Wealth Management,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥5.98B
• Operating Income: ¥-1.37B
• Net Income: ¥-487M
• EPS: ¥-73.24

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

Wealth Management Co., Ltd. (consolidated, JGAAP) reported FY2026 Q2 revenue of ¥5,978 million (+3.7% YoY), but profitability deteriorated with operating loss of ¥1,367 million (loss widened by 78.6% YoY) and net loss of ¥1,404 million (+126.7% YoY). Gross profit was ¥1,246.6 million, implying a gross margin of 20.9%, but elevated operating costs and interest burden pushed EBITDA to ¥-1,310.2 million (-21.9% margin) and ordinary income to ¥-1,908 million. Interest expense of ¥624.2 million significantly pressured ordinary income; other non-operating items appear slightly net positive (~¥+83 million). A tax benefit of ¥148.0 million partially offset losses, consistent with the net loss profile. The DuPont breakdown shows a net margin of -23.49%, asset turnover of 0.103x, and financial leverage of 3.33x, resulting in an ROE of -8.05%, indicating losses driven primarily by weak margins and low turnover. Total assets were ¥58.15 billion with total liabilities of ¥42.70 billion and equity of ¥17.45 billion, implying an equity-to-asset ratio around 30% based on the totals (the reported equity ratio field is 0.0%, which likely reflects non-disclosure). Liquidity appears strong on headline ratios (current ratio 742%) with current assets of ¥53.70 billion versus current liabilities of ¥7.24 billion, suggesting substantial working capital tied to projects/assets held for sale. Operating cash flow was a sizable outflow of ¥5,015 million, materially larger in magnitude than the net loss, pointing to working capital build and/or weaker cash conversion. Financing cash inflow of ¥733 million likely reflects additional borrowings or similar funding to support projects; investing cash flow and cash balance were not disclosed in the provided XBRL fields. Dividend per share was ¥0.00 amid losses. Overall, results indicate a business in an investment/transition phase with heavy interest burden and weak cash conversion; sustainability hinges on project monetization and normalization of operating cash flow. Data limitations exist (several fields show zeros indicating non-disclosure), so conclusions focus on the disclosed, non-zero data.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin -23.49% × Asset turnover 0.103 × Financial leverage 3.33 = ROE -8.05% (matches reported). The main drag is margin; asset intensity is high and turnover low, typical of real-asset/project businesses. Gross margin at 20.9% suggests projects/services are generating spread at the gross level, but operating margin is -22.9% (¥-1,367m / ¥5,978m), reflecting high SG&A and project-related costs. EBITDA margin is -21.9%, indicating limited operating leverage at current volume; fixed costs and project carrying costs outweigh gross profit. Interest expense of ¥624m versus EBITDA of ¥-1,310m yields an EBITDA interest coverage of -2.1x to -2.2x, highlighting substantial financial burden. Ordinary loss widened to ¥-1,908m, with non-operating items net negative mainly from interest. Effective tax rate appears 0.0% due to a tax benefit (¥-148m), consistent with losses. Overall profitability will remain constrained until revenue scale and project completions lift gross profit and SG&A leverage improves, and/or interest burden declines.

Growth Assessment

Revenue grew 3.7% YoY to ¥5,978m, indicating some resilience or pipeline progression; however, the growth did not translate into profit, given the larger operating and net losses. The gross profit of ¥1,246.6m suggests underlying contribution from ongoing projects, but net profitability is challenged by cost structure and financing costs. Asset turnover at 0.103x implies that much of the balance sheet is tied up in assets in progress or low-yielding holdings; monetization is key for sustainable growth. Profit quality is weak this quarter: EBITDA negative, ordinary loss widened, and OCF more negative than NI, signaling growth is not yet self-funding. Near-term outlook hinges on project deliveries, asset sales, and potential cost rationalization; margin recovery will require improved pricing/mix and operating leverage as revenue scales. Given the interest burden, topline growth alone is unlikely to restore profitability without simultaneous cost/financing improvements.

