Cyber Security Cloud,Inc. Q1 FY2025 earnings call

Financial Overview

• The year-over-year operating profit decline compared to the prior-year Q1 is due to a one-time large spot contract from the Digital Agency in the prior-year period; core underlying growth remains on track with no slowdown.
• Operating expenses increased year-over-year due to higher personnel and outsourcing costs from the consolidation of Generative Technology and continued investment in CloudFastener; further personnel cost increases are expected after DataSign consolidation starting in March 2025.
• Total group headcount has grown significantly due to recent M&A activity; additional new graduate hires joining in April will further increase headcount by the end of Q2.

Strategic Partnerships & New Service Launches

• Launched the joint service CTC-SOC for Public Cloud powered by CloudFastener with Itochu Techno Solutions (CTC). CTC integrates CloudFastener into its existing CTC-MSS SOC offering to provide cloud-specific security capabilities, while CTC retains end-to-end client relationship management.
• Leverages CTC's large, established enterprise customer base that Cyber Security Cloud would not otherwise access, with management expecting meaningful business expansion from this collaboration.

AWS Ecosystem Expansion & Credentialing

• Earned the AWS Level 1 MSSP Competency (Software) certification in March 2025, the first Japanese company to achieve this credential.
• This third-party validation is critical for growth in the 140,000+ partner AWS ecosystem, as it provides official AWS endorsement that builds trust with end users and unlocks AWS-supported go-to-market opportunities including co-hosted events and co-marketing.
• CloudFastener meets all competency requirements with fully in-house developed functionality, unlike most competing MSSP offerings that rely on third-party technology which introduces operational instability.
• Previously earned Japan's first Amazon Security Lake Subscriber Partner and Amazon Security Lake Ready certifications, which served as foundational relationship building with AWS.

Global Expansion

• Global lead generation and deal pipeline growth has accelerated in North and South America, driven by targeted joint in-person and virtual seminars with regional partners.
• Held co-hosted in-person seminars with US partner CStream in Irvine and San Diego, California, attracting dozens of highly interested attendees that converted to qualified leads and active negotiations.
• Held the first Spanish-language webinar with a South American partner following a large regional client win, and is already receiving inquiries from other South American countries with active negotiations underway.
• Exhibited at a Chicago industry event, which is also generating new qualified leads.

Capital Raising

• Completed a 2.1 billion yen total fundraising in February 2025, led by the government-affiliated JICVGI Opportunity Fund No. 1. The investment is aligned with Japan's national cyber security industry promotion policy focused on growing the domestic cyber security market, and will fund additional investment in CloudFastener and future M&A activity.

Core cybersecurity SaaS (Kougeki Shadan-kun, WafCharm): Core products maintained stable churn with no significant changes, contributing the majority of total 1.186 billion yen in Q1 revenue. CloudFastener: The cloud security operations platform is growing steadily, with new customer additions including Schoo and SHIFT PLUS, and is embedded in the co-developed service with CTC. Generative Technology Co., Ltd.: The subsidiary established after an October 2024 M&A has begun contributing spot revenue from its contract development business. webtru: The privacy tech product from the February 2025 DataSign acquisition was added to the ARR lineup, with Q1 revenue consolidation starting in March 2025. Overall Q1 results: Total revenue reached 1.186 billion yen, up 24.4% year-over-year; gross profit was 0.762 billion yen; operating profit was 0.240 billion yen; annual recurring revenue (ARR) grew 30.9% year-over-year.

Management maintained its underlying growth outlook for the full fiscal year, with no upward or downward revisions to full-year guidance provided in the Q1 release. Key forward-looking outlooks are:

• Continued steady customer growth for CloudFastener, with the new AWS competency expected to drive accelerating adoption in both the short and medium term.
• webtru (from the DataSign acquisition) is expected to deliver significantly faster ARR growth under Cyber Security Cloud's ownership than it achieved as an independent company, and will become an increasingly meaningful contributor to group ARR over the next 1-2 years.
• Personnel costs will continue to increase following the consolidation of DataSign, as the company scales to support growing product lines.
• Global expansion efforts are in early stages but are showing promising early traction, and management will continue investing in this growth initiative.
• M&A activity will continue, with new capital allocated to pursue targets that expand the company's cloud security and adjacent compliance offerings.

No material new operational risks or failures were disclosed in the Q1 earnings call. Key structural risk factors noted by management are:

• Persistent industry-wide shortage of cyber security and technology talent, which constrains growth across the sector.
• Most competing MSSP offerings rely on external third-party functionality, which introduces operational and strategic risk for those players, but this is not a risk for Cyber Security Cloud as CloudFastener is fully in-house.

Q: What are the differentiating features of webtru, and what is its expected contribution to ARR over the next 1-2 years? / A: webtru is a privacy tech product that helps website operators manage cookie consent and compliance with global privacy regulations. Its key differentiators versus leading global competitor OneTrust include higher detection accuracy, easier implementation, and more competitive pricing. Management did not disclose a specific target, but expects webtru to grow much faster after the acquisition than it did independently, and to become a meaningful ARR contributor over time. It also aligns with the company's broader goal of expanding into governance, risk, and compliance (GRC) offerings that share overlapping customer bases with existing cyber security products.

Q: What benefits will Cyber Security Cloud gain from Japan's new Cyber Security Industry Promotion Strategy, and will it lower hiring costs? / A: The strategy's target to grow industry headcount is a major long-term benefit, as the industry currently faces a severe shortage of skilled cyber security personnel. While it is unclear if hiring costs will decline in the next three years, expanding the talent pool is critical for sustained long-term industry and company growth. Management also noted that policy support will create more potential partnership and M&A targets across the sector. On the talent front, the company is also leveraging generative AI to reduce reliance on manual labor in order to sustain growth even with ongoing talent constraints.

Q: What progress is expected from the CTC partnership, and what are the timeline for impact? / A: The partnership gives Cyber Security Cloud access to CTC's large, established enterprise customer base that it could not reach through its own sales channels. While early, management expects the partnership to drive meaningful incremental adoption of CloudFastener over time as the joint service gains traction among CTC's clients.