WDB HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥25.39B
• Operating Income: ¥2.33B
• Net Income: ¥1.57B
• EPS: ¥75.40

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Verdict: A mixed FY2026 Q2 with resilient bottom-line supported by tax effects but weaker operating performance. Revenue declined 1.0% YoY to 253.87, while operating income fell 10.4% YoY to 23.33, indicating operating softness. Gross profit was 57.76 with a gross margin of 22.8%, and SG&A was 34.42, implying an SG&A ratio of about 13.6%. Operating margin compressed to 9.2% from roughly 10.2% a year ago (about 97 bps contraction), reflecting weaker operating leverage. Despite this, net income grew 11.8% YoY to 14.80, lifting net margin to 5.8% from roughly 5.2% (about 67 bps expansion), primarily due to a more favorable below-the-line/tax outcome. Ordinary income was 23.59 (-9.7% YoY) and non-operating items were minimal (net +0.26), so tax and possibly non-controlling interests likely drove the NI increase. Cash generation was solid relative to earnings: operating cash flow was 15.07, about 1.02x net income, indicating adequate earnings quality. However, capital expenditures were sizable at 38.68, causing negative discretionary FCF (OCF - Capex) of roughly -23.6 this period. The balance sheet remains very strong with cash and deposits of 174.53 and current liabilities of 66.70, yielding a current ratio of 364% and net cash coverage of near 2.6x current liabilities. Leverage is low with total liabilities/equity near 0.24x and financial leverage in DuPont terms at 1.24x, resulting in a modest ROE of 4.3%. ROIC is reported at 9.2%, comfortably above a 7–8% benchmark, suggesting disciplined capital deployment despite near-term margin pressure. Dividend payout ratio is high at 84.7%, which looks stretched versus internal cash generation in a capex-heavy quarter, but ample cash reserves provide short-term flexibility. Overall, the quarter shows stable demand but cost/margin pressure, offset by tax rate benefits and robust liquidity. Forward-looking, management will likely need to defend gross margin via pricing/mix and control SG&A to stabilize OPM. Watch capex intensity and its payoff on growth/ROIC; sustained high capex alongside a high payout could constrain FCF. With net margin expansion driven by non-operating/tax factors, sustainable earnings growth will depend on restoring operating leverage and maintaining utilization and billing rates.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 5.8% × 0.602 × 1.24 ≈ 4.3%. The most notable change this quarter is the divergence between operating margin and net margin: operating margin compressed ~97 bps YoY (from ~10.16% to 9.19%), while net margin expanded ~67 bps (from ~5.16% to 5.83%). Business driver: revenue declined 1.0% while operating income fell 10.4%, indicating weaker operating leverage—likely higher personnel costs or pricing/mix pressure—whereas a lower effective tax rate versus last year (current 34.3%) or reduced non-controlling interests lifted net income. Sustainability: margin expansion at the net level appears one-time or non-core if primarily tax-driven; absent improvement in gross margin or SG&A efficiency, ROE uplift is not durable. Asset turnover at 0.602 reflects a cash-rich balance sheet; without stronger growth, ATO may remain muted. Flags: SG&A grew faster than revenue on an implied basis (operating income down more than revenue), suggesting cost discipline needs attention. Maintaining ROE will require stabilizing operating margins and better asset utilization.

Growth Assessment

Top line contracted slightly (-1.0% YoY), pointing to soft demand or pricing. Operating profit declined 10.4% YoY, signaling negative operating leverage and pressure in core operations. Net income rose 11.8% YoY due to favorable below-the-line/tax effects rather than core growth, so quality of profit growth is mixed. Gross margin at 22.8% and OPM at 9.2% are reasonable but below last year’s levels at the operating level. Non-operating income remained small (0.27), so ordinary income dynamics mirror operating trends. Outlook hinges on restoring utilization and billing rates and controlling wage inflation; otherwise, revenue stabilization may not translate into profit stabilization. Given ROIC at 9.2%, current investments could support medium-term growth if they yield expected returns. Near term, manage cost inflation and efficiency to re-widen OPM.

Financial Health

Liquidity is very strong: current ratio 364% and quick ratio 364% with cash and deposits of 174.53 exceeding current liabilities of 66.70. No warning triggers (Current Ratio well >1.0, D/E well <2.0). Solvency is conservative: total liabilities/equity ~0.24x, and financial leverage 1.24x. The company appears net cash, though specific interest-bearing debt is unreported. Maturity mismatch risk is low given current assets (242.76) far exceed current liabilities (66.70). Off-balance sheet obligations are not disclosed in the data provided.

Cash Flow Quality

OCF/Net Income is 1.02x, indicating earnings are backed by cash generation this period. However, capex of 38.68 exceeds OCF (15.07), implying negative discretionary FCF of about -23.6 for the period; sustained high capex would pressure cash unless offset by higher OCF. With cash and deposits at 174.53, the company can fund near-term investments and dividends, but prolonged negative FCF would consume cash. No clear signs of working capital manipulation are evident from the limited disclosure; OCF roughly matches NI, suggesting no unusual accrual build this quarter.

Dividend Sustainability

The calculated payout ratio of 84.7% is above the <60% benchmark, implying limited buffer from earnings. Given OCF only slightly exceeds NI and capex is elevated, dividend coverage from FCF is weak this quarter (negative discretionary FCF). Nevertheless, the large cash balance provides short-term coverage. For medium-term sustainability, either capex needs to normalize or OCF must rise; otherwise, maintaining a high payout could constrain balance sheet flexibility.

Risk Assessment

Business Risks:

• Operating margin pressure from wage inflation and staffing cost increases
• Pricing/mix or utilization softness leading to negative operating leverage
• Execution risk on elevated capex not translating to revenue/ROIC gains
• Potential demand variability from client budget cycles

Financial Risks:

• High payout ratio (84.7%) alongside negative discretionary FCF in the quarter
• Dependence on tax-rate benefits to sustain net margin expansion
• Asset turnover drag from a large cash position limiting ROE

Key Concerns:

• Operating income fell 10.4% vs revenue -1.0%, indicating cost pressures
• Operating margin compressed ~97 bps YoY
• Capex (38.68) materially exceeded OCF (15.07) this period

Investment Implications

Key Takeaways:

• Top-line slightly down, but operating profits declined more sharply, compressing OPM
• Net income growth driven by below-the-line/tax, not core operations
• Strong balance sheet and liquidity provide resilience
• High capex and high payout ratio pressure free cash flow
• ROIC at 9.2% is encouraging if sustained

Metrics to Watch:

• Operating margin and SG&A ratio trajectory
• Gross margin drivers: utilization and billing rates
• OCF/NI and working capital movements
• Capex pacing and project returns (ROIC maintenance >8%)
• Effective tax rate normalization and its impact on NPM
• Cash balance versus dividend and investment needs

Relative Positioning: Financially conservative with strong liquidity and low leverage, but current-period profitability lags due to operating margin pressure; earnings quality is adequate, yet growth quality is mixed as net income relies on non-operating/tax tailwinds.

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