Cyber Security Cloud,Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥3.73B
• Operating Income: ¥844M
• Net Income: ¥472M
• EPS: ¥56.93

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

Cyber Security Cloud (TSE: 4493) delivered strong FY2025 Q3 consolidated results under JGAAP, with revenue of ¥3,728 million, up 33.1% YoY, indicating robust demand for its security solutions. Operating income rose 21.1% YoY to ¥844 million, demonstrating solid operating leverage, although operating margin modestly compressed given faster growth in operating costs than gross profit. Net income increased 20.3% YoY to ¥567 million, implying a net margin of 15.2%, consistent with the DuPont input provided. Gross profit was reported at ¥1,897 million, representing a 50.9% gross margin, which is healthy for a software/security subscription-led model. There is a numerical inconsistency between reported cost of sales (¥904 million) and gross profit; we rely on the disclosed gross profit and margin for analysis and treat the cost of sales figure as potentially classified differently. Ordinary income was ¥804 million, and with income tax expense of ¥227 million, the implied effective tax rate is approximately 28–29%, consistent with Japan’s statutory range. DuPont shows ROE of 13.63%, driven by a 15.21% net margin, 0.69x asset turnover, and 1.30x financial leverage—an attractive return profile for a company with low balance-sheet risk. Liquidity is strong with a current ratio of 216.9% and working capital of ¥1,192 million, supporting operational flexibility. The balance sheet appears conservative: total liabilities of ¥1,310 million versus equity of ¥4,160 million implies a debt-to-equity ratio of 0.31x and an equity ratio of roughly 77% (calculated), evidencing low leverage. Interest expense was modest at ¥2.6 million, and interest coverage is very high at about 321x, reflecting minimal financial risk. Cash flow statements were unreported in the dataset (zeros reflect nondisclosure), so operating cash flow and free cash flow cannot be assessed from this extract; we therefore base earnings quality primarily on income-statement and balance-sheet indicators. EPS was ¥56.93; outstanding shares and book value per share were not disclosed in this data, limiting per-share trend analysis beyond EPS. The absence of dividends (annual DPS ¥0) aligns with a growth-oriented reinvestment stance; payout ratio and FCF coverage metrics are not informative given undisclosed cash flows. Overall, the company exhibits healthy growth, margin resilience, and strong solvency, with rising profits and attractive ROE, though we note data limitations in certain line items and the lack of cash flow disclosure in this extract. Outlook depends on sustaining subscription growth, cross-sell/upsell of security products, and disciplined cost scaling. Key watchpoints include maintaining gross margin amidst expansion, confirming cash conversion as sales scale, and monitoring any uptick in customer acquisition costs.

Profitability Analysis

ROE decomposition: Using DuPont, ROE is 13.63% = net margin 15.21% × asset turnover 0.69x × financial leverage 1.30x. The ROE level is attractive for a low-leverage capital structure, indicating solid economic profitability. Margin quality: Reported gross margin is 50.9% (¥1,897m GP on ¥3,728m sales). Operating margin is approximately 22.6% (¥844m/¥3,728m), suggesting healthy operating efficiency, though growth in SG&A likely outpaced gross profit growth given operating income grew 21.1% versus revenue +33.1%. Net margin is 15.2%; with income tax expense of ¥226.9m and ordinary income of ¥804m, the implied effective tax rate is about 28–29% (the 0.0% figure in metrics reflects non-disclosure artifacts). Operating leverage: Revenue grew faster than operating income (+33.1% vs +21.1%), indicating some margin dilution in the period, possibly from increased go-to-market investments, R&D, or partner channel incentives. Interest burden is negligible (interest expense ¥2.6m; coverage ~321x), so financial leverage is not a material ROE driver; returns are predominantly operational. Note: There is an internal inconsistency between cost of sales and gross profit; we anchor margin analysis to the reported gross profit and margin.

Growth Assessment

Top-line growth of +33.1% YoY to ¥3,728m indicates strong demand momentum, consistent with subscription and cloud-security adoption trends. Operating income grew +21.1% YoY to ¥844m, suggesting continued scalability but with some cost catch-up as the company invests in growth. Net income increased +20.3% YoY to ¥567m, reflecting sustained profitability despite heavier opex. Asset turnover at 0.69x is reasonable for a software-like model with accumulated intangible investments; as scale increases, turnover may gradually improve. The growth mix likely includes both volume expansion and potential price/mix effects from higher-value offerings; however, product/segment detail is not available in this dataset. Sustainability hinges on retention rates, net revenue retention (NRR), and expansion via upsell/cross-sell; these metrics are not disclosed here, so we infer sustainability from continued operating profit growth and healthy margins. Near-term outlook: If the company maintains double-digit bookings growth and controls customer acquisition costs, operating leverage can re-accelerate; conversely, aggressive hiring and marketing could moderate margin expansion. International expansion or channel partnerships could be incremental drivers but may compress margins during the build-out phase. We see no signs of one-off gains inflating profit; income growth appears operationally driven based on ordinary income tracking operating income.

