SECURE,INC. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥4.95B
• Operating Income: ¥204M
• Net Income: ¥214M
• EPS: ¥19.24

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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: Solid top-line growth but significant margin compression led to a weak profit quarter for FY2025 Q3. Revenue rose 4.8% YoY to 49.48, indicating underlying demand resilience. Gross profit reached 19.05 with a gross margin of 38.5%. Operating income declined 29.3% YoY to 2.04, implying operating margin fell to 4.1%. Ordinary income decreased 33.0% YoY to 1.87, reflecting higher non-operating expenses and lower operating leverage. Net income dropped 51.2% YoY to 1.04, driving net margin down to 2.1%. Based on reconstructed prior-period figures, operating margin likely contracted by about 200 bps (from ~6.1% to 4.1%). Net margin likely contracted by roughly 240 bps (from ~4.5% to 2.1%). SG&A at 16.16 absorbed 85% of gross profit, compressing operating leverage despite revenue growth. Interest expense remained modest at 0.09, and interest coverage was strong at 21.9x. Liquidity is robust with a current ratio of 285% and cash and deposits of 23.16 against current liabilities of 14.31. Balance sheet leverage is moderate with D/E of 0.77x and financial leverage at 1.77x. ROE stands at 3.6%, weighed by low net margin despite decent asset turnover of 0.98x. Cash flow data were not disclosed, so earnings quality (OCF vs NI) cannot be assessed this quarter. With goodwill of 3.05 and intangible assets of 3.74, there is some future impairment risk if profitability does not stabilize. Near-term focus should be on cost control and mix improvement to restore operating margin while preserving growth.

Profitability Analysis

DuPont (ROE = Net Profit Margin × Asset Turnover × Financial Leverage): 2.1% × 0.982 × 1.77 ≈ 3.6%, consistent with the reported ROE. The largest driver of the weak ROE is the compressed net profit margin; asset turnover is acceptable (~0.98x) and leverage is moderate (1.77x). Operating income fell 29.3% YoY despite 4.8% revenue growth, indicating SG&A growth outpaced gross profit growth and squeezed operating margin to 4.1%. Business reason: higher operating expenses (likely personnel, go-to-market, and development-related costs) and/or less favorable project mix eroded operating leverage; non-operating expenses (0.11) also ticked up vs minimal non-operating income (0.01). Sustainability: margin pressure is partly cyclical/mix-driven but not necessarily structural; without explicit cost normalization measures, recovery is uncertain. Watch for SG&A growth vs revenue—current data signal negative operating leverage (SG&A/GP ~85%). Gross margin at 38.5% provides room for recovery if cost discipline improves and higher-margin offerings (e.g., solutions/services) scale.

Growth Assessment

Revenue growth of +4.8% YoY to 49.48 suggests steady demand. However, profit growth lagged significantly: operating income -29.3% and net income -51.2% YoY, indicating growth quality issues due to cost inflation or unfavorable mix. Reconstructed prior-period context implies operating margin fell ~200 bps and net margin ~240 bps YoY. Non-operating items were a small headwind (net -0.10), not the primary driver. Outlook hinges on restoring operating leverage via SG&A discipline and potentially price/mix improvements. With cash at 23.16 and ample liquidity, the company has runway to invest in growth, but near-term EPS recovery requires margin stabilization. No guidance or backlog disclosed; thus, revenue sustainability beyond Q3 cannot be firmly assessed.

Financial Health

Liquidity is strong: current ratio 285.1% and quick ratio 285.1% (no inventories reported). Cash and deposits of 23.16 comfortably cover short-term loans of 2.00 and a large portion of total current liabilities of 14.31, indicating low near-term refinancing risk. Solvency is healthy with D/E at 0.77x and total liabilities of 21.95 vs equity of 28.46; financial leverage at 1.77x is moderate. Interest coverage is robust at 21.9x, reflecting manageable interest burden. No explicit off-balance sheet obligations were disclosed. Asset composition includes goodwill (3.05) and intangible assets (3.74), which introduce potential impairment risk if performance weakens. No maturity mismatch risk evident given current assets (40.80) substantially exceed current liabilities (14.31).

Cash Flow Quality

Operating cash flow was not disclosed; thus OCF/Net Income and free cash flow cannot be evaluated this quarter. With net income at 1.04 and no working capital details beyond receivables (7.78), we cannot assess accrual intensity or working capital-driven earnings management. Cash on hand (23.16) provides a buffer, but without OCF we cannot confirm cash conversion or FCF sustainability for capex and dividends.

Dividend Sustainability

Dividend-related data (DPS, total dividends, payout) were not disclosed. Consequently, payout ratio and FCF coverage cannot be calculated. With net income of 1.04 and strong liquidity, the balance sheet could support modest distributions; however, given margin compression and absent OCF visibility, prudence would suggest prioritizing margin recovery and cash generation until profitability stabilizes. No explicit dividend policy was provided in the data.

Risk Assessment

Business Risks:

• Margin compression risk from SG&A growth outpacing revenue, evidenced by operating income -29.3% YoY despite +4.8% revenue.
• Project mix and pricing risk affecting gross and operating margins.
• Execution risk on scaling higher-margin solutions/services while controlling fixed costs.
• Potential impairment risk related to goodwill (3.05) and intangible assets (3.74) if earnings weaken.

Financial Risks:

• Limited visibility on cash generation due to unreported OCF and capex.
• Earnings sensitivity to non-operating items, albeit currently small (net non-operating -0.10).
• Refinancing and interest rate risks are low near term but still present given long-term loans of 6.19.

Key Concerns:

• Net margin compressed to 2.1%, pulling ROE down to 3.6%.
• Negative operating leverage (SG&A/GP ~85%) constraining profit growth.
• Data gaps in cash flow and SG&A breakdown limit assessment of cost structure and earnings quality.

Investment Implications

Key Takeaways:

• Top-line growth (+4.8% YoY) contrasted with sharp profit declines (OP -29.3%, NI -51.2%).
• Operating margin fell to ~4.1% and net margin to 2.1%, implying ~200–240 bps YoY margin compression.
• ROE at 3.6% is held back by low net margin despite acceptable asset turnover (0.98x) and moderate leverage (1.77x).
• Balance sheet and liquidity are strong (current ratio 285%, D/E 0.77x, interest coverage 21.9x).
• Cash flow visibility is lacking; earnings quality cannot be validated this quarter.

Metrics to Watch:

• OCF and FCF trends (OCF/NI target >1.0) once disclosed.
• SG&A growth vs revenue growth and SG&A/GP ratio for operating leverage restoration.
• Gross margin trajectory and pricing/mix changes.
• Backlog/order intake and project timing indicators (if disclosed).
• Impairment signals for goodwill/intangibles.
• Interest-bearing debt schedule and any refinancing updates.

Relative Positioning: Within small-cap tech/security peers, SECURE shows healthy liquidity and conservative leverage but currently lags on profitability momentum due to cost pressure; near-term relative performance hinges on margin recovery rather than growth acceleration.

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