SecuAvail Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥636M
• Operating Income: ¥47M
• Net Income: ¥49M
• EPS: ¥6.31

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: A strong FY2026 Q2 with robust top-line growth and sharp operating leverage, underpinned by clean cash flow and a fortress balance sheet. Revenue rose 36.9% YoY to 6.36, while operating income jumped 210.8% YoY to 0.47 and net income increased 76.9% YoY to 0.48. Gross profit reached 2.87, implying a gross margin of about 45.1%, consistent with a higher-value security services mix. Operating margin expanded to roughly 7.4% (0.47/6.36), materially higher than last year as operating income growth far outpaced revenue. Based on back-solved priors (revenue 4.65, OI 0.15), operating margin expansion is approximately +414 bps YoY. Net margin improved to 7.5%, an estimated +172 bps YoY (from roughly 5.8% last year). Ordinary income was 0.48 (+192.4% YoY), indicating minimal non-operating distortion, with non-operating income only 0.01 (predominantly interest income). Earnings quality is solid: operating cash flow of 0.61 exceeds net income of 0.48 (OCF/NI 1.28x), and capex was modest at 0.03, suggesting high cash conversion. The balance sheet is very strong with 11.54 in cash and deposits, current assets of 14.17 versus current liabilities of 3.25, yielding a 436% current ratio and limited solvency risk. Leverage is low (D/E 0.28x) and interest expense is de minimis, consistent with the 1,146x interest coverage ratio. ROE is 3.9% via DuPont (NPM 7.5% × AT 0.406 × leverage 1.28x), reflecting low leverage and moderate asset turnover despite improved margins. The reported ROIC of 67.2% appears unusually high for the business model and is likely influenced by a very small invested capital base; interpret cautiously. Tax expense was low (effective tax rate 3.3%), which may normalize and modestly temper net margins ahead. Working capital remains well-managed, with receivables of 1.99 versus an H1 run-rate suggesting a reasonable DSO in the ~56-day range. Forward-looking, the company appears positioned to sustain growth given operating leverage and ample liquidity, but continued margin expansion will depend on disciplined SG&A and utilization. Key watch items include demand momentum in managed security, hiring and wage inflation, and any normalization in the tax rate.

Profitability Analysis

ROE decomposition (DuPont): ROE 3.9% = Net Profit Margin 7.5% × Asset Turnover 0.406 × Financial Leverage 1.28x. The largest driver of YoY improvement is margin expansion: operating income growth (+210.8%) vastly outpaced revenue growth (+36.9%), implying stronger operating leverage and improved mix/pricing. Business reason: higher utilization and scale benefits in security services, combined with tight SG&A control (SG&A at 2.40 is 37.7% of sales) and negligible interest burden. Sustainability: some of the operating leverage is repeatable if growth persists and utilization remains high, but margin gains may moderate as the company invests in talent and sales capacity; also, an exceptionally low 3.3% tax rate is unlikely to be structurally sustainable. Asset turnover at 0.406 reflects a cash-heavy balance sheet and conservative capital structure; incremental growth without commensurate asset increases could lift AT modestly, but large cash reserves will cap the near-term upside. Financial leverage is low (1.28x), limiting ROE amplification; leverage is unlikely to rise given strong cash and limited debt use. Concerning trends: none apparent in the period, but monitor if SG&A growth accelerates faster than revenue (risk as hiring ramps). EBITDA margin is 7.7% and operating margin 7.4%, indicating modest but improving profitability; further expansion likely requires continued scale and service mix optimization.

Growth Assessment

Revenue growth of +36.9% YoY to 6.36 is strong and likely driven by demand for managed security/monitoring and possibly higher attach of value-added services. Profit growth substantially outpaced sales (OI +210.8%, NI +76.9%), evidencing operating leverage and improved unit economics. Current gross margin of ~45% supports the view of a higher-value service mix, though we lack prior gross margin to quantify YoY change. The improvement in net margin to 7.5% suggests better cost discipline and minimal non-operating noise. With OCF at 0.61 and capex at 0.03, cash conversion is excellent—supportive for reinvestment in sales capacity, R&D, and selective M&A if opportunities arise. Outlook: momentum appears favorable into H2 if order intake and retention hold; risks include hiring bottlenecks, wage inflation in cybersecurity talent, and timing of large project revenues. We also note the unusually low effective tax rate (3.3%), which may normalize and trim bottom-line growth even if operating momentum continues. Given strong liquidity, the company can sustain growth investments without incremental leverage.