Financial Health

Liquidity: Current assets ¥2,212m vs current liabilities ¥1,020m yield a current ratio of 216.9% and quick ratio effectively the same (no inventories disclosed), indicating ample short-term coverage. Working capital stands at ¥1,192m, supporting ongoing growth investments and buffer against receivable cycles. Solvency: Total liabilities ¥1,310m vs equity ¥4,160m result in a debt-to-equity ratio of 0.31x; calculated equity ratio ≈ 77% (4,160/5,405), implying a strong capital base. Interest expense is minimal (¥2.6m), with interest coverage ~321x, reflecting low financial risk. Capital structure: Leverage is conservative; ROE is achieved mainly through margins and turnover rather than debt, providing resilience in downturns. Note: Reported equity ratio of 0.0% in the metrics appears to reflect non-disclosure formatting rather than actual capital weakness.

Cash Flow Quality

Cash flow statements are not disclosed in this dataset (OCF, ICF, FCF shown as zero are placeholders), so we cannot compute OCF/NI, FCF, or cash conversion cycle from this extract. Earnings quality must therefore be inferred from income statement and balance sheet. Profitability is supported by high gross and operating margins and minimal interest burden, which typically correlate with solid cash generation in subscription models. Working capital: With sizeable working capital (¥1,192m) and no inventories, cash conversion will depend on receivables and deferred revenue dynamics, which are not provided here. Depreciation and amortization are not disclosed; EBITDA cannot be assessed from the extract, but D&A is likely non-zero for software capitalization/amortization. Absent cash flow data, we cannot validate free cash flow coverage or the durability of cash generation; management disclosures on deferred revenue, billings, and OCF would be key to confirm earnings-to-cash conversion.

Dividend Sustainability

The company paid no dividends (DPS ¥0), and payout ratio is 0%, consistent with a growth-focused capital allocation policy. Without disclosed operating or free cash flow, FCF coverage cannot be assessed from this extract. Given strong balance sheet metrics (equity ratio ~77%, low leverage) and positive earnings, the company would have capacity for dividends if policy allowed, but reinvestment appears prioritized. Outlook: We expect continued retention of earnings to fund growth initiatives, with any future payout decisions likely contingent on visibility of sustained free cash flow and growth investment needs.

Risk Assessment

Business Risks:

• Customer concentration and renewal risk typical in enterprise security contracts
• Competitive intensity from global cloud and cybersecurity vendors potentially pressuring pricing and margins
• Technology obsolescence and the need for continuous R&D to address evolving threats
• Go-to-market execution risk as the company scales domestically and internationally
• Dependence on partner ecosystems and public cloud platforms
• Regulatory and data protection changes impacting product requirements and costs

Financial Risks:

• Potential working-capital swings from receivables and deferred revenue timing
• Limited cash flow visibility in disclosures; uncertainty around OCF/FCF conversion in this extract
• Foreign currency exposure if international sales expand
• Rising personnel and marketing costs could compress operating margins

Key Concerns:

• Inconsistency between reported cost of sales and gross profit in the dataset; reliance on gross profit disclosure for margin analysis
• Lack of cash flow disclosure (OCF/FCF) limits earnings quality assessment
• Potential margin dilution if growth investments accelerate faster than revenue

Investment Implications

Key Takeaways:

• Strong topline growth (+33.1% YoY) with sustained profitability (OP margin ~22.6%, net margin 15.2%)
• Attractive ROE of 13.63% achieved with low leverage (equity ratio ~77%)
• Operating leverage positive but moderating as growth investments rise
• Balance sheet strength (current ratio 217%, D/E 0.31x) provides resilience and optionality
• Cash flow data not disclosed in this extract; verification of OCF and FCF is a key next step

Metrics to Watch:

• Billings and deferred revenue growth as leading indicators of subscription momentum
• Operating cash flow and free cash flow conversion versus net income
• Gross margin trend amid product mix and scaling of support/infra costs
• Sales efficiency (e.g., CAC payback, sales and marketing as % of revenue)
• Net revenue retention and churn rates
• R&D intensity and pace of new product releases

Relative Positioning: Within Japan’s cybersecurity/software cohort, Cyber Security Cloud exhibits above-peer revenue growth and healthy double-digit operating margins with a conservative balance sheet. Its ROE is competitive given minimal leverage, positioning it favorably on quality metrics, though sustained cash conversion and continued operating leverage will be important to maintain this standing.

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