SideChannel, Inc. (SDCH)·Q3 2025 Earnings Summary

Executive Summary

• Revenue declined modestly; Q3 revenue was $1.78M, down 3.8% YoY and down 6.2% QoQ, with gross margin at 47.0% (down 190 bps YoY and 270 bps QoQ), and net loss widened to $(0.26)M from $(0.05)M in Q2 .
• Management highlighted continued traction for Enclave zero-trust with two DoD clients onboarded and cited growing opportunities across DoD agencies; additional momentum came from a 1,700-agent municipal deployment and a new Threat Intelligence/Insider Threat offering launched at DEF CON 33 .
• TTM revenue retention continued to trend lower (61.4% in Q3 vs. 62.4% in Q2 and 66.1% in Q1), reflecting prior vCISO churn; management continues to expand sales/marketing to drive Enclave adoption and services growth .
• No formal financial guidance is provided; management reiterated priorities around Enclave expansion and go-to-market investments, leaving estimates context to be driven by limited microcap coverage (consensus unavailable via S&P Global) .

What Went Well and What Went Wrong

• What Went Well

  • Enclave adoption: “two Department of Defense clients already onboard” with expansion opportunities across DoD; municipal deal for >1,700 Enclave agents underscores public-sector traction .
  • Portfolio expansion: Debut of Threat Intelligence Labs and Insider Threat program at DEF CON 33, positioned as a complementary solution leveraging Enclave capabilities .
  • Strategic positioning: CEO emphasized momentum in critical markets and a broadened vCISO services portfolio driving long-term growth aspirations .

• What Went Wrong

  • Top-line/margins: Q3 revenue fell 3.8% YoY and 6.2% sequentially; gross margin declined to 47.0% (−190 bps YoY, −270 bps QoQ) .
  • Profitability: Net loss widened to $(261)k vs. $(54)k in Q2 and $(146)k in prior-year Q3, reflecting lower gross profit and higher OpEx YoY (+$47k) .
  • Retention: TTM revenue retention fell to 61.4% from 62.4% in Q2 and 66.1% in Q1; management has previously cited the loss of a handful of larger vCISO contracts in the back half of FY24 .

Financial Results

KPIs and balance-sheet visibility

Notes:

• Management did not provide non-GAAP adjustments; figures above are GAAP as presented in press releases and 8-K exhibits .
• Sequential GM step-down (49.7% → 47.0%) was not specifically attributed by management in Q3 materials .

Guidance Changes

Management reiterated strategic priorities (accelerate Enclave adoption; invest in sales/marketing; expand vCISO and cross-sell) without quantitative guidance .

Earnings Call Themes & Trends

Note: We found no Q3 2025 call transcript. The Q3 press release announced a call, but a transcript was not available in our corpus at time of research. Themes below compare Q1 and Q2 call commentary to Q3 press/other releases .

Management Commentary

• “Enclave, our Zero Trust software platform, is gaining strong traction with two Department of Defense clients already onboard and clear opportunities to expand both within these organizations and into additional DoD agencies.” — Brian Haugli, CEO .
• “At DEFCON 33, we also launched our Insider Threat program… Early client interest has been encouraging, and we see this as a powerful complement to Enclave’s broader security benefits.” — Brian Haugli, CEO .
• “Insider threats are often blind spots for organizations… we centralize the identification and mitigation of insider threats in a structured and proactive way.” — Brian Haugli, CEO (Threat Intelligence Labs) .
• Municipal deployment: “a major Arizona city has selected its Enclave platform… rollout includes more than 1,700 Enclave agents” — Press Release .

Q&A Highlights

(From Q1 and Q2 calls; Q3 transcript not available)

• Enclave competitive positioning and headwinds: management highlighted differentiation vs Illumio/Zscaler/Perimeter81 (now Check Point), citing ease of deployment, no cloud dependency, and lower cost; headwinds center on enabling and scaling the sales organization .
• Capital structure and potential raise: no immediate need to raise capital; any future raise would be to accelerate Enclave GTM; reverse split authorization is a tool with no current action planned .
• Federal pipeline/product features: 2 DoD clients, with partner-led access; development of machine/non‑person identity management feature in Enclave driven by DoD use cases .
• Sales/Channel strategy: adding BD talent, leveraging channel/MSP partners to scale Enclave distribution and stack replacement opportunities .

Estimates Context

• We attempted to retrieve S&P Global consensus for Q3 2025 revenue and EPS; consensus was unavailable for SDCH, so beats/misses versus estimates cannot be assessed at this time (Values retrieved from S&P Global).*

Key Takeaways for Investors

• Enclave momentum is the core thesis: DoD beachheads and a sizable municipal rollout validate product-market fit in high-need public-sector environments; Insider Threat Labs broadens the platform narrative .
• Near-term prints reflect mix/retention headwinds: revenue and gross margin declined sequentially; TTM retention decreased again, but management continues to invest behind pipeline rebuild and software-led growth .
• Operating leverage path remains intact but lumpy: after a near break-even Q2, Q3 swung to a wider net loss with lower revenue and GM; watch mix shift toward higher-margin software and sales execution cadence .
• Cash runway modest but stable: cash+ST investments ended Q3 at ~$1.2M; management reiterated no need to raise near-term, with any future raise targeted at scaling Enclave GTM .
• Catalysts: further DoD expansion, additional public-sector logos, and partner-led channel wins could drive narrative and operating metrics; Insider Threat platform adoption is a new vector to watch .
• Risk checks: continued retention pressure in services, competitive intensity in zero-trust/microsegmentation, and microcap liquidity/coverage constraints (no consensus) should be monitored .

Additional Detail (Source Documents)

• Q3 2025 results press release and financial tables .
• Q2 2025 results press release and call transcript –.
• Q1 2025 results press release and call transcript –.
• Other Q3-period press releases: municipal Enclave deployment; DEF CON Threat Intelligence Labs launch .

Footnote:
*Consensus estimates unavailable via S&P Global for this period and ticker (screen returned no data). Values retrieved from S&P Global.