can other especially services, kind to we're line is our we're through pen to capabilities So we and that start XX/X we ourselves of Ryan, average misstate kind you're so other to we on where of don't be touch I to you cybersecurity layering in we value know direct capabilities, managed going. I doing, don't of a that all

Ryan Polk

quick I'll give a stats. Brian, of Sure, Yes. couple

number each it, we quarter. and Richard, deals value call use contract that on internal annual $XXX,XXX secure new measure, above is -- we consistently -- the an So average we

looked $XXX,XXX. consistently quarterly we value, if new above we're annual at client contract So average

much that. Sometimes higher it will be than

are enterprises the things. got One to an who uptick that right larger annual Sometimes hours vCISOs. will at number, measure, for, I trend now. be requiring X it The clients line that's closer it's number think new talking higher from increasing, is think, to our value of We've but a where I and hours agreement. that we're per increasing contract we're ourselves finding from in for is

steady. Our rates are pretty

We companies where haven't right where our ourselves very that too are situation don't We be in -- now. to in had probably a rate an we pressures price. months. to may we hourly experiencing want XX for sensitive of putting the budgetary opportunities our increase We're being on a aggressive some lose we're lose lot because

So are higher of we deals necessarily our new this rates not a a have of But the growth. lot third-party are vCISO in services addition percentage driving and products. to seeing

internal are contract expanding the on capabilities annual new so value X, And increasing our the is X why reasons and expanding catalog clients.

Unknown Analyst

Department possibility in still the contract a the large contract, same of Is realm? of Defense

Brian Haugli

Well, Ryan services is of that discussing the revenue. about what date values, most was talking what we're our has that Enclave is doing contract positioning at was to about I with been client, really different. what which our software DoD

favorable, our seen applicable this can want environments. do environment, agency, value, be annual X sit we it's we and will further get other don't can beyond x we amount X here it if first say going we in what value, and as especially Now and we've to be The the services line, favorable in like we're contract and the with show for penetration software deals Knowing I with bigger days organization. Whoever ear please opportunity than differently deal dog obviously is are. looking based but Generally, what payback. the count count that be agency would early would DoD is only software priced DoD the line. gotten mute be an on that, or structured. agency very to show but how seat our at than valuable that, user a

positive. -- be than those probably commercial we contracts in is are the And the contracts opportunity our looking larger value So the our for services at is what there space. would

our commercial our entities contracts commercial follow. have to buying understand different how But current large different predominantly, Richard, knowing that we've service So answer better you large different requirements, those on in exceed contracts. and contracts is envision how doing the structures counts, pricing been kind space, in Enclave spaces would government into your does question, for that focused entities. also had are The been services we've the work that they and have on They DoD our DoD our requirements help would has sales seat and that of Okay. service I methods.

Unknown Analyst

Yes.

Brian Haugli

the questions as you and Sure. for well. joining for Great the question. call Thank

Operator

you. again, this you may at once And at it are there your press this a time. has Thank And keypad. if anyone further question in X time, queue star questions appears on no

Brian Haugli

was it -- X is in folks me investor who give and somebody case. minute. give anybody after know minute a wanted little X we I hit a had slow like just slow that button to a Let she in button the hitting to just case the posted ask just the to little call last question. online you

Operator

Absolutely. Instructions] closing back would Brian, the I at Thank questions but time, you, to floor for you. and no remarks. [Operator now this I see Yes, do turn

Brian Haugli

folks, remember, of Well, are for we an quarter the very Thank you. route about again, end September in we fiscal Again, another down year. how the the XXXX. books. of excited going rest are I'm

an MiniCell, as sitting has now Partnerships; David know are well, QX. as as we he's well. on So joined here, us our President aside of I Vice new in and just

we LinkedIn. -- with able do excited on are partnerships our clients. and to what we're And partners are what We their establishing to we broaden doing can him announced at for we be

our help our are their David be we both are at signing to more new sales welcome of on, revenue an drive We services into into and that through we look able and It's up and and basically focusing through that are to bring more to space. vCISO us clients. as team SideChannel that definitely partnerships a member Enclave cybersecurity looking area

excited So within and my within operations a the on the teams excitement team team, excited teams, even that to administrative of the we office. to within board, the delivery have have lot him have, still

doing. tuned So very speaking the and you in. we any on LinkedIn SideChannel soon. as well well. you other thank to And you you, please you us with for investors follow Thank us as call. everyone the everybody what other any who Thank all look content to follow for have forward on on And we're updates to to YouTube at

Operator

you. Thank call. conclude This conference today's does

have disconnect this participation. a phone day. for your may you You your lines Thank at wonderful and time,

Brian Haugli

Thank operator. again certainly. Thanks you,

Operator

great Have you. Thank a day.

too. Bye-bye. You

SideChannel (SDCH) 7 May 242024 Q2 Earnings call transcript