Financial Health

Liquidity is exceptionally strong: current assets 14.17 vs current liabilities 3.25 yields a 436% current ratio and a quick ratio of 436%. No red flag on Current Ratio (<1.0) or D/E (>2.0); D/E is 0.28x and equity/assets are approximately 78% (12.22/15.66). Maturity mismatch risk is low: cash and deposits of 11.54 alone cover all current liabilities (3.25) 3.6x. Interest-bearing debt is unreported, but interest expense is near zero, consistent with minimal financial leverage. Accounts payable are small (0.19), suggesting limited supplier financing reliance. No off-balance sheet obligations were disclosed in the data provided. Overall solvency risk is low and the firm has ample capacity to fund growth internally.

Cash Flow Quality

OCF/Net income is 1.28x (0.61/0.48), indicating high-quality earnings backed by cash. Free cash flow appears robust based on available items: OCF 0.61 minus capex 0.03 implies FCF of ~0.58; note that full investing CF details are unreported, so this FCF proxy may omit other investing outflows/inflows. Working capital appears well-managed: receivables 1.99 against a half-year revenue of 6.36 imply an estimated DSO near 56 days on an annualized run-rate, reasonable for B2B services. No signs of aggressive working capital management are visible (payables only 0.19; no spike in accrued items reported). Financing CF was -0.16, likely reflecting dividends or minor equity-related cash flows; with strong OCF, financing reliance is minimal. Overall, cash conversion supports both reinvestment and shareholder returns.

Dividend Sustainability

The calculated payout ratio is 32.0%, comfortably within the <60% benchmark. Using NI of 0.48, implied dividends would be ~0.15 if the 32% ratio reflects actual policy; however, total dividends paid are unreported, so treat this as indicative. With proxy FCF of ~0.58, coverage of implied dividends is approximately 3.8x, suggesting strong sustainability. The cash balance (11.54) and low leverage further reinforce capacity to maintain or modestly raise dividends while funding growth. Policy outlook: with improving profitability and a cash-rich balance sheet, the company has flexibility; watch for any stated medium-term payout targets and capital allocation priorities (hiring, R&D, selective M&A).

Risk Assessment

Business Risks:

• Talent acquisition and wage inflation in cybersecurity could pressure SG&A and margins.
• Project timing and customer budget cycles may cause revenue and OCF volatility.
• Customer concentration risk (common in smaller IT/security firms) could impact stability if a large client churns.
• Service delivery capacity/utilization risk as growth accelerates.
• Potential normalization of the currently low effective tax rate (3.3%).

Financial Risks:

• Limited disclosure on interest-bearing debt and investing cash flows (data gaps).
• ROIC (67.2%) may be inflated by a very small invested capital base; misinterpretation risk.
• Foreign exchange exposure if any cross-border contracts or costs exist (not disclosed).
• Small-cap equity market liquidity risk impacting capital flexibility if external funding needed.

Key Concerns:

• Sustainability of margin gains if SG&A ramps ahead of revenue to support growth.
• Dependence on continued strong demand for managed security services in a competitive market.
• Potential tax rate normalization reducing net margin by 100–300 bps over time.

Investment Implications

Key Takeaways:

• Strong Q2 with revenue +36.9% YoY and significant operating leverage (OPM ~7.4%).
• High-quality earnings: OCF/NI 1.28x and proxy FCF ~0.58 with modest capex.
• Balance sheet strength: cash 11.54; current ratio 436%; D/E 0.28x; equity ratio ~78%.
• ROE 3.9% constrained by low leverage and moderate asset turnover despite better margins.
• Dividend capacity appears ample with an indicative 32% payout comfortably covered by FCF.
• Tax rate is unusually low and could normalize, modestly dampening net margins.

Metrics to Watch:

• Revenue growth trajectory and backlog/order intake visibility.
• Operating margin and SG&A ratio (cost discipline vs hiring ramp).
• OCF/NI ratio and working capital metrics (DSO/DPO).
• Effective tax rate normalization path.
• Customer concentration and retention metrics.
• Capex and any M&A-related investing outflows not captured in current data.

Relative Positioning: Within Japanese cybersecurity and IT security services peers, the company exhibits superior liquidity and low leverage with improving margins and cash conversion, but ROE remains modest due to conservative balance sheet structure; continued scale and disciplined cost control are key to closing the profitability gap with top-tier peers.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis