BroadBand Security,Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥1.49B
• Operating Income: ¥32M
• Net Income: ¥5M
• EPS: ¥1.16

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

Broadband Security Co., Ltd. (4398) reported FY2026 Q1 single-entity results showing modest top-line growth and a sharp rebound in profitability from a low base. Revenue rose 4.8% year over year to ¥1,493 million, while operating income increased to ¥32 million (+816% YoY), lifting the operating margin to roughly 2.1%. Ordinary income (¥15 million) was below operating income, indicating negative net non-operating items despite modest reported interest expense (¥1.4 million). Net income was ¥5 million (+222% YoY), for a net margin of 0.33%, consistent with the provided DuPont net margin. Gross profit was reported at ¥365 million, implying a gross margin of 24.5%; however, cost of sales of ¥1,059.8 million would mechanically imply a higher gross profit by arithmetic, so the gross profit line should be treated as reported rather than derived. Liquidity is solid with current assets of ¥2,561 million and current liabilities of ¥1,304 million, yielding a current ratio of 196% and quick ratio of 196%, supported by negligible inventories (¥2.1 million). The balance sheet remains conservative: total assets are ¥3,698 million and total equity is ¥2,076 million, implying financial leverage of 1.78x and a liabilities-to-equity ratio of 0.81x. Asset turnover of 0.404x and the 0.33% net margin translate into a low calculated ROE of 0.24%, in line with the reported figure for the quarter. Interest coverage appears comfortable at 22.7x based on operating income versus interest expense. Several cash flow and shareholder metrics (OCF, FCF, cash balance, DPS, shares outstanding, equity ratio) are undisclosed in this quarter’s dataset and shown as zero; these should be treated as not reported rather than actual zeros. As such, earnings quality and dividend capacity cannot be validated via cash-based measures this quarter. The sharp YoY improvement in operating income suggests operating leverage and/or cost discipline, but the absolute profit level remains modest and vulnerable to revenue variability. Working capital is ample, which should support near-term operations and any growth in project volumes. Overall, the company displays improving profitability momentum on stable liquidity and moderate leverage, but the lack of cash flow disclosure and the low net margin temper conviction in earnings durability until further quarters confirm trend and provide cash-based corroboration.

Profitability Analysis

ROE_decomposition: DuPont components for the quarter: Net Profit Margin 0.33% × Asset Turnover 0.404 × Financial Leverage 1.78 = ROE 0.24% (matches reported). The ROE is low primarily due to a very slim net margin; leverage is moderate and asset turnover is modest. margin_quality: Reported gross margin is 24.5% (gross profit ¥365 million on revenue ¥1,493 million). Operating margin is ~2.1% (¥32 million / ¥1,493 million). Net margin is 0.33% (¥5 million / ¥1,493 million). Note: gross profit computed arithmetically from revenue minus cost of sales would differ from the reported gross profit; we rely on the provided gross margin for analysis. The compression from operating to net reflects net non-operating costs. operating_leverage: Operating income grew +816% YoY on +4.8% revenue growth, indicating high incremental margins and operating leverage from a low base (likely SG&A discipline and utilization gains). However, given the small absolute profit, leverage can cut both ways if revenue softens.

Growth Assessment

revenue_sustainability: Revenue grew 4.8% YoY to ¥1,493 million. For a cybersecurity services provider, this aligns with steady enterprise demand; sustainability will depend on project mix (assessment/consulting vs. managed security) and retention. profit_quality: Profit expansion outpaced revenue, implying cost control and improved mix or utilization. Ordinary income below operating income suggests some drag from non-operating items; monitoring other income/expense will be important. outlook: Near-term outlook is cautiously constructive given secular cybersecurity demand and available working capital to support delivery. Confirmation requires subsequent quarters to show: (1) continued mid-single to high-single digit revenue growth, (2) operating margin expansion toward mid-single digits, and (3) stability in non-operating items.

Financial Health

liquidity: Current assets ¥2,561 million vs. current liabilities ¥1,304 million imply a current ratio of 196.4% and quick ratio of 196.2%, supported by minimal inventories (¥2.1 million). Working capital is ¥1,256.8 million, indicating strong short-term liquidity. solvency: Total liabilities ¥1,690 million vs. equity ¥2,076 million result in a liabilities-to-equity (debt-to-equity proxy) of 0.81x and financial leverage of 1.78x. Interest coverage at 22.7x suggests manageable financial risk. capital_structure: The balance sheet is equity-heavy with moderate leverage. The disclosed equity ratio is shown as 0.0% in the dataset but should be treated as undisclosed; based on assets and equity, the implied equity ratio would be approximately 56%.

Cash Flow Quality

earnings_quality: Cash flow data (OCF, investing, financing, cash balance) are not disclosed this quarter and appear as zeros. Accordingly, OCF/Net Income of 0.00 and FCF of 0 should be treated as not available. Earnings quality cannot be validated via cash conversion this quarter. FCF_analysis: Free cash flow cannot be calculated due to missing OCF and capex details. No view on reinvestment intensity or cash generation can be formed from the provided data. working_capital: With ¥1,256.8 million of working capital and very low inventories, liquidity looks robust. However, absent cash flow data, we cannot assess receivables collection or payables timing effects.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are shown as 0.00 in the dataset (treated as undisclosed). With quarterly net income of ¥5 million and low net margin, distributable capacity appears limited near term without evidence of sustained profit expansion. FCF_coverage: FCF coverage is shown as 0.00x but OCF/FCF are undisclosed; no conclusion can be drawn on coverage. policy_outlook: Given modest profitability and the company’s growth profile, priority is likely on reinvestment and maintaining liquidity rather than cash returns, pending clearer visibility on earnings and cash generation.

Risk Assessment

Business Risks:

• Project timing and utilization risk inherent to cybersecurity consulting and assessment services
• Pricing pressure from competition and vendor consolidation
• Talent acquisition and retention in a tight cybersecurity labor market
• Potential client budget delays impacting quarterly revenue recognition
• Execution risk in scaling managed/security monitoring services

Financial Risks:

• Low net margin (0.33%) leaves little buffer against revenue volatility
• Non-operating drag (ordinary income below operating income)
• Lack of disclosed cash flow data limits visibility on cash conversion and liquidity composition
• Potential working capital swings given services billing cycles

Key Concerns:

• Earnings durability unconfirmed due to missing OCF/FCF data
• Discrepancy between reported gross profit and arithmetic derivation from revenue and cost of sales
• Small absolute profit base despite YoY improvement

Investment Implications

Key Takeaways:

• Top-line grew 4.8% YoY to ¥1,493 million; operating income rebounded to ¥32 million (+816% YoY) from a low base
• Net margin remains thin at 0.33%, yielding low quarterly ROE of 0.24%
• Liquidity is strong (current ratio ~196%, working capital ~¥1.26 billion) with moderate leverage (liabilities/equity 0.81x)
• Interest coverage is comfortable at 22.7x, indicating low near-term financing stress
• Cash flow metrics are undisclosed this quarter, limiting assessment of earnings quality and dividend capacity

Metrics to Watch:

• Revenue growth trajectory and backlog/pipeline indicators
• Operating margin progression toward mid-single digits
• Ordinary income versus operating income to track non-operating items
• Cash flow from operations and free cash flow once disclosed
• DSO/DPO trends and any receivables concentration
• Headcount and utilization rates affecting delivery capacity

Relative Positioning: Within Japan’s listed cybersecurity services space, the company exhibits solid liquidity and moderate leverage with improving operating momentum, but currently trails best-in-class peers on profitability and cash flow visibility.

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