SideChannel Reports 9.9% Revenue Growth to $1.9 Million, Net Loss Improves

SideChannel, Inc. reported its financial results for the three months ended December 31, 2024, revealing a total revenue of $1.9 million, an increase of $172,000 or 9.9% compared to $1.7 million in the same period last year. The growth was driven by an 8.0% increase in revenue from virtual Chief Information Security Officer (vCISO) services, which totaled $1.3 million, and a 13.7% rise in revenue from cybersecurity software and services, amounting to $654,000. Despite the revenue growth, the company recorded a net loss of $195,000, a slight improvement from the $246,000 loss reported in the prior year.

The company's gross profit for the quarter was $874,000, resulting in a gross margin of 45.8%, down from 48.7% in the previous year. This decline in gross margin was attributed to a higher proportion of revenue derived from third-party software and services, which typically carry lower margins than the company's direct offerings. Operating expenses decreased by 2.2% to $1.08 million, primarily due to reduced general and administrative costs, which fell to $661,000 from $709,000. Research and development expenses increased by 21.4% to $153,000, reflecting higher personnel costs.

In terms of operational metrics, SideChannel's customer base and engagement levels have shown positive trends. The company continues to focus on increasing the adoption of its proprietary software, Enclave, and expanding its vCISO client base. As of December 31, 2024, the company had $1.1 million in cash and cash equivalents, a slight increase from $1.0 million at the end of the previous quarter. The company also reported a working capital of $1.2 million, down from $1.3 million, primarily due to changes in accounts receivable and prepaid expenses.

Strategically, SideChannel is committed to enhancing its cybersecurity offerings and expanding its market presence. The company is actively pursuing new vCISO clients and plans to introduce additional cybersecurity software and services. The recent settlement of a lawsuit, which required the issuance of 356,400 shares of common stock, reflects the company's ongoing legal and operational adjustments. The company anticipates that its existing cash reserves and projected cash flows will be sufficient to meet its operational needs over the next 12 months.

Looking ahead, SideChannel remains optimistic about its growth trajectory, emphasizing the importance of its cybersecurity solutions in an increasingly digital landscape. The company aims to leverage its existing client relationships and expand its service offerings to capture a larger share of the cybersecurity market, which it identifies as currently underserved, particularly among mid-market and emerging companies.