WEATHERNEWS INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.13B
• Operating Income: ¥2.27B
• Net Income: ¥1.64B
• EPS: ¥73.86

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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: Strong Q2 with clear margin expansion and double-digit profit growth, underpinned by operating leverage and a fortress balance sheet. Revenue grew 4.5% YoY to 121.33, while operating income rose 35.3% to 22.68 and net income climbed 44.4% to 16.38, indicating strong cost control and mix improvements. Gross margin printed at 46.7%, and operating margin improved to 18.7% from roughly 14.4% a year ago, a c. 426 bps expansion. Net margin also expanded to 13.5% from about 9.8%, a c. 373 bps improvement on lower non-operating drag and steady taxes. SG&A as a percentage of revenue was 28.0%, suggesting fixed-cost leverage as revenue scaled modestly. The tax rate was 29.5%, consistent with domestic norms, and the interest burden exceeded 1.0, reflecting net non-operating income rather than interest expense pressure. ROE was 7.2%, up with earnings but still below the 8–10% comfort range, constrained by low asset turnover (0.466) and very low financial leverage (1.15x). Liquidity is exceptionally strong: current ratio 8.17x, quick ratio 8.17x, and net cash far exceeds total liabilities (cash and deposits 173.19 vs total liabilities 33.99). The balance sheet quality supports resilience and optionality for investment and shareholder returns. Cash flow statements were not disclosed, so we cannot validate earnings-to-cash conversion or free cash flow coverage of dividends this quarter. Reported payout ratio of 151.8% appears mechanically inflated because it divides full-year dividends by first-half net income; the interim payout using only the Q2 dividend (¥70) vs H1 EPS (¥73.86) is about 95%, while full-year payout adequacy depends on H2 earnings. Absent equity-method dependencies or commodity exposures, results appear driven by core service profitability and utilization. Forward-looking, the pronounced operating leverage implies earnings sensitivity to modest top-line growth, while the cash-rich position reduces financial risk. Key watch items are H2 order momentum/renewals, OCF disclosure, and any guidance updates on dividends and growth investments. No quality alerts were flagged in the data.

Profitability Analysis

DuPont decomposition (ROE = Net Profit Margin × Asset Turnover × Financial Leverage): 0.135 × 0.466 × 1.15 ≈ 7.2%. The largest driver of YoY improvement was the net profit margin, which expanded by roughly 373 bps as operating margin rose by about 426 bps on modest revenue growth. Business drivers likely include operating leverage (SG&A held at 28.0% of revenue despite wage and platform costs) and stable gross margin. Interest burden of 1.025 indicates negligible interest drag and small net non-operating gains; tax burden at 0.705 is in a normal range. Sustainability: the margin gains appear partly structural (cost discipline, scale benefits) but could normalize if wage or cloud/data costs re-accelerate; the low leverage and modest asset turnover structurally cap ROE unless asset efficiency improves. Watch for any period-specific factors (pricing, product mix, one-time cost timing); with only H1 data, we cannot confirm one-offs. Concerning trend check: we cannot confirm SG&A growth versus revenue growth due to lack of prior SG&A disclosure, but the large delta between revenue growth (+4.5%) and operating income growth (+35.3%) signals favorable operating leverage rather than cost slippage.

Growth Assessment

Top-line growth of 4.5% YoY to 121.33 is steady, with stronger translation to profit (OP +35.3%, NI +44.4%) indicating improved efficiency and/or mix. Gross margin at 46.7% and operating margin at 18.7% suggest healthy monetization of services. Non-operating items were a net positive (0.55) with minimal expense (0.03), and taxes normalized at 29.5%. With asset turnover at 0.466, incremental growth can still deliver high incremental margins given the current cost base. However, the sustainability of double-digit profit growth will depend on renewals, new services penetration, and retention across corporate customer segments. We lack segment disclosure, but weather-sensitive demand seasonality can influence H2. The strong balance sheet allows continued investment in data platforms and analytics to support medium-term growth. Outlook hinges on H2 seasonality and subscription momentum; absent negative shocks, operating leverage should continue to support earnings.

Financial Health

Liquidity is robust: current assets 226.92 vs current liabilities 27.76 yields a current ratio of 8.17x (well above the 1.5x benchmark). Quick ratio is similarly 8.17x, reflecting minimal inventory reporting. Leverage is very conservative: total liabilities 33.99 vs equity 226.61 gives a D/E of ~0.15x; interest-bearing debt is unreported but the structure suggests net cash (cash and deposits 173.19 exceed total liabilities). No warning triggers: Current Ratio is not below 1.0, and D/E is far below 2.0. Maturity mismatch risk appears low as cash and receivables (34.80) comfortably cover current liabilities. No off-balance sheet obligations were disclosed in the provided data. The company has ample financial flexibility for capex or shareholder returns without stressing the balance sheet.

Cash Flow Quality

Operating, investing, and financing cash flows were not disclosed, so we cannot compute OCF/Net Income, FCF, or cash conversion. Accordingly, we cannot test the OCF/NI > 1.0 benchmark or FCF coverage of dividends and capex. Balance sheet signals are positive: working capital is strong (199.15), and cash exceeds total liabilities by 139.20, reducing near-term liquidity risk. Accounts receivable of 34.80 against H1 revenue implies an approximate DSO in the ~50-day range on a simple H1 basis, which seems reasonable for enterprise services, though seasonality and billing terms may distort the point-in-time snapshot. Without OCF, we cannot rule out working capital-driven boosts to earnings; monitor H1-to-H2 changes in receivables and deferred revenue.

Dividend Sustainability

Reported Q2 DPS is ¥70 and year-end DPS is ¥35, totaling ¥105 for the fiscal year. The provided payout ratio of 151.8% divides full-year dividends by first-half net income and therefore overstates payout pressure; it is not an appropriate measure of full-year sustainability. Using only the interim DPS (¥70) vs H1 EPS (¥73.86) implies an interim payout of about 95%, which is high but could normalize on H2 earnings contribution. With cash of 173.19 and minimal leverage, near-term dividend capacity appears supported by the balance sheet even absent OCF data. However, without FCF disclosure, structural sustainability (dividends covered by recurring FCF after capex) cannot be confirmed. Policy outlook likely depends on H2 performance and any stated shareholder return framework; monitor guidance and FCF disclosure in the full-year report.

Risk Assessment

Business Risks:

• Revenue seasonality and weather pattern variability affecting service usage and renewals
• Customer concentration or sector cyclical exposure in corporate subscriptions (not disclosed)
• Cost inflation in data acquisition, cloud, and labor potentially pressuring margins
• Product mix shifts that could impact gross margin and pricing power

Financial Risks:

• Earnings-to-cash conversion risk due to missing OCF/FCF disclosure
• Potential working capital swings around billing cycles and seasonality
• Dividend policy risk if H2 earnings undershoot while annual DPS remains elevated

Key Concerns:

• ROE at 7.2% remains below 8–10% comfort despite profit growth, constrained by low asset turnover and low leverage
• Limited disclosure on SG&A components and depreciation/CapEx reduces visibility on medium-term margin durability
• Dividend payout optics appear high when compared to H1 earnings; full-year coverage depends on H2 delivery

Investment Implications

Key Takeaways:

• Strong operating leverage: revenue +4.5% drove operating income +35.3% with 426 bps OPM expansion to 18.7%
• Net margin improved to 13.5% and tax rate stable at ~29.5%, lifting NI +44.4%
• Balance sheet is exceptionally liquid (current ratio 8.17x) with effective net cash, minimizing financial risk
• ROE improved but remains modest at 7.2%, limited by low asset turnover (0.466) and conservative leverage
• Cash flow disclosure gap is the primary constraint on assessing earnings quality and dividend coverage

Metrics to Watch:

• Operating cash flow and free cash flow in H2
• Revenue growth run-rate and renewal rates in corporate segments
• SG&A trajectory versus revenue (signal on operating leverage durability)
• AR days and deferred revenue balances for working capital health
• Full-year EPS versus annual DPS (coverage) and any updates to dividend policy

Relative Positioning: Within Japan-listed information services providers, the company exhibits above-average margins and best-in-class liquidity, with below-peer ROE due to conservative balance sheet usage; earnings momentum is favorable, but sustained outperformance hinges on cash conversion and H2 growth.

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