WDI Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥16.20B
• Operating Income: ¥349M
• Net Income: ¥1.01B
• EPS: ¥-44.35

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

WDI reported FY2026 Q2 consolidated results under JGAAP showing modest top-line growth but continued bottom-line pressure. Revenue grew 2.6% year over year to ¥16.20bn, indicating steady demand but not a strong acceleration. Gross profit was ¥11.39bn, corresponding to a high gross margin of 70.3%, suggesting strong menu pricing power and/or favorable product mix, typical of a restaurant operator with significant service value-add. Operating income rebounded sharply to ¥349m (+191% YoY), and the operating margin improved to approximately 2.2%, reflecting better cost control and operating leverage on a largely fixed cost base. Ordinary income came in at ¥308m, slightly below operating income due to net non-operating costs (including interest expense of ¥34.9m). Despite positive operating and ordinary profits, the company recorded a net loss of ¥277m, primarily driven by a sizeable income tax expense of ¥410m and likely non-recurring or structural tax items. EBITDA was ¥704m, with an EBITDA margin of 4.3%, signaling improving, but still modest, cash earnings power relative to sales. DuPont analysis indicates an ROE of -3.68%, mainly due to a negative net margin (-1.71%), while asset turnover (0.698x) and financial leverage (3.08x) are within a typical range for the sector. Liquidity appears adequate with a current ratio of 1.63x and a quick ratio of 1.41x, supported by working capital of ¥3.26bn. The capital structure shows leverage is meaningful but manageable, with a liabilities-to-equity ratio of 1.92x; implied equity ratio is roughly 32% based on reported assets and equity (the disclosed equity ratio field is unreported). Operating cash flow was negative at -¥86.5m, which is weaker than the income statement suggests, and OCF covered only 31% of net loss, pointing to earnings quality and working capital headwinds in the period. Financing cash outflow of -¥678m suggests debt repayment and/or lease liabilities reduction; investing cash flow was not disclosed, limiting free cash flow assessment. Dividend per share was nil with a payout ratio of 0%, consistent with preserving liquidity while profitability normalizes. Overall, WDI shows improving operating performance but remains challenged at the net level by taxes and possibly extraordinary/non-operating items, with cash conversion still soft. Data limitations (notably zero placeholders for certain XBRL fields) constrain a complete assessment of cash and capex, so conclusions on free cash flow are tentative. The near-term outlook hinges on sustaining same-store sales growth, further margin recovery, and normalization of tax effects to return to positive net income.

Profitability Analysis

ROE_decomposition: DuPont ROE of -3.68% = Net margin (-1.71%) × Asset turnover (0.698x) × Financial leverage (3.08x). The negative ROE is driven primarily by the net loss despite positive operating income. margin_quality: Gross margin at 70.3% is high for the sector, indicating strong value-add from service/experience. Operating margin of ~2.2% and ordinary margin of ~1.9% show improvement, but net margin is -1.71% due to a large tax expense (¥410m) and minor non-operating drag. Note: the disclosed gross profit, revenue, and cost of sales imply classification differences versus a simple revenue minus cost of sales calculation; we rely on the reported gross profit and margin. operating_leverage: Operating income rose to ¥349m on 2.6% revenue growth, implying favorable incremental margins as fixed costs are leveraged. EBITDA margin of 4.3% vs. operating margin of 2.2% indicates D&A burden is meaningful (D&A ¥355m), but coverage of interest is comfortable (10.0x on operating income). Sustained SSS growth would likely unlock further margin expansion.

Growth Assessment

revenue_sustainability: Top-line growth of 2.6% YoY suggests stable demand but not a strong acceleration. In a restaurant context, growth likely stems from modest price/mix and recovering traffic; sustainability depends on maintaining guest counts, inbound tourism, and store productivity. profit_quality: Operating and ordinary profits are positive, but the net loss reflects tax expense and non-operating items. OCF of -¥86.5m contrasts with positive operating profit, indicating weaker cash conversion due to working capital or timing effects; quality of earnings is therefore mixed. outlook: If same-store sales remain positive and cost inflation (food and labor) is managed, operating margin could continue to recover. Normalization of tax effects and tighter working capital discipline are key to translating operating gains into net profitability and cash flow.

Financial Health

liquidity: Current assets ¥8,457m vs. current liabilities ¥5,197m yield a current ratio of 1.63x and quick ratio of 1.41x, indicating adequate near-term liquidity. Working capital stands at ¥3,260m. solvency: Total liabilities ¥14,440m against total equity ¥7,526m imply a liabilities-to-equity ratio of 1.92x. Based on assets ¥23,204m and equity ¥7,526m, the implied equity ratio is ~32% (the reported equity ratio field is unreported). Interest burden is modest (¥34.9m) with 10.0x operating coverage. capital_structure: Leverage is meaningful but appears manageable given positive operating earnings and interest coverage. Continued reduction of financing cash outflows and strengthening OCF would improve resilience.

Cash Flow Quality

earnings_quality: OCF/Net income is 0.31, with OCF at -¥86.5m vs. net loss of -¥277m, indicating weak cash conversion this period. The divergence suggests working capital outflows or timing effects, despite positive operating profit. FCF_analysis: Investing cash flow was not disclosed (zero placeholder), preventing a reliable FCF calculation; the provided FCF metric is therefore not actionable. Without capex data, we cannot judge maintenance vs. growth capex or FCF coverage. working_capital: Negative OCF alongside positive operating income implies working capital consumption (e.g., inventory build or receivables timing). Inventories are ¥1,158m; continued monitoring of inventory turns and payables days is warranted.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is ¥0.00 with a payout ratio of 0%, appropriate given the net loss and negative OCF. Earnings do not currently support distributions. FCF_coverage: FCF coverage cannot be assessed due to unreported investing cash flows; prudent to assume limited capacity for dividends until OCF turns sustainably positive and capex needs are covered. policy_outlook: Near-term policy likely prioritizes liquidity and balance sheet stability over distributions. Resumption would depend on sustained net profitability and demonstrable free cash flow.

Risk Assessment

Business Risks:

• Slower-than-expected same-store sales growth and traffic volatility
• Food and labor cost inflation compressing margins
• Execution risk in menu pricing and cost controls
• Exposure to tourism/inbound demand cycles
• Operational disruptions (pandemics, weather, supply chain)

Financial Risks:

• Working capital outflows leading to weak cash conversion
• Tax expense volatility impacting bottom line
• Leverage at 1.92x liabilities-to-equity limiting flexibility if earnings soften
• Refinancing and lease obligations within a rising rate or tighter credit environment
• Currency exposure if there are overseas operations or USD-linked costs

Key Concerns:

• Negative OCF despite positive operating income
• Persistent net loss driven by large tax expense
• Limited visibility on capex and investing cash flows (FCF uncertainty)

Investment Implications

Key Takeaways:

• Revenue grew 2.6% YoY to ¥16.20bn; growth is steady but modest
• Operating income surged to ¥349m; operating margin ~2.2% shows recovery
• Net loss of ¥277m driven largely by a ¥410m tax expense
• EBITDA ¥704m; interest coverage 10.0x indicates manageable debt service
• OCF -¥86.5m signals weak cash conversion and working capital headwinds
• Leverage is meaningful (1.92x liabilities-to-equity) but currently serviceable
• Dividend remains suspended (DPS ¥0) pending earnings and cash flow normalization

Metrics to Watch:

• Same-store sales growth and traffic/mix trends
• Operating and EBITDA margins, especially labor and food cost ratios
• OCF and working capital movements (inventory and payables turns)
• Capex and investing cash flows to assess true FCF
• Effective tax rate and any one-off tax/extraordinary items
• Leverage metrics (implied equity ratio, net debt/EBITDA when available)

Relative Positioning: Within Japanese casual and full-service dining peers, WDI’s operating recovery appears underway, with margins improving but still below best-in-class operators. Balance sheet leverage is moderate, and liquidity is adequate, but cash conversion lags, keeping it in a middle-of-the-pack position pending improvement in OCF and normalization of tax effects.

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