SDCH · SideChannel, Inc.

SideChannel reported Q2 FY2026 revenue of $1.6 million, a 16.8% decline from $1.9 million in the prior year quarter, primarily due to lower demand amid a focus on scaling its platform business. Despite the revenue drop, gross margin expanded significantly by 380 basis points to 53.5%, reflecting improved cost efficiencies in delivering cybersecurity services and the Enclave platform. This margin improvement partially offset the impact of sharply higher operating expenses, which surged 28.8% to $1.3 million, driven by targeted investments in selling and marketing as highlighted by CEO Brian Haugli. Selling and marketing expenses more than doubled to $388 thousand, while general and administrative rose 10.7% and R&D increased 49.2%, contributing to an operating loss of $448 thousand versus $61 thousand last year. The net loss widened to $444 thousand or $0.10 per share from $54 thousand or $0.01 per share. Year-to-date trends mirrored the quarter, with revenue down 11.9% to $3.4 million, gross margin up 460 bps to 52.3%, and net loss expanding to $840 thousand. Positive signals include trailing twelve-month revenue retention improving to 66.8% from 63.6%, attributed to marketing and partnership investments. Cash position deteriorated to $311 thousand from $1.165 million at fiscal year-end, signaling tight liquidity as the company prioritizes Enclave pipeline conversion to recurring revenue while maintaining operating discipline. Management emphasized scaling Enclave alongside fractional vCISO and security services, with no forward guidance provided beyond ongoing priorities.