| Metric | Current | Prior | YoY |
|---|---|---|---|
| Revenue | ¥80.7B | ¥70.9B | +13.8% |
| Operating Income | ¥13.6B | ¥12.5B | +9.2% |
| Ordinary Income | ¥14.7B | ¥13.2B | +11.8% |
| Net Income | ¥10.3B | ¥9.2B | +12.2% |
| ROE | 10.5% | 9.9% | - |
FY2026 Q3 results show SEC Corporation achieving revenue of 80.7 billion yen (YoY +13.8%), operating income of 13.6 billion yen (+9.2%), ordinary income of 14.7 billion yen (+11.8%), and net income of 10.3 billion yen (+12.2%). The company demonstrated solid top-line growth with double-digit revenue expansion, though operating profit growth lagged behind revenue growth by approximately 4.6 percentage points. Operating margin compressed to 16.9% from the prior year's 17.6%, a contraction of roughly 70 basis points. Total assets decreased to 115.6 billion yen from 117.8 billion yen, while total equity strengthened to 98.9 billion yen from 93.3 billion yen, reflecting improved capital adequacy. Non-operating income contributed 1.1 billion yen, primarily from interest income, supporting ordinary income growth. The company maintains exceptionally strong liquidity with cash and deposits of 37.2 billion yen against minimal short-term debt of 1.2 billion yen.
Revenue growth of 13.8% substantially outpaced the company's full-year forecast growth rate of 3.9%, indicating accelerated business momentum in Q3. The revenue expansion appears driven by increased transaction volumes with existing customers or successful new customer acquisition, supported by a healthy gross profit margin of 30.1%. However, selling, general and administrative expenses grew at a rate exceeding revenue growth, resulting in operating income advancing only 9.2%, creating a 4.6 percentage point gap with revenue growth. This suggests ongoing investment in business infrastructure or sales capabilities that temporarily compressed margins.
On the profit side, operating income of 13.6 billion yen translates to an operating margin of 16.9%, down from approximately 17.6% in the prior year. Non-operating income of 1.1 billion yen, primarily interest income, supplemented operating results to produce ordinary income of 14.7 billion yen. The tax burden at an effective rate of approximately 29.8% reduced pre-tax income to net income of 10.3 billion yen, representing a net profit margin of 12.8%. The progression from operating to net income remained relatively stable with no material extraordinary items identified.
The pattern observed is revenue up, profit up, though with margin compression indicating cost growth outpacing revenue expansion. This represents a growth-investment phase where the company prioritizes market expansion while accepting near-term margin pressure.
[Profitability] ROE of 10.5% represents solid returns on equity, calculated through net profit margin of 12.8%, asset turnover of 0.698, and financial leverage of 1.17. Operating margin stands at 16.9%, declining 70 basis points from the prior year's 17.6%, reflecting increased operating expenses relative to revenue. Net profit margin of 12.8% positions in the favorable zone relative to industry standards. The EBIT margin of 16.9% combined with interest burden coefficient of 1.081 and tax burden coefficient of 0.701 demonstrates efficient non-operating and tax management. [Cash Quality] Cash and equivalents of 37.2 billion yen provide coverage of 30.6 times short-term debt of 1.2 billion yen, indicating exceptional liquidity reserves. However, accounts receivable represent 43.9% of total assets with DSO of approximately 230 days, signaling extended collection periods that warrant attention. [Investment Efficiency] Asset turnover of 0.698 reflects moderate asset utilization. Days sales outstanding of 230 days and cash conversion cycle of 203 days indicate room for improvement in working capital efficiency. [Financial Health] Equity ratio of 85.5% substantially exceeds industry norms, demonstrating fortress-like balance sheet strength. Current ratio of 661.1% and quick ratio of 654.1% indicate overwhelming short-term debt coverage capacity. Debt-to-equity ratio of 0.01 reflects minimal leverage with interest-bearing debt totaling only 1.2 billion yen.
