FFRI Security, Inc.

Business Details

Leveraging core technologies in the fields of security vulnerabilities, malware, IoT, and embedded devices, the company operates across three categories: sales of security products (the FFRI yarai series), National Security Services for the Ministry of Defense and other government agencies, and Other Security Services. Major customers include Cyber Research Consortium (¥1,107,116 thousand), NEC Corporation (¥686,128 thousand), and the Cabinet Secretariat (¥499,916 thousand). The company is accelerating its focus on the security domain, backed by its credibility as a purely domestic enterprise.

Recent Overview

All three categories grew over 44% year on year, with the overall segment growing 54%

Cyber Security Business sales for FY2026 (ending March 2026) were ¥3,988 million (up 54.1% year on year). Security products grew 44.7% due to strengthened collaboration with strategic sales partners, favorable OEM sales, and an increase in FFRI yarai Analyzer licenses. National Security Services achieved the largest growth at 66.9%, driven by the implementation of Economic Security Key Technology Development Program projects and cyber security-related projects. Other Security Services also grew 52.3%, supported by high engineer utilization from the acquisition of long-term projects. Equity in earnings of the joint venture NF Laboratories was ¥74 million (up 70.2% year on year). For FY2027 (ending March 2027), National Security Services is projected at ¥2,159 million (up 37.0%), with the overall segment expected to reach ¥4,796 million (up 20.3%). Major customers shifted to Cyber Research Consortium (¥1,107 million), NEC Corporation (¥686 million), and the Cabinet Secretariat (¥500 million), with customer concentration increasing further.

Key Products

Growth Drivers

• Rapid expansion of demand from government agencies and defense-related sectors due to the introduction of active cyber defense under the Active Cyberspace Defense Act enacted in May 2025, and the new Cyber Security Strategy adopted by the Cabinet in December (consolidation of functions into the National Cyber Command Center, and mandatory incident reporting for critical infrastructure operators)
• Increase in corporate and individual sales of the FFRI yarai series due to strengthened collaboration with strategic sales partners and favorable OEM sales
• Expansion of National Security Services through continued acquisition of projects related to the Economic Security Key Technology Development Program (planned at ¥2,159 million for FY2027 (ending March 2027), up 37.0%)
• Boost to security product sales from an increase in contracted licenses for FFRI yarai Analyzer
• Increased demand for security education and training at NF Laboratories, a joint venture with NTT DOCOMO BUSINESS (equity in earnings of affiliates of ¥74 million, up 70.2% year on year)
• Strengthened sales initiatives targeting government agencies, critical infrastructure companies, local governments, and medical institutions leveraging the strength of purely domestic products, and activities to acquire new strategic sales partners

Risks

• Securing and developing engineering talent with core cyber security technology may become a bottleneck, potentially constraining capacity relative to increasing demand (the shift of personnel from the Software Development & Testing Business is ongoing)
• Concentration of resources in National Security Services may limit orders in Other Security Services, creating a risk of imbalance in the business portfolio
• Sales dependence on the top three customers (Cyber Research Consortium, NEC, and the Cabinet Secretariat) has increased further (totaling ¥2,293 million, approximately 53% of consolidated sales), expanding customer concentration risk
• The need for continuous R&D investment to keep pace with the rapid sophistication and diversification of cyber attack techniques
• Risk of information leakage due to handling of confidential information such as users' security system information and malware samples
• The projected operating income growth rate for FY2027 (ending March 2027) (up 6.5%) is significantly lower than the projected sales growth rate (up 18.1%), posing a risk of margin decline due to rising costs such as personnel expenses