Release Date: December 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SideChannel Inc (SDCH, Financial) achieved its goal of becoming cash flow positive in fiscal year 2024, demonstrating strong financial management.
- The company has expanded its marketing and brand presence, ranking high on Google searches and gaining visibility through platforms like ChatGPT.
- SideChannel Inc (SDCH) has developed a robust channel program, forming partnerships with MSPs and other firms, which is expected to drive exponential growth.
- The Enclave product has seen good adoption and offers a versatile solution with multiple functionalities, appealing to a wide range of clients.
- The company has successfully hired industry experts, such as Dutch Schwartz, to strengthen its cloud security offerings and drive growth in that sector.
Negative Points
- SideChannel Inc (SDCH) faces challenges with toxic warrants that have a full ratchet provision, which could deter potential investors.
- The company had to cut costs in sales and marketing to achieve cash flow positivity, potentially impacting growth.
- There was a slight unexpected drop in margins due to underutilized employees, affecting the cost of goods sold.
- The company is constrained by its OTC listing, limiting access to institutional investors and capital markets.
- Revenue growth has been moderate, and the company acknowledges the need to expand its sales and marketing efforts to drive future growth.
Q & A Highlights
Q: What are the company's plans to attract additional investors given the current low visibility in the market?
A: Brian Hogly, CEO, mentioned that SideChannel has been engaging in retail investor outreach initiatives and has conducted meetings with high net worth individuals and family offices. However, the OTC listing limits institutional investment. The company plans to continue building its brand and financial strength to attract investors, potentially engaging an IR firm in the future.
Q: Can you explain why the warrants are considered toxic and how they affect the company's financial strategy?
A: Ryan Polk, CFO, explained that the warrants have a full ratchet provision, which increases the quantity of warrants and decreases their price if stock is sold below $0.36. This makes them highly dilutive and unattractive to potential investors, limiting the company's ability to raise growth capital.
Q: What led to the repricing of board options from $6 to $18, and how does this affect the board's interests?
A: Ryan Polk clarified that the repricing was due to a miscommunication regarding the exercise price. The board has been supportive of the company's cash flow positive goals, foregoing cash payments in favor of stock options, aligning their interests with the company's growth.
Q: How does the company plan to handle the seasonality in its business and ensure consistent revenue growth?
A: Ryan Polk noted that SideChannel experiences seasonal fluctuations due to purchasing cycles, with upticks in late Q1 and strong Q2. The company is focusing on new sales initiatives, including channel partnerships, to drive incremental revenue and maintain consistent growth.
Q: What is the status of the legacy polymorphic software, and how does it fit into the company's current strategy?
A: Brian Hogly stated that the company retains the patents and trademarks for the Polymorphic Encryption Core (P/E C), which is being integrated into the Enclave product. While not a primary focus, it remains a valuable asset for specific use cases like low-power communication environments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
