WEATHERNEWS (4825) FY2027 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥6.34B
• Operating Income: ¥892M
• Net Income: ¥595M
• EPS: ¥13.34

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Full Year Forecast

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AI Financial Analysis

Executive Summary

Weathernews’ FY2027 Q1 delivered revenue growth but weaker profitability. Revenue rose 5.5% year on year to ¥6.34bn. Gross profit increased approximately 25.2% to ¥3.47bn as the gross margin expanded from 46.2% to 54.8%, a gain of roughly 860 basis points. SG&A rose approximately 38.6% to ¥2.58bn, outpacing revenue growth and absorbing the gross-profit improvement. Operating income consequently fell 2.2% to ¥892m. The operating margin narrowed from 15.2% to 14.1%, or about 110 basis points. Ordinary income declined 2.1% to ¥896m. Profit attributable to owners fell more sharply, down 11.9% to ¥592m. Its margin declined from 11.2% to 9.3%, or about 185 basis points. The effective tax rate increased from approximately 26.5% to 33.7%, explaining much of the difference between the pretax-profit and net-profit trends. Non-operating items were modest on a net basis, although foreign-exchange losses