Cash and deposits increased 14.9 billion yen (66.8% YoY) to 37.2 billion yen, representing a substantial buildup in liquidity. This accumulation occurred alongside net income of 10.3 billion yen, suggesting strong cash generation from operations or other sources. Working capital composition shifted materially with inventories declining 2.8 billion yen (-74.7%), indicating either improved inventory efficiency or deliberate stock reduction. Accounts payable decreased 4.7 billion yen (-48.3%), suggesting accelerated supplier payments that represent cash outflows and potential working capital pressure. Short-term borrowings increased 0.86 billion yen (237.5%), though the absolute amount remains small at 1.2 billion yen total. The combination of rising cash, falling inventory, and declining payables suggests the company may be converting inventory to cash while settling supplier obligations more rapidly. Cash coverage of short-term liabilities stands at 30.6 times, providing substantial buffer against near-term obligations. The extended DSO of 230 days represents the primary constraint on cash conversion efficiency, as significant receivables remain uncollected despite strong profitability.
Ordinary income of 14.7 billion yen versus operating income of 13.6 billion yen shows non-operating net contribution of approximately 1.1 billion yen, primarily comprising interest and dividend income reflecting the company's substantial cash holdings. Non-operating income represents 1.4% of revenue, consisting mainly of financial income with minimal reliance on equity method gains or other non-recurring items. The progression from EBIT to net income demonstrates clean earnings without material one-time items or extraordinary gains and losses. The effective tax rate of 29.8% aligns with standard corporate rates, indicating no unusual tax benefits or charges. Gross profit margin of 30.1% remains healthy, supporting sustainable profitability from core operations. The primary earnings quality concern stems from accounts receivable representing 43.9% of total assets with DSO of 230 days, indicating a significant portion of reported revenue has not yet converted to cash. While operating cash flow data is unavailable for quarterly analysis, the 66.8% increase in cash deposits suggests strong cash generation, though the extended receivables collection period warrants monitoring to ensure reported earnings translate to actual cash inflows over time.
Full-year forecast calls for revenue of 107.0 billion yen, operating income of 18.4 billion yen, ordinary income of 20.1 billion yen, and net income of 13.95 billion yen. Q3 cumulative results show revenue progress of 75.4%, operating income of 74.1%, ordinary income of 73.2%, and net income of 74.1% versus full-year targets. These progress rates align closely with the standard Q3 benchmark of 75%, indicating the company is tracking on plan across all profit metrics. The implied Q4 performance requires revenue of 26.3 billion yen (32.6% of annual target), operating income of 4.8 billion yen (26.1%), ordinary income of 5.4 billion yen (26.8%), and net income of 3.6 billion yen (25.9%). Full-year guidance assumes YoY growth of 3.9% for revenue, 2.6% for operating income, 6.1% for ordinary income, and 3.8% for net income. The stronger Q3 YoY revenue growth of 13.8% versus full-year forecast of 3.9% suggests either conservative annual guidance or expectation of normalization in Q4. Annual dividend forecast of 56 yen per share implies payout against forecast net income of 13.95 billion yen.
Year-end dividend of 110.00 yen per share has been declared for the current period. Against Q3 cumulative net income of 10.3 billion yen and estimated share count of 10.24 million shares, the dividend payout ratio calculates to approximately 108.9%, exceeding 100% and indicating dividend payments exceed current period earnings. This elevated payout ratio raises sustainability concerns, though the company's substantial cash reserves of 37.2 billion yen and minimal debt provide near-term coverage capacity. The full-year forecast indicates annual dividend of 56 yen per share, which against forecast net income of 13.95 billion yen would result in a more sustainable payout ratio. The apparent discrepancy between period-end dividend of 110 yen and annual forecast of 56 yen requires clarification regarding dividend frequency and policy. No share buyback activity has been disclosed. The total return ratio currently equals the payout ratio given absence of buybacks. Dividend sustainability depends on maintaining profitability levels and managing the elevated payout ratio toward more conservative levels while preserving cash generation capacity.
Accounts receivable concentration and extended collection periods represent the primary financial risk, with DSO of 230 days indicating either customer credit quality issues or collection practice inefficiencies. Receivables comprise 43.9% of total assets, creating vulnerability to customer payment defaults or delays that could materially impact cash flows. Quantifying this risk, a 10% receivable impairment would reduce equity by approximately 5.1%. Customer concentration risk compounds this exposure if major customers represent the bulk of outstanding receivables. Operating margin compression of 70 basis points from 17.6% to 16.9% indicates cost growth outpacing revenue expansion, with SG&A expenses rising faster than sales. If this trend continues, profitability could deteriorate further, particularly if revenue growth decelerates while fixed cost structures remain elevated. Dividend sustainability risk emerges from the calculated payout ratio of 108.9% exceeding earnings, which if maintained would require drawing on cash reserves or equity. While current cash holdings of 37.2 billion yen provide a buffer, long-term dividend payments exceeding earnings generation would gradually erode financial flexibility and capital adequacy.
[Industry Position] (Reference - Proprietary Analysis)
Profitability: ROE 10.5% exceeds industry median of 8.3% (IQR: 3.6%-13.1%), positioning the company in the upper half of IT/Telecom sector peers. Operating margin of 16.9% substantially outperforms industry median of 8.2% (IQR: 3.7%-17.6%), ranking near the top quartile and demonstrating superior cost efficiency. Net profit margin of 12.8% significantly exceeds industry median of 6.0% (IQR: 2.4%-12.3%), placing at the upper quartile boundary and reflecting strong bottom-line profitability.
Financial Health: Equity ratio of 85.5% substantially exceeds industry median of 59.2% (IQR: 41.4%-72.1%), indicating exceptionally conservative capital structure. Current ratio of 661.1% far surpasses industry median of 2.13x (IQR: 1.56x-3.58x), demonstrating extraordinary liquidity strength. Financial leverage of 1.17 stands well below industry median of 1.66 (IQR: 1.37-2.37), reflecting minimal debt utilization.
Efficiency: Asset turnover of 0.698 aligns closely with industry median of 0.68 (IQR: 0.49-0.94), indicating typical asset utilization efficiency. Receivables turnover of 230 days significantly lags industry median of 62 days (IQR: 47-83 days), representing the company's primary efficiency weakness and suggesting collection practices require substantial improvement. Revenue growth of 13.8% exceeds industry median of 10.0% (IQR: -1.4%-19.6%), demonstrating above-median growth momentum.
(Industry: IT/Telecom sector, N=102 companies; Comparison: 2025-Q3 period; Source: Proprietary analysis)
Strong profitability fundamentals with operating margin of 16.9% and net margin of 12.8% both substantially exceeding industry medians demonstrate the company's superior earnings power and competitive positioning within the IT/Telecom sector. The 13.8% revenue growth significantly outpaces both industry median of 10.0% and the company's own full-year forecast of 3.9%, indicating accelerating business momentum that may warrant upward guidance revision if sustained.
Exceptional financial strength characterized by 85.5% equity ratio, 661% current ratio, and minimal debt provides substantial strategic flexibility and downside protection, though the extended DSO of 230 days versus industry median of 62 days represents a critical working capital efficiency gap requiring management attention to enhance cash conversion and reduce credit risk exposure.
Dividend policy sustainability requires monitoring given the calculated payout ratio of 108.9% against Q3 earnings, though substantial cash reserves of 37.2 billion yen and full-year guidance suggesting more normalized payout levels provide near-term support, with long-term sustainability dependent on maintaining earnings growth and improving working capital efficiency to support both shareholder returns and operational reinvestment.
This report was automatically generated by AI analyzing XBRL earnings data as an earnings analysis tool. This is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled from publicly available earnings data. Please make investment decisions at your own responsibility and consult professionals as needed.