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

SECURE Inc. (42640) reported FY2025 Q3 (cumulative) revenue of ¥4,948 million, up 4.8% year over year, indicating sustained top-line growth despite a softer earnings profile. Gross profit was ¥1,905 million, translating to a gross margin of 38.5%, which is healthy for a security systems and solutions integrator but shows limited operating leverage at the current scale. Operating income declined 29.3% YoY to ¥204 million, compressing the operating margin to about 4.1%, implying higher SG&A and/or project mix headwinds. Ordinary income was ¥187 million, slightly below operating income, suggesting net non-operating expenses of roughly ¥17 million, including interest expense of ¥9.3 million. Net income fell 51.2% YoY to ¥104 million, with EPS at ¥19.24, indicating notable bottom-line pressure versus modest sales growth. The DuPont decomposition points to a net margin of 2.10%, asset turnover of 0.982x, and financial leverage of 1.77x, resulting in an ROE of 3.65%, which is subdued versus typical mid-single to low-double digit targets for the sector. Liquidity remains solid with a current ratio of 191%, supported by current assets of ¥2,942 million against current liabilities of ¥1,539 million, and working capital of ¥1,403 million. The balance sheet appears conservative with total liabilities of ¥2,502 million and total equity of ¥2,846 million; this implies an equity ratio around 56.4%, despite a reported equity ratio of 0.0% (the 0% reflects non-disclosure under the provided feed, not actual zero). Interest coverage is comfortable at 21.9x, highlighting manageable financing costs. Effective tax appears closer to 39% (¥66 million taxes on ~¥170 million pre-tax) rather than 0% indicated in the “calculated metrics,” which is a limitation of the supplied dataset. Cash flow statements are not disclosed in this feed (zeros indicate unreported), restricting assessment of operating cash conversion and free cash flow. No dividend was reported (DPS ¥0), consistent with a conservative stance while earnings softness persists and cash flow data are unavailable. The earnings mix suggests margin headwinds likely from project timing, input costs, and/or investment in growth capabilities. With asset turnover near 1.0x, capital intensity appears moderate, but the absence of depreciation and cash flow disclosures limits visibility on capex and maintenance needs. Overall, the company maintains a sound financial position but faces near-term profitability pressure, and the key swing factors will be gross margin resilience, SG&A discipline, and order/project execution into the fiscal year-end. Data limitations constrain deeper cash flow quality analysis; conclusions focus on the available non-zero items.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 2.10%
• asset_turnover: 0.982x
• financial_leverage: 1.77x
• calculated_ROE: 3.65%
• commentary: ROE of 3.65% is driven by modest asset efficiency and low net margins. Leverage is moderate and not the main driver. Margin compression is the principal headwind to ROE expansion. margin_quality: Gross margin at 38.5% is solid for a solutions/installation-heavy model but did not translate into operating leverage; operating margin stands at 4.1% (¥204m/¥4,948m), down sharply YoY as operating income fell 29.3% vs. +4.8% sales growth. Ordinary income trailing operating income implies net non-operating costs (¥17m), primarily interest (¥9.3m) and potentially other minor items. operating_leverage: Negative operating leverage in the period: +4.8% revenue vs. -29.3% operating profit indicates SG&A growth and/or lower project pricing offsetting gross profit gains. Sustained scale or improved mix will be needed to restore mid-single-digit operating margins.

Growth Assessment

revenue_sustainability: Top-line growth of 4.8% YoY to ¥4,948m suggests steady demand, likely from security systems, access control, and related services. Sustainability hinges on backlog, repeat maintenance/service revenues, and public/private capex cycles. profit_quality: Net income declined 51.2% YoY to ¥104m despite revenue growth, pointing to margin pressure rather than revenue shortfall. Effective tax inferred at ~39% also weighed on bottom line. Ordinary income < operating income shows mild non-operating drag. outlook: Key to recovery will be stabilization of gross margin, tighter SG&A control, and project execution into Q4. If component costs and delivery lead times normalize and higher-value software/recurring services mix increases, profitability could mean-revert; otherwise, OPM may remain around low-4% levels near term.

Financial Health

liquidity: Current assets ¥2,942m vs. current liabilities ¥1,539m yield a current ratio of 191% and working capital of ¥1,403m, suggesting ample short-term liquidity. Quick ratio is shown as 191% due to inventory not being disclosed in this dataset. solvency: Total liabilities ¥2,502m and equity ¥2,846m; implied equity ratio ≈56.4% and debt-to-equity 0.88x indicate moderate leverage. Interest coverage at 21.9x (¥204m/¥9.3m) is comfortable. capital_structure: Leverage is balanced with room to support growth. Absence of disclosed cash and detailed debt breakdown limits visibility on net debt and maturity profile.

Cash Flow Quality

earnings_quality: Cash flow statements are not disclosed in the provided data (zeros represent unreported). As such, OCF/NI and FCF conversion cannot be assessed, and the reported 0.00 ratios should not be interpreted as actual cash shortfalls. FCF_analysis: Depreciation and capex are not disclosed, preventing estimation of EBITDA or FCF. Given moderate asset turnover, capital intensity may be manageable, but verification requires OCF/CapEx details. working_capital: Working capital is positive at ¥1,403m. With inventories not disclosed, receivables and payables dynamics cannot be analyzed; project-based billing could cause quarter-to-quarter volatility in OCF.

Dividend Sustainability

payout_ratio_assessment: DPS is reported as ¥0 and payout ratio 0%. With EPS of ¥19.24 and lower net income YoY, management appears to be preserving capital. Lack of cash flow disclosure prevents a coverage assessment. FCF_coverage: FCF is unreported; thus, FCF coverage cannot be calculated. The displayed 0.00x is a placeholder due to missing CF data. policy_outlook: Absent a disclosed dividend and with profitability under pressure, a conservative stance is plausible near term. If margins normalize and OCF visibility improves, future distributions could be reconsidered, subject to policy and growth investment needs.

Risk Assessment

Business Risks:

• Project timing and mix volatility impacting gross and operating margins
• Component and equipment procurement costs and lead times affecting pricing and delivery
• Customer concentration risk in large projects or public-sector tenders
• Competitive pricing pressure in security systems and integration services
• Execution risk in scaling software/recurring services to lift margins
• Currency exposure on imported hardware (USD/JPY) impacting COGS

Financial Risks:

• Margin compression leading to weaker interest coverage if borrowing increases
• Potential receivables collection timing risk due to milestone-based billing
• Limited visibility on cash and capex due to unreported CF and depreciation figures
• Tax rate variability (~39% implied) affecting net income sensitivity

Key Concerns:

• Operating income down 29.3% YoY despite 4.8% revenue growth
• Net income down 51.2% YoY; ROE at 3.65% below sector norms
• Lack of disclosed cash flow data impedes assessment of earnings-to-cash conversion

Investment Implications

Key Takeaways:

• Revenue growth of 4.8% but pronounced operating deleverage; OPM ~4.1%
• ROE at 3.65% constrained by a 2.10% net margin despite moderate leverage
• Solid liquidity (current ratio 191%) and moderate leverage (D/E 0.88x)
• Interest coverage healthy at 21.9x; financing risk currently low
• Cash flow disclosure absent; FCF and OCF conversion unknown
• No dividend declared, consistent with preserving balance sheet flexibility

Metrics to Watch:

• Gross margin trajectory and project mix
• SG&A growth versus revenue growth (operating leverage)
• Order backlog and win rates for higher-value solutions/services
• Operating cash flow and receivables days once disclosed
• Capex and depreciation to gauge capital intensity and EBITDA
• Tax rate normalization and non-operating items impacting ordinary income

Relative Positioning: Within Japanese security systems and integration peers, SECURE exhibits steady top-line growth but currently lower operating margin and ROE, balanced by solid liquidity and moderate leverage; margin recovery and cash conversion are key for convergence with peer profitability metrics.

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
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