WDB HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥25.39B
• Operating Income: ¥2.33B
• Net Income: ¥1.47B
• 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 Integrated Analysis

Analysis integrating XBRL data (GPT-5) and PDF earnings presentation (Claude)

Executive Summary

WDB Holdings (2475) reported FY2026 Q2 consolidated results under JGAAP showing modest top-line softness but resilient cash generation and a strong balance sheet. Revenue was ¥25.39bn, down 1.0% YoY, while operating income declined 10.4% YoY to ¥2.33bn, indicating negative operating leverage in the period. Despite weaker operating profits, net income rose 11.8% YoY to ¥1.48bn, suggesting support from non-operating items and/or below-the-line factors. Ordinary income of ¥2.36bn exceeded operating income, pointing to positive non-operating contributions. Gross profit was ¥5.90bn with a gross margin of 23.2%, and the operating margin was approximately 9.2%, down relative to revenue, indicating some cost pressure. The DuPont breakdown yields a net margin of 5.83%, asset turnover of 0.602x, and financial leverage of 1.24x, resulting in an ROE of 4.35% for the period. Asset turnover appears healthy for a human-capital-intensive model, while low leverage limits ROE expansion via gearing. Operating cash flow (OCF) came in at ¥2.19bn, 1.48x net income, underscoring solid earnings-to-cash conversion. The balance sheet is conservative with total assets of ¥42.17bn, equity of ¥34.03bn, and liabilities of ¥8.51bn (D/E of ~0.25x). Liquidity is strong, with current assets of ¥27.41bn and current liabilities of ¥6.94bn, yielding a current ratio of 395%. Working capital is ample at ¥20.47bn, consistent with a staffing/services model where receivables dominate current assets. EBITDA was ¥2.46bn (9.7% margin), supported by low D&A of ¥0.125bn, reflecting an asset-light structure. The company appears minimally reliant on interest-bearing debt, with reported interest expense at 0 (noting potential non-disclosure). Dividends are shown as zero with a 0% payout, likely reflecting timing or non-disclosure for the interim period rather than a definitive policy shift. Key data such as cash and equivalents, investing cash flows, and share count are unreported in the provided extract, which limits certain ratio analyses (e.g., effective tax rate, interest coverage, per-share book metrics, and free cash flow calculation). Overall, WDB demonstrates defensive financial health and solid cash conversion despite a slight revenue contraction and margin pressure, but sustained profit growth will depend on stabilizing operating margins and demand trends in its core staffing/services segments.

From Earnings Presentation: WDB Holdings' Q2 FY2026/3 financial results presentation reveals the strategies and challenges behind the financial figures shown in the XBRL analysis. The Human Resources Services business achieved revenue and profit growth (revenue +1.5%, operating income +5.9%) driven by higher dispatch unit prices and improved utilization rates for permanent-employee-type dispatched workers, while improving gross margin despite implementing wage increases for dispatched staff. Meanwhile, the CRO business experienced revenue and profit declines (revenue -14.3%, operating income -46.9%) due to major clients' insourcing and the sale of unprofitable overseas operations, becoming a factor in the consolidated operating income decrease. Management maintained the full-year forecast announced in May 2025, presenting a conservative outlook incorporating increased SG&A expenses and profit decline in the second half. As part of the platform strategy, in addition to doconico, the company released 'Doco1,' a unified management system for multiple dispatch companies, in May 2025, with orders progressing smoothly. In the medium to long term, the company aims to recover profitability by leveraging its dominant position in science-field dispatch (30% market share) through unit price revisions, utilization rate improvements, and expansion into high-value-added areas. The dividend policy emphasizes continuous dividend increases based on a 40% payout ratio, and the company implemented a share buyback of 456,000 shares (2.32%) in November 2025 to improve capital efficiency and strengthen shareholder returns.

Financial Analysis

Profitability

ROE_decomposition: ROE 4.35% = Net margin 5.83% × Asset turnover 0.602 × Financial leverage 1.24. Net profitability is moderate for a staffing/services firm, asset turnover is healthy, and low leverage dampens ROE (by design, given a conservative balance sheet). margin_quality: - Gross margin: 23.2% (¥5.90bn/¥25.39bn) indicates reasonable pricing vs. direct labor/subcontracting costs. - Operating margin: ~9.2% (¥2.33bn/¥25.39bn) declined YoY alongside revenue, implying negative operating leverage and/or higher SG&A (e.g., wage inflation, hiring/training costs, utilization). - EBITDA margin: 9.7% reflects limited non-cash charges (D&A ¥0.125bn), consistent with an asset-light dispatch model. operating_leverage: Revenue decreased 1.0% YoY while operating income fell 10.4% YoY, indicating unfavorable operating leverage (fixed-cost absorption and/or mix deterioration). The spread between ordinary income (¥2.36bn) and operating income (¥2.33bn) suggests non-operating tailwinds partially offset operating pressure.

Growth

revenue_sustainability: Top-line declined slightly to ¥25.39bn (-1.0% YoY), suggesting softer demand or pricing in the period. Given the company’s human-capital-intensive model, utilization rates and billable hours likely drove the contraction more than volume attrition. profit_quality: Net income growth (+11.8% YoY to ¥1.48bn) outpaced revenue despite lower operating income, implying supportive non-operating items and/or below-the-line factors. With OCF/NI at 1.48x, earnings quality appears solid for the half-year. outlook: Stabilization of operating margin will be key. Watch for client demand normalization in core industries, wage inflation pass-through in contract pricing, and utilization improvement to reduce negative operating leverage in the second half.

Financial Health

liquidity: Current assets ¥27.41bn vs. current liabilities ¥6.94bn yield a current ratio of 395% and quick ratio of ~394%, indicating very strong short-term liquidity. Working capital stands at ¥20.47bn. solvency: Total liabilities of ¥8.51bn versus equity of ¥34.03bn imply low leverage (liabilities/equity ~0.25x). Interest expense is reported as 0 (likely minimal financial debt), suggesting negligible refinancing risk. capital_structure: Financial leverage of 1.24x (assets/equity) is conservative. The equity ratio is not disclosed in the extract (shown as 0), but a rough proxy suggests equity/asset ratio of ~81% (¥34.03bn/¥42.17bn), highlighting balance sheet strength.

Cash Flow

earnings_quality: OCF of ¥2.19bn vs. net income of ¥1.48bn (OCF/NI 1.48x) indicates strong conversion, likely supported by working capital discipline typical of staffing models. FCF_analysis: Free cash flow is shown as 0 due to missing investing cash flow and capex data. With low D&A (¥0.125bn), maintenance capex is likely modest, but precise FCF cannot be determined from the provided data. working_capital: Inventories are negligible (¥0.065bn), consistent with services. The large working capital base is likely driven by receivables; OCF strength suggests no major deterioration in collections during the period.

Dividend Sustainability

payout_ratio_assessment: Reported DPS and payout ratio are 0, which likely reflects interim timing or non-disclosure rather than a definitive zero dividend policy. EPS is ¥75.40 for the period; without declared dividends, payout cannot be assessed. FCF_coverage: FCF coverage cannot be evaluated due to missing investing cash flows and capex data. Given strong OCF and low D&A, coverage would likely be adequate for a modest dividend, but this remains unverified. policy_outlook: With a conservative balance sheet and solid cash generation, the capacity for distributions appears intact. Formal guidance or historical policy references are needed to assess consistency and trajectory.

Business Outlook

Full-year forecast maintained at revenue of ¥51.14 billion (flat YoY), operating income of ¥4.23 billion (-16.5% YoY), and net income of ¥2.41 billion (-21.0% YoY). While the Q2 operating income progress rate of 54.5% exceeds the typical range (48-51%), the plan anticipates increased SG&A expenses in Q3 and Q4, with profit amount expected to decrease. The Human Resources Services business is promoting enhanced recruitment capabilities through April wage increases for dispatched staff, strengthened sales structure, enhanced customer proposals for seniors and part-time workers, and regional limited new graduate hiring for permanent-employee-type dispatch. The CRO business is advancing sales activities and quality improvements to compensate for revisions in client contract scope and work volume, while concentrating management resources on higher-margin operations at MEDFILES. The 'Doco1' platform enables unified management of orders, contracts, attendance, and billing across multiple dispatch companies, addressing customer needs for dispatch management efficiency. In the medium to long term, the company aims to expand margins by leveraging its dominant share in science-field dispatch through unit price revision penetration, utilization rate normalization, expansion into high-value-added areas (bio, AI/data science, etc.), and increased contracting ratio.

Management Guidance

Management explains that 'we are investing in wage increases for dispatched staff and platform development to achieve continuous growth in the future.' The stagnation in ordinary income since FY2023/3 is positioned as strategic investment for corporate value enhancement and long-term shareholder return maximization, rather than short-term profit pursuit. The dividend policy is 'based on a 40% payout ratio and maintains the ability to continue stable dividends even in unforeseen circumstances.' Regarding share buybacks, 'while our basic policy is not to conduct them, we implemented 456,000 shares (2.32%) to improve capital efficiency and respond to changes in the business environment.' Progress at Q2 is generally in line with expectations for both revenue and profit margins, with a focus on SG&A expense control and utilization rate improvement in the second half to achieve the full-year forecast. The CRO business profit decline impact is already incorporated, aiming for recovery from next fiscal year onward through resumption of major client contracts and new orders. Platform investments temporarily increase costs as development and personnel expenses, but are expected to contribute to revenue base strengthening through operational efficiency and customer loyalty improvement in the medium to long term.

Strategic Initiatives

• Release and expansion of 'Doco1,' a unified management platform for multiple dispatch companies (launched May 2025, developed in response to requests from doconico users)
• Wage increases for dispatched staff (implemented April 2025) to strengthen talent procurement capabilities and improve job retention rates
• Strengthening sales structure to provide a wider range of jobs matching job seeker needs and improve selection rates from job seekers
• Enhanced customer proposals for seniors and part-time workers to increase orders
• Strengthening recruitment capabilities through regional limited new graduate hiring for permanent-employee-type dispatch
• Sales activities and quality improvements to compensate for contract scope and work volume revisions in CRO business, and concentration of MEDFILES resources on higher-margin operations
• Conversion of inexperienced workers into immediate assets through practical laboratory skills training at nationwide training centers, maintaining talent supply capabilities
• Leveraging No.1 position (approximately 30%) in science-field dispatch market for unit price revisions and expansion into high-value-added areas
• Supporting customer operational efficiency and visualization through doconico and Doco1 for differentiation and customer loyalty improvement
• Strengthening shareholder returns through continuous dividend increases based on 40% payout ratio and share buyback (456,000 shares)

Risk Assessment

Business Risks:

• Demand cyclicality in client industries affecting utilization and billable hours
• Wage inflation and talent retention pressures compressing gross and operating margins
• Pricing power constraints in dispatch contracts limiting pass-through of cost increases
• Regulatory changes in labor dispatch and employment laws impacting flexibility and costs
• Client concentration or sector concentration risk if large accounts slow hiring
• Competition in staffing/services compressing spreads

Financial Risks:

• Potential working capital swings (receivables collection timing) impacting OCF
• Sensitivity of profitability to utilization (negative operating leverage in downturns)
• Limited disclosure of cash and equivalents and investing CF complicates liquidity monitoring
• Event risks below the operating line (extraordinary items) influencing net income volatility

Key Concerns:

• Operating income decline (-10.4% YoY) despite only a 1.0% revenue drop
• Reliance on non-operating support for net income growth in the half
• Data gaps (cash balance, investing CF, share data) limiting full valuation and payout analysis

Risk Factors from Presentation:

• Revenue decline risk from major CRO business client insourcing previously outsourced operations (already materialized)
• Impact of sale of unprofitable overseas operations (contributing factor to CRO business revenue decline)
• Risk of gross margin pressure from slow penetration of unit price revisions following dispatched staff wage increases
• Risk of utilization rate decline for permanent-employee-type dispatch (securing placements after recruitment)
• Fluctuations in dispatch demand due to investment tempo adjustments in customer industries (pharmaceutical, chemical, manufacturing R&D, etc.)
• Profit pressure from planned SG&A expense increases in second half (Q3, Q4) (recruitment, training, system investments, etc.)
• Increased platform development and operation costs and investment recovery timeline
• Although not explicitly stated in materials, risks from regulatory changes (Dispatch Act, equal pay for equal work) and continued wage inflation trends

Investment Implications

Key Takeaways:

• Top line modestly down (-1.0% YoY) with disproportionate operating profit decline, signaling negative operating leverage
• Net income up 11.8% YoY aided by non-operating/below-the-line items
• Strong cash conversion (OCF/NI 1.48x) and ample liquidity (current ratio ~395%)
• Low leverage (liabilities/equity ~0.25x) provides financial resilience
• EBITDA margin 9.7% and low D&A indicate asset-light model
• ROE of 4.35% constrained by low leverage; profitability improvements are the primary lever for ROE expansion

Metrics to Watch:

• Operating margin trajectory and SG&A intensity in H2
• Utilization rates and billable hours to gauge operating leverage normalization
• Pricing power and wage pass-through in new/renewed contracts
• Receivables days and OCF sustainability
• Non-operating items and effective tax rate normalization
• Capex and disclosed investing CF to clarify FCF

Relative Positioning: Compared with domestic human-capital-intensive peers, WDB exhibits stronger balance sheet conservatism and healthy cash conversion but faces similar margin pressures from labor cost inflation and utilization swings; sustained competitive positioning will hinge on pricing discipline, client mix, and talent retention.

Supplementary Insights (Key Highlights)

• Human Resources Services business achieved revenue and profit growth through higher dispatch unit prices and improved utilization rates for permanent-employee-type dispatched workers, realizing gross margin improvement even after implementing wage increases for dispatched staff
• CRO business experienced significant profit decline (-46.9%) due to major clients' insourcing and sale of unprofitable overseas operations, while maintaining contract processing personnel in preparation for next orders
• Released 'Doco1,' a unified management platform for multiple dispatch companies, in May 2025, progressing smoothly as a pillar of platform strategy alongside doconico
• No.1 position with 30% share in the science-field dispatch market, with strong talent procurement capabilities through technical training at nationwide training centers and ability to handle both registration-type and permanent-employee-type dispatch
• Implemented share buyback of 456,000 shares (2.32%) in November 2025, strengthening shareholder returns together with continuous dividend increase policy based on 40% payout ratio
• Although full-year forecast was maintained, Q2 operating income progress rate of 54.5% (vs. historical average of 48-51%) is high, with conservative outlook incorporating increased SG&A expenses and profit decline in the second half

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