Earnings Deep Dive: Broadband Security (4398) FY2026 Results – Record-High Revenue, Shift to High Profitability, and Evolving Growth Strategies

Broadband Security, Inc. (Securities Code: 4398), a provider of comprehensive cybersecurity solutions, has released its financial results for the fiscal year ended June 2026. Following a restructuring of its sales organization, the company has achieved record-high revenue and significant profit growth throughout the second half of the fiscal year.

This report extracts key topics from the latest financial disclosures, providing a detailed analysis of the company's performance highlights, shifts in profit structure, segment-specific KPIs, future growth strategies, and enhanced shareholder return policies.

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1. FY2026 Performance Summary: Record Revenue and Significant Operating Profit Improvement

For the fiscal year ended June 2026, the company reported consolidated net sales of 6,779 million yen (+11.1% YoY) , operating profit of 511 million yen (+98.4% YoY) , ordinary profit of 542 million yen (+115.9% YoY) , and net income of 371 million yen (+160.0% YoY) , achieving both revenue growth and a substantial increase in profits. Net sales reached a record high .

While the company fell short of its initial full-year forecasts (net sales of 7,100 million yen, operating profit of 700 million yen) due to the time required to fully operationalize its new "comprehensive solution sales" structure, the gross profit margin improved by +2.5pt to 31.2% (from 28.7% in the previous year), and the operating profit margin improved by +3.2pt to 7.5% (from 4.2% in the previous year).

The following slide illustrates the structural changes between the first and second halves of the year that underpin this performance.

[Slide Analysis: Performance Trends and Profit Structure Strengths]

The slide above (Page 4) clearly demonstrates the "acceleration of growth momentum from the first to the second half" and the "profit structure highlighting high marginal profit ratios," which are critical to understanding the company's performance.

• Rapid Expansion in the Second Half : While first-half sales were 3,247 million yen (+5.7% YoY), second-half sales surged to 3,531 million yen (+16.5% YoY) . Operating profit saw an even more dramatic shift, rising from 190 million yen in the first half (+45.8% YoY) to 321 million yen in the second half (+152.3% YoY) , with the second half alone accounting for approximately 63% of total operating profit.
• High Profit Sensitivity via Fixed-Cost Model : The company’s business model allows fixed costs, such as cost of sales and SG&A, to be kept at a constant level. Consequently, as sales exceed the break-even point, profit margins expand rapidly. The successful penetration of comprehensive solution proposals has proven this structural strength, resulting in a significant jump in operating profit margins toward the end of the fiscal year.

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2. Customer KPIs and Order Backlog Trends: Rising ARPU and Record-High Backlog

Key performance indicators supporting the company's growth show not only quantitative growth in the number of customers but also a notable increase in Average Revenue Per User (ARPU) .

• Customer Count and Revenue per Customer : While the number of customers remained steady at 1,628 (compared to 1,611 in the previous year), revenue per customer grew to 4.16 million yen (from 3.79 million yen). This reflects the success of enhanced upselling and cross-selling efforts, shifting from single-service offerings to integrated security solutions.

The following slide shows the trends in order backlog, a leading indicator of future performance.

[Slide Analysis: Order Backlog Trends and Revenue Stability]

The slide above (Page 6) illustrates the accumulation and quality of the order backlog , which serves as the foundation for future revenue.

• Record-High Order Backlog of 3,183 Million Yen : The year-end order backlog reached 3,183 million yen, up 9.1% YoY , maintaining an upward trend and hitting a record high.
• Stable Recurring Revenue Ratio : Within the backlog, Information Leakage IT Countermeasures account for 67% (2,148 million yen) . This represents stock-type revenue, such as monthly operation and monitoring services, which enhances the stability of future earnings.
• Growth in Consulting as a Gateway : The backlog for "Auditing & Consulting," which serves as the starting point for all projects, has also steadily accumulated to 762 million yen (24% of the total) . This confirms that the cross-sell pipeline—identifying customer issues through consulting and leading them to "Vulnerability Assessment" (9%, 272 million yen) and "Information Leakage IT Countermeasures"—is functioning effectively.

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3. Performance Highlights by Service Segment

The company's business is divided into three main segments, all of which achieved year-on-year growth in FY2026.

1. Auditing & Consulting : Net sales of 1,849 million yen ( +15.4% YoY )
   • High-level consulting projects grew significantly, leveraging expertise in standards such as PCI DSS and SWIFT to expand the customer base.
2. Vulnerability Assessment : Net sales of 1,778 million yen ( +10.5% YoY )
   • Services diagnosing latent risks in systems and web applications; growth in orders and sales in the second half contributed significantly to full-year results.
3. Information Leakage IT Countermeasures : Net sales of 3,151 million yen ( +9.0% YoY )
   • The company's core business, covering security monitoring and operations (SOC/MDR, etc.). Recurring revenue (stock revenue) in this area grew 5.1% YoY to 2,389 million yen , supporting growth alongside spot-type revenue (equipment sales, initial fees, etc., 706 million yen).

Additionally, the company continues to launch high-value-added solutions tailored to modern needs, such as "Frontier AI Countermeasures" for financial institutions, "Supply Chain Risk Response" for governance support, and "Incident Response Training Simulators."

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4. FY2027 Earnings Forecast and Mid-to-Long-Term Growth Vision

The company anticipates further growth acceleration for the fiscal year ending June 2027.

• Net Sales : 7,600 million yen (+12.1% YoY)
• Operating Profit : 750 million yen (+46.6% YoY)
• Operating Profit Margin : 9.9% (+2.4pt YoY)
• Net Income : 470 million yen (+26.7% YoY)

Key Factors Supporting Growth

• Robust Order Backlog : A record-high backlog exceeding 3 billion yen provides a solid revenue floor.
• Establishment of Comprehensive Solution Sales : The restructured sales organization is now fully established, entering a phase of expanded cross-selling.
• Full Contribution of "G-MDR®" : Through collaborations with partners like Kanematsu Electronics (KEL), the active cyber defense service "G-MDR®" will begin to contribute significantly to earnings.
• Strengthened Alliances : Multi-channel approaches are advancing through joint efforts with major capital and business partners, including GSX (education/resources), KEL (sales enhancement), ID Holdings (IT infrastructure/AI integration), and DNP (OT SOC/factory security).

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5. Financial Soundness and Proactive Shareholder Return Policy

Financially, the company maintains a solid foundation with total assets of 4,501 million yen and net assets of 2,427 million yen, resulting in a healthy equity ratio of 54.0% .

Based on this solid financial base and the recovery in performance, the company has significantly strengthened its shareholder return policy, as summarized in the following slide.

[Slide Analysis: Enhanced Returns via Dividend Increases and New Shareholder Perks]

The slide above (Page 18) presents the company's proactive stance and specific measures regarding shareholder returns .

• Continuous Dividend Increases : Following a 15 yen annual dividend in FY2025, the company increased the dividend to 16 yen per year (8 yen interim, 8 yen year-end) for FY2026. A further increase to 17 yen per year (8 yen interim, 9 yen year-end) is planned for FY2027.
• Shareholder Perk Program : Shareholders holding 300 shares or more for at least six months receive 10,000 yen worth of Digital Gift® annually (5,000 yen each at interim and year-end). These gifts are highly convenient for individual investors, as they can be exchanged for various cashless payment methods such as PayPay, Amazon Gift Cards, and QUO Card Pay.
• Objective of Returns : By offering attractive perks alongside stable dividend growth, the company aims to encourage long-term shareholding and meet expectations for corporate value enhancement.

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Summary

Broadband Security's FY2026 results mark a clear V-shaped recovery, overcoming temporary stagnation during the sales restructuring phase. The company has demonstrated the success of its "comprehensive solution proposals," proven its high-profit structure, and secured a record-high order backlog.

Looking toward FY2027, the company has set ambitious growth targets of 7.6 billion yen in sales and 750 million yen in operating profit (9.9% margin). Success will hinge on co-creation with major partners and the market penetration of advanced services like "G-MDR®." With a strong financial base and enhanced shareholder returns (dividend increases + 10,000 yen in annual perks), the company's future trajectory in the cybersecurity market warrants close attention.