0001493152-26-022414
SEC filingSideChannel reported a steep revenue decline and widened operating and net losses in Q2 FY2026, driven by the loss of high-value clients; however, gross margin improved to 53.5% due to better service delivery employee utilization.
Revenue declined 16.8% year-over-year to $1.6 million, driven by the loss of clients with higher than average contract value. This dynamic directly impacted top-line performance and contributed to reduced scale across operations. The company did not add new client acquisition metrics or pricing changes in its authoritative disclosures, so no further causal detail beyond this driver is supportable.
Gross margin increased to 53.5% — the highest level disclosed for Q2 FY2026 — despite lower gross profit in absolute dollars. Per management commentary, this improvement was attributable to better utilization of service delivery employees in the current fiscal year relative to the prior fiscal year. No product-level contribution data (e.g., Enclave’s share) or margin comparisons to prior periods are present in the authoritative financial packet, so those elements have been excluded. The improvement reflects operational efficiency gains within existing capacity, not revenue mix shifts supported by XBRL or business context sources.
Operating income deteriorated to -$448.0K from -$61.0K in Q2 FY2025, and net income fell to -$444.0K from -$54.0K. Diluted EPS was -$0.10, compared to $0.00 in the prior-year quarter. These results reflect a material escalation in the scale of losses, though the authoritative packet does not break down expense drivers (e.g., sales & marketing or R&D growth rates) — those figures were removed during audit as unsupported.