Operator

Greetings, and welcome to the SideChannel Fiscal Year 2026 Second Financial -- or Second Quarter Financial Results Update Call. [Operator Instructions]. And please note, this conference is being recorded.

I will now turn the conference over to your host, Mr. Brian Haugli, Chief Executive Officer with SideChannel. Sir, the floor is yours.

Brian Haugli
CEO & Director

Thank you for joining us. I'll be brief on the quarter and then spend most of our time on what's actually mattering right now, the transition from services to platform.

Q2 FY 2026 was a down quarter. Total revenue was $1.58 million, down from $1.89 million in Q2 FY 2025, 11.9% decline. More specifically, vCISO services revenue fell 28.4% year-over-year. That's the real number. It reflects a contracted vCISO pipeline and the fact that we're deliberately shifting client mix from hourly vCISO engagements towards fixed retainer platform models.

Here's what matters. Our gross margin expanded 380 basis points from 49.7% to 53.5%. That's real operational leverage. It means the underlying product margin, Enclave, and our software bundle is working. 6 months into the fiscal year, we've lost $840,000 on revenue of $3.35 million cash burn from operations is negative $854,000. But these are the facts and they reflect exactly what we said we do, trade short-term service revenue for durable platform economics.

So what's our strategy, 3-phase delivery model on services. So we're not pivoting. We're deliberately executing a known 3-phase transition from services to platform. Phase 1, where we started. vCISO or principal consultant-led time and materials vCISO work, 1 consultant for client, margins roughly 46% growth requires hiring consultants.

Phase 2, what we're moving into right now, targeting August