Financial Health

Liquidity: Current assets ¥53,697m vs current liabilities ¥7,237m yields a current ratio of 742% and working capital of ¥46,460m, indicating substantial short-term asset coverage. Quick ratio is shown as 742%, but inventory and cash fields are undisclosed (0 indicates not reported), so the true quick liquidity is uncertain. Solvency: Total liabilities ¥42,703m and equity ¥17,445m imply debt-to-equity of 2.45x and an implied equity ratio around 30% (reported equity ratio field shows 0.0% due to non-disclosure). Interest coverage is negative (EBITDA coverage -2.2x), underscoring pressure from financing costs. Capital structure: High leverage relative to earnings capacity this quarter; reliance on debt funding (financing CF +¥733m) persists. The balance sheet can likely absorb near-term shocks given equity and current asset base, but sustained losses and negative OCF would erode resilience.

Cash Flow Quality

Earnings quality is weak near term: Operating CF was ¥-5,015m versus net income ¥-1,404m, giving an OCF/NI ratio of ~3.6x in absolute terms (OCF more negative than NI), indicating poor cash conversion likely due to working capital build (e.g., receivables, real estate for sale, deposits) and/or timing of project expenditures. D&A is modest at ¥56.8m versus EBITDA loss of ¥1,310m, so cash burn is driven by operating activities rather than non-cash charges. Free cash flow cannot be assessed reliably as investing CF is undisclosed (0 indicates not reported); reported FCF of 0 should not be interpreted as actual. Financing inflow of ¥733m suggests dependence on external funding to bridge operating outflows. Working capital: With current assets heavily outweighing current liabilities, the company may have significant project assets pending conversion; successful liquidation or turnover is key to normalizing OCF.

Dividend Sustainability

DPS is ¥0.00 with a payout ratio of 0.0%, aligned with reported losses (EPS ¥-73.24) and negative operating cash flow. With EBITDA and operating income negative and interest coverage below 1x, internal capacity to fund dividends is absent in the period. FCF coverage is shown as 0.00x, but investing CF is not disclosed; even so, negative OCF indicates limited distributable cash. Policy outlook likely remains conservative until profitability and cash generation recover; reinstatement would require sustained positive OCF and visibility on project monetization and leverage reduction.

Risk Assessment

Business Risks:

• Execution risk on project pipeline and timing of asset sales/completions affecting revenue recognition and cash conversion
• Margin risk from cost overruns, pricing pressure, or mix shift within projects
• Dependence on real-asset cycles (e.g., hotel/real estate markets) and macro conditions impacting valuations and demand
• Operational leverage with high fixed costs leading to losses at subscale revenue levels
• Concentration risk if revenue depends on a limited number of large projects or counterparties

Financial Risks:

• High interest burden (¥624m in the period) with negative EBITDA leading to weak coverage
• Refinancing and covenant risk if borrowing bases depend on asset values and project milestones
• Sustained negative operating cash flow (¥-5.0bn) requiring ongoing external funding
• Leverage elevated relative to earnings (debt-to-equity ~2.45x) increasing sensitivity to shocks
• Liquidity composition uncertainty due to undisclosed cash and inventory details

Key Concerns:

• Negative operating margin (-22.9%) and EBITDA margin (-21.9%) despite modest revenue growth
• OCF significantly more negative than net loss, indicating working capital strain
• Ordinary loss widened to ¥-1,908m largely due to interest expense
• Data gaps (cash, inventories, investing CF) limit visibility on immediate liquidity and capex needs

Investment Implications

Key Takeaways:

• Topline grew 3.7% YoY, but profitability deteriorated at all levels; interest expense is a major drag
• Balance sheet shows ample current assets vs current liabilities, yet cash conversion is weak and OCF is deeply negative
• ROE of -8.05% is driven by poor margins and low asset turnover; leverage amplifies downside
• Sustainability depends on near-term project monetization to improve OCF and reduce financing dependence

Metrics to Watch:

• Project completions/asset sales and their gross margins
• Operating cash flow to net income conversion and working capital movements
• Interest expense run-rate and interest coverage (EBITDA and EBIT-based)
• Revenue growth and asset turnover (sales/average assets)
• Capital structure metrics: net debt, equity ratio, refinancing schedule and covenants
• Cash and equivalents balance (once disclosed) and committed undrawn facilities

Relative Positioning: Within Japan real-asset/project-driven peers, the company currently sits in a weaker earnings and cash conversion position due to negative EBITDA and high interest burden, albeit supported by a sizable current asset base that could improve liquidity upon successful monetization.

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