Q3 results for the fiscal year ending March 2026 delivered growth across all metrics: Revenue ¥7.81B (YoY +¥1.52B +24.1%), Operating Income ¥1.58B (YoY +¥0.41B +35.1%), Ordinary Income ¥1.53B (YoY +¥0.43B +38.4%), and Quarterly Net Income ¥1.00B (YoY +¥0.28B +39.5%). Operating margin reached 20.2%, as the three-target strategy—Cybersecurity Business for upper mid-tier/mid-sized/SMB clients, Security Education Business for IT companies/SIers, and Security Talent Business—proved effective, driving YoY revenue growth across all business domains. Full-year guidance is maintained at Revenue ¥11.00B (+25.0% YoY), Operating Income ¥2.20B (+36.2%), and Net Income ¥1.42B, targeting a 20% operating margin.
[Revenue] Top-line drivers: Revenue of ¥7.81B grew +24.1% YoY, driven primarily by: (1) Security Education Business surged +61.7%, with cumulative trainees reaching 25,445 (11,294 in the current period); (2) Security Talent Business grew +44.3% with active headcount increasing to 137; (3) Cybersecurity Business maintained steady growth at +14.2%, led by targeted email phishing simulation (cumulative 11,000 corporate implementations) and vulnerability assessment services. The regional bank channel (business alliance model with Kirayaka Bank), nationwide expansion via 47 reseller partners, and enhanced sales coverage with the new Hokkaido office (February 1, 2025) contributed.
[Profit and loss] Bottom-line drivers: Operating Income ¥1.58B (+35.1%) with an operating margin of 20.2% (improved +1.7pt from 18.5% in the prior-year period). Gross margin held at 36.4%, and SG&A efficiency delivered operating leverage. Between Operating Income and Ordinary Income, Non-operating Income of ¥0.11B and Non-operating Expenses of ¥0.15B were recognized; among these, an equity-method investment loss of ¥0.04B (related to BroadBand Security) had an impact. From Ordinary Income of ¥1.53B to pre-tax quarterly income of ¥1.52B, special items were near zero. The effective tax rate was approximately 34.4%, resulting in Net Income of ¥1.00B (net margin 12.8%). While a temporary equity-method investment loss of ¥0.04B was recorded, the recurring income structure remained solid, achieving a pattern of higher revenue and profits.
Cybersecurity Business (for upper mid-tier, mid-sized, and SMB clients) achieved steady growth with revenue up +14.2% YoY. The targeted email phishing simulation service has cumulative adoption by 11,000 companies, and the one-stop provision of vulnerability assessments and security solutions underpins earnings stability. Security Education Business (for IT companies and SIers) delivered strong growth with revenue up +61.7%, reaching 25,445 cumulative trainees. Expanding security talent development needs and demand associated with DX promotion drove growth. Security Talent Business (CyberSTAR) saw revenue up +44.3%, with active headcount increasing to 137, and business acceleration supported by the spin-off effect. The 36.4% gross margin reflects the high value-added nature of education and talent services across businesses, establishing a well-balanced growth structure across all domains. The 20.2% operating margin resulted from growth and operating leverage in each business; while the core business is presumed to be the Cybersecurity Business, the key growth drivers for higher revenue and profit were the Security Education and Talent businesses.
Profitability: ROE 24.9% (improved YoY), Operating Margin 20.2% (+1.7pt from 18.5% in the prior-year period), Net Margin 12.8%, EBIT margin 20.2%. DuPont three-factor decomposition: Net Margin 12.8%, Total Asset Turnover 0.859x, Financial Leverage 2.27x. CFA five-factor decomposition: Tax Burden 0.655 (effective tax rate approximately 34.4%), Interest Burden 0.965, EBIT margin 20.2%. Financial soundness: Equity Ratio 44.1% (improved +6.3pt from 37.8%), Current Ratio 144.0%, Quick Ratio 143.6%. Interest-bearing debt ¥1.84B, Debt-to-Equity Ratio 1.27x, Debt/Capital Ratio 31.5%. Cash quality: Interest expense ¥0.014B, Interest Coverage 114x (EBIT ¥1.578B ÷ interest expense ¥0.014B). Contract liabilities of ¥1.67B reflect advance receipts/performance status and contribute to revenue stability. Working capital ¥1.63B (Current Assets ¥6.72B − Current Liabilities ¥5.09B).
Operating Cash Flow (OCF): Specific figures are undisclosed, but OCF support relative to Net Income of ¥1.00B is important for the sustainability of the dividend policy. If the ratio of OCF to Net Income is ≥1.0x, it indicates healthy cash generation. Investing CF: Investment securities increased from ¥0.76B to ¥1.27B YoY (+¥0.51B, +66.3%), likely driven by capital alliances (Kanematsu Electronics, Marubeni I-DIGIO Holdings) and an LP commitment to Japan Cybersecurity Fund No.1. Financing CF: Short-term borrowings increased from ¥0.40B to ¥0.70B YoY (+¥0.30B, +75.0%), used for temporary funding of working capital and investments. Dividends: interim ¥20.85, year-end ¥20.86, continuing a progressive dividend policy (Payout Ratio 35%). FCF: Since OCF is undisclosed, precise calculation is difficult; however, relative to Net Income of ¥1.00B, considering the ¥0.51B increase in investment securities and capex, the company appears able to both fund dividends (planned ¥41.71 per share, total approximately ¥0.63B) and build equity. Cash generation assessment: Standard to needs-monitoring. With higher short-term borrowings and a high payout ratio, stability of OCF is key to dividend sustainability.
The gap between Ordinary Income of ¥1.53B and Net Income of ¥1.00B is mainly tax expense of ¥0.53B, with an effective tax rate of approximately 34.4%. Special items had near-zero impact (pre-tax quarterly income before special items was ¥1.52B), indicating limited one-offs. Although an equity-method investment loss of ¥0.04B was recorded in non-operating expenses, the core operating income structure is recurring and high quality. Non-operating income was ¥0.11B, only about 1.4% of Revenue ¥7.81B, implying low reliance on non-core income. Accrual analysis is difficult as OCF is undisclosed; however, contract liabilities of ¥1.67B function as deferred revenue, and the management of accounts receivable of ¥2.53B (27.8% of total assets) affects earnings quality. The high ROE of 24.9% is primarily driven by strong core operating profitability and asset efficiency, evidencing a high-quality recurring income structure.
Progress versus full-year guidance: Revenue of ¥7.81B is 71.0% of the full-year forecast of ¥11.00B; Operating Income of ¥1.58B is 71.8% of the ¥2.20B forecast; Net Income of ¥1.00B is 70.4% of the ¥1.42B forecast. Compared to standard progress (Q3 = 75%), Revenue is -4.0pt, Operating Income is -3.2pt, and Net Income is -4.6pt—slightly below—but still achievable, implying Q4 standalone Revenue of ¥3.19B and Operating Income of ¥0.62B. No forecast revision has been made, maintaining targets of +25.0% Revenue growth, +36.2% Operating Income growth, and a 20.0% operating margin. The slightly lower progress reflects a plan that allocates costs to Q4, incorporating advertising expenses of around ¥0.15B for human capital investment over the full year and year-end bonuses. Management’s mid-term targets call for 25% annual Revenue growth and a 1.0pt annual improvement in Operating Margin, aiming for Revenue of ¥17.19B and a 22% operating margin in FY2028. While sustained high growth is required for full-year achievement, current progress is on plan supported by the three-target strategy and channel expansion.
Dividend policy: Continuing a progressive dividend policy, with a full-year Payout Ratio of 35% planned. The company plans a total of ¥41.71 (interim ¥20.85, year-end ¥20.86). Based on full-year Net Income guidance of ¥1.42B and approximately 15 million shares outstanding, total dividends would be approximately ¥0.63B, implying a Payout Ratio of about 44%. The progressive dividend stance maintains increases in step with profit growth from the prior period. Share repurchases: No share buybacks are mentioned in the disclosed data; returns are via dividends only. Total Return Ratio is calculated based on dividends alone. Dividend sustainability: With Net Income of ¥1.00B and total dividends of approximately ¥0.63B (Payout Ratio roughly 44%), financial backing is supported by Equity of ¥4.01B and an increase in retained earnings (+¥0.59B, +25.5% YoY). Given the relatively high payout, sustained OCF generation is key to maintaining the policy. If cash and OCF are maintained, the progressive dividend policy appears sustainable. The shareholder benefits program was enhanced and changed to a semiannual, selectable format (around 50 shareholders chose education services), reflecting an active return stance.
[Short-term] (1) Check progress toward full-year guidance: focus on achieving Q4 Revenue of ¥3.19B and Operating Income of ¥0.62B. (2) Expansion of the regional bank channel: horizontal rollout of the Kirayaka Bank model to approach approximately 52,000 companies in Yamagata Prefecture and extend to other regional banks to accelerate channel expansion. (3) Impact of the new Hokkaido office: contribution from the five-office nationwide structure following the February 1, 2025 launch. (4) Whether equity-method affiliate BroadBand Security’s performance recovers. [Long-term] (1) Progress toward mid-term numerical targets: sustaining 25% annual growth and a 1.0pt annual margin improvement to reach Revenue of ¥17.19B and a 22% operating margin in FY2028. (2) Addressing the shortage of security talent (domestic shortfall of 110,000) via the CyberSTAR spin-off effect and expansion of the security-talent SES model. (3) Collaboration effects with capital alliance partners: new customer acquisition and product lineup expansion via alliances with Kanematsu Electronics and Marubeni I-DIGIO Holdings. (4) Capturing market expansion driven by national economic security policies and rising protection needs for critical infrastructure.
[Industry position] (Reference information; company-compiled) Profitability: ROE 24.9% (+17.6pt vs. industry median 7.3%), Operating Margin 20.2% (+13.8pt vs. 6.4%), Net Margin 12.8% (+8.0pt vs. 4.8%). The company ranks among the top in the industry on profitability, demonstrating advantages from high value-added services. Growth: Revenue growth +24.1% (+12.1pt vs. industry median +12.0%). The company’s growth is among the top in the industry, with the three-target strategy and channel expansion delivering high growth. Soundness: Equity Ratio 44.1% (−11.1pt vs. industry median 55.2%), Current Ratio 1.44x (−0.64x vs. industry median 2.08x). Although soundness indicators are below the industry median, this is viewed as a strategic choice to employ moderate financial leverage (2.27x) to enhance ROE. Net debt/EBITDA is the industry median −2.88 (net cash), while the company is likely in positive territory due to increased short-term borrowings. Return on total assets: The company’s ROA is approximately 11.0% (= Net Margin 12.8% × Total Asset Turnover 0.859), significantly above the industry median of 3.8%. Industry: IT & Communications (68 companies), Comparison set: 2025 Q3 results, Source: company compilation
(1) Risk of revenue growth slowdown: While current growth is +24.1%, achieving +25.0% for the full year and the mid-term 25% annual growth target presupposes sustained high growth. If order trends or contract renewals stall, the regional bank channel rollout is delayed, or intensified competition slows customer acquisition, underperformance versus revenue plans could delay operating margin improvement. Contract liabilities of ¥1.67B (18.4% of total assets) are large, and contract cancellations or execution delays would directly impact short-term earnings. (2) Dividend sustainability risk: While the planned Payout Ratio is 35%, on an actual basis it is about 44%, which is relatively high. Paying total dividends of approximately ¥0.63B against Net Income of ¥1.00B assumes stable OCF generation. As OCF is undisclosed, rigorous assessment is difficult; however, short-term borrowings increased from ¥0.40B to ¥0.70B (+¥0.30B, +75.0%), indicating the use of short-term liabilities to supplement working capital and investments. If OCF falls below Net Income, or if large investments (M&A, capex) occur, dividend capacity may be constrained, making it difficult to maintain the progressive policy. Monitoring cash balances and the OCF/Net Income ratio is important. (3) Escalation in sophistication of cyber threats and intensification of state-sponsored attacks: While the urgency of security measures for clients increases due to risks of leakage of critical technologies and rising attacks on critical infrastructure, if the company’s service quality and response capabilities fail to keep pace with evolving threats, there is a risk of reduced customer satisfaction and order declines. The recognition of a ¥0.04B loss on investment in equity-method affiliate BroadBand Security suggests alliance partner underperformance could affect profitability.
Earnings highlights: (1) Balancing high profitability and high growth: The company simultaneously achieves top-tier industry profitability and growth—ROE 24.9%, Operating Margin 20.2%, and Revenue growth +24.1%. All three targets (Cybersecurity for upper mid-tier/mid-sized/SMBs, Education for IT/SIers, and Security Talent) are growing, with a well-balanced business portfolio. The +61.7% growth in the Security Education Business and +44.3% growth in the Talent Business are major drivers of higher revenue and profit, with operating leverage delivered by high value-added services. Data indicate that as scale expands, the operating margin improved by +1.7pt from 18.5% to 20.2%, with scale benefits and SG&A efficiency supporting profitability. (2) Balance between dividend policy and cash allocation: While maintaining a relatively high return stance with an effective Payout Ratio of about 44% under a progressive policy, retained earnings increased +¥0.59B (+25.5% YoY), expanding Equity to ¥4.01B. Meanwhile, short-term borrowings rose +¥0.30B (+75.0%) and investment securities increased +¥0.51B (+66.3%), indicating simultaneous progress of strategic investments—such as capital alliances and the LP commitment to Japan Cybersecurity Fund No.1—and short-term funding. The data suggest a construct in which short-term borrowings supplement liquidity to execute both high dividends, internal reserves accumulation, and strategic investments. Stability of OCF is key to dividend sustainability, and management of accounts receivable of ¥2.53B (27.8% of total assets) and the cash conversion cycle will drive cash quality. (3) Progress in the regional bank channel and nationwide rollout: The regional bank channel rollout, modeled on the business alliance with Kirayaka Bank (approaching approximately 52,000 companies in Yamagata Prefecture), and the establishment of a five-office nationwide structure with the new Hokkaido office are progressing as concrete measures for channel expansion. Together with strengthened nationwide sales coverage via 47 reseller partners, the feasibility of +25.0% full-year growth and the mid-term 25% annual growth target is increasing. Importantly, revenue is growing +24.1% YoY in line with plan, indicating the regional bank channel and partner network are functioning. The effects of channel expansion and horizontal rollout of the regional bank model from Q4 onward will be key drivers toward achieving mid-term growth targets.
This report is an automatically generated earnings analysis produced by AI through integrated analysis of XBRL earnings release data and PDF earnings presentation materials. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company based on publicly disclosed financial data. Investment decisions are your own responsibility; please consult a professional as needed before making any investment decisions.