SDCH - Earnings call transcript Q3 2024

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Operator

Greetings. Welcome to the SideChannel Fiscal Year 2024 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. [Operator Instruction] Before we begin, I need to read the following statement. plans, on not call projections necessarily statements the made include, statements or comments intentions. of are or but limited company's or this forward-looking conference may other Statements expectations objectives, to, financial These matters and certain involve risks uncertainties. differ actual a projected to or from company's our factors, of which any The in significantly statements SEC detail in in forward-looking those may results due variety suggested are discussed filings. being recorded. Please this conference is note, host, will now conference the Haugli. I over to Brian your turn

You may begin.

Brian Haugli

afternoon, Good CEO much. so This am is today the you Thank Polk, I'm Haugli, everybody. of joined Brian I SideChannel. our by Ryan CFO.

We into of comments a just will queue, from dig highlights over of we Ryan the from let will a couple and go questions. myself to couple then and go

quarter year and, of good more interesting becoming much or time think, for in It's really the both the prevalent I bad overall, news, for cybersecurity. So reasons.

causing right do CrowdStrike got, that are trying You've to unfortunately through organizations that one thing, like on issues the their hand, are software.

hand, other organizations have solving real and and solid you malicious the the that we clients. I to our On found states think, businesses causing niche to good is, where others harm there. with from hackers And just nation out see

be that advisers they not trusted is just and those a have at this large. new time, able honest are area the whether to to do business just have, out these at recovery, we just is with it section long a industry grown to the or in on that's have and that incident and need Our clients but had I a clients posture that issues, there. the overview. threats see through won't with of out a queue, as up at We against those expanded and stand for new proactive clients growing, but helping brokers which and have also both help disaster response new, we them kind to that in highlight and just building making to clients the sure through stance are clients them Q, plans, obviously to them risks I but for really we continue look that least obviously want us everything the that continue in us look go to

XX-Q. You'll down the find Page of that XX on starting

This them they least doing what's clients potentially And we writing with happening are I in industry that helping to quarter, should have but are I we our is bad day to, again, happen. prepare that risk And and this. of and the lot at for. our X key kind we're wanted bad highlight SideChannel of points what at of preparing outside reacting the horizon a on really were data that also are for really looked there a when reducing or watching

particularly do. from is obviously, significant what and governance surveys a one Partners, parcel as why go a lot teams we're compliance, first think the of cloud-enabled services services, noted. and are again, back, really able these among of they I such planning adoption the their a client's look their and vCISO to and at what areas space, part views their are small by Hitch highlights in key mentoring that by to in. security And Their SideChannel SideChannel of information and do, to value strategic and go able companies, rise The and is vCISO provided leader vCISO provider which,

are that especially offered flexibility expertise when to and attractive hires, and facing delivery a option and market, seeing full-time supports in program. makes notes the constraints them seeing we're North out like compared to still report of what the at America report globally. by in vCISO So what the in obviously, and market The position you're budget our security this robust again, establish from companies that potentially the needing our we're Hitch looking

we again, Gauthier to So Brennan, that are have and underneath Matt now leading this who and it's the is that engineering testament leading capabilities Jared area, Eric our Klein, also is where shines a team who vCISO the operations team. SideChannel in Dele, in but

this that we what is their if wouldn't company for clients. So to and be wasn't where for deliver it it need team ability

[indiscernible] of operations. a different we the issues. breach When every in primary the driver X% broader report want trends at only behind for of importance good the thank robust at highlighting was the measures landscape, no report motors or that type just other Verizon really of at everybody start maturing that to the Cannon and I already public data Financial is And than to if XXXX kudos organizations really market of years look documentation aspects of embraced for Hollywood, give of what's we they've are not right? security So past. and happening you to breaches. look least in accounts the it. current It's emphasize cyber embracing It XX% year.

are really on like of based and think previous have breaches ease with scalable like I exploitation, large [indiscernible] a surpassing significant incidents associated the ones that others. impact, [indiscernible],

a organizations to to like is I going step to in, going SideChannel to think relying deliver software able base the program going that like unchecked, be what reliance that we're are those software are go that. to for a to on security on continued are open-source that solidify services require see software,

able and revenue that array on growing. The to some and that. suite think to of you'll comprehensive be designed appropriately highlight our and and aspects this. their I organizations those yearly Magic And prioritize surveys to honing of their the surveys, meet have adopted our at are second zero think that services, is to has technology to and forefront. services Ryan for or this We of to come software the over Quadrants trust but really going Gartner assets Ryan. needs the actually in of what of one Their kind it organizations that XX% an has cybersecurity ability effectively framework security turn solutions Enclave encompasses digital not look at will fully I'll I and framework. And look protect then and maybe like for to last and category strategies their of adopted be see have shown companies have partially many implement in the

we're to you. great always differentiates idea execute it's that's you seeing. is what So have I about how an And what think actually

for segmentation continued micro just software-defined need and is are really a defining sizes, good growing to and that's go time that And coupled obviously do. Gartner able the about interest what Enclave's vulnerability create growing effort deliver to seeing secure have we importance right find asset at using to right now in by a And feel able discovery ability we're our able So that. software, pathway a with It's seeing our Trust. networking, of all And market. the for we which be and to that scope We then to that the tools component being the and on that. web right a product early our proprietary intelligence, capabilities of and new segmentation, of Zero to excited like a where we're is other gateway. the

more Enclave. We're of are We proof concepts. of getting front in more positioning customers with

next start it's quarters Enclave I associated think at increased usage being the revenue to positioning the seeing over that is current us And on go what We are able with new next clients, the and bullish you'll the years and very at clients. do.

where Gartner whole, excited seeing ourselves the fit. as very is highlighting, can a we be industry as in what the Enclave by what markets we're a seeing in make we're we're but also So solid directly

with and forward. will highlight areas to turn So Ryan that, to it I this of quarter looking over

all to you. Ryan, over it I'll So turn right, if that's

Ryan Polk

It's of Appreciate I of want make Thank about sacrifice our and taken certainly X of about talk that. you, just team to that. And are to we I that. about Brian. pride cash cash our that positive flow. quite a bit doing accomplish from our a But the quarters proud to comments effort having team consecutive want few feels flow.

recognize in selling increase received licenses cash is seasonality, that us our being received of deferred had line is and advance primary In services some it's in our to and largely the other to clients. record balance annual on our March February, advance software services have of use to revenue We've growth revenue. and the in able does words, revenue delivering of account third-party we to capital April. driver that working typically for Deferred due products. an item between cash our the seasonality. in our First, sheet are These that renew account

number At on was XX, revenue the balance $XXX,XXX is So sheet, $XXX,XXX. XX, in beginning our June September at that XXXX. of the year, deferred

is fiscal our balance $XXX,XXX year. $XXX,XXX deferred year higher today. was it than than it's lower the about at ago, was of start it our revenue One So

selling XXXX, So of likely during December renewing annually the and we the But and fiscal means quarter, quarter quarters -- we've is that sign XX, more XX, third-party first our or balances is, line is that which during XXXX. are next in that ended some that the revenue September we cash the like our software that we've bottom similar which I fiscal year have services to X year, next ends report lower clients had that deferred driving said, seasonality, to which an had increase fourth XXXX. our

The we focus adjustment XXXX, to provided for on to X our cash statement cash totals depreciation, $XXX,XXX. cash that Second, statement. in the for stock June I amortization want you on ended flow flow months facts expense comp and XX, the

we're $XX,XXX for loss 'XX year gap we gap X flow between Last is loss was $XX,XXX loss on add-back XXXX. for statement. $X.X year and $XXX,XXX, is in million. our that $X.X time, and this net of showing in a Again, between at That the noncash expenses. means million noncash which you those gap Our cash that only was gap expenses, cash the year, X ago. our That our gap fiscal months have net net

closing as growth make well including Unfortunately, that success of as to marketing. company, had every we selling Continued gap. and the elimination the for reasons make of that we've area the in and at revenue aggressive attribute cuts OpEx,

we model that to business we opportunities we we've during story is highlight we've The last the our last And will those opportunities so, operations, look this in occasions, cuts. and that make from years. harvest for thing growth want we as high because not should that has our cash the as so generate marketing reinvest and had we're that on growth to to company said multiple I providing. be selling progress X are industry the made can And

SideChannel. named the X time losses about of July July conducted XXXX that million. $XXX,XXX in to was the the company's business Lock, excess X been funded Cypher XXXX, were communicate. Lock a XXXX. combination, traded XXXX. At in June publicly was businesses at I at company reporting XXXX what combined This pre you'll Cypher that appreciate cash think the of pre-business to understand the called quarterly perhaps It's second you've operations XX, July was following July and as and business If time I'm the post We which implies averaging us balance of $X.X and take could for combination months, would have been more August XXXX, reported one

successful. company We that's have a

a which on assuming has capital. very quarters have it Cypher and the to gap expenses, are it survived that now at company We And loss narrow additional was noncash that have not earlier. that raise cash highlighted could well able as had, between a beyond balance we Lock I the net X

to would Of have course, equity would would capital raise have been had have dilutive. form additional if been and of the it in that

phase, the I while, everyone a it up picked success followed or who's so, originated we line for premerger that perhaps are the entity now business and positive with company. Cypher for the in is a a this just a that for in a with an result And important promising cash after our merger Lock the you for think flow of And revenue pre-July of it's XXXX. pipeline era Services this growing story software

have we just deliver who our reflect in while to shareholders. our on management some able for accomplishments to appreciate clients have I been it all to So time a our team, of want to been the take a to ourselves and as to employees, and that us

John, Q&A. John, So any go not Q&A. my concludes comments. would seeing to that We like to we're

in if me any Q&A don't to I Q&A refresh any Let webcast. see see have webcast. the on the we

Operator

have We'll Okay. currently queue conducting We the no Instructions] [Operator a from lines. in questions be phone session. question-and-answer

Brian Haugli

time who great Well, hard today. thank Okay. attention want of work, have. to the And I interested as or taking your your parties. for from team we everybody again, has we us SideChannel obviously, appreciate thank We joined all for investors everybody

we what working about on go future are very to are what we're the and on We excited looking do. towards about

on team. you of the again, of behalf and executive Ryan will leadership soon. and that, talk Board of the and Directors we myself, rest to with the So Thank you

Operator

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

SideChannel (SDCH) 7 Aug 242024 Q3 Earnings call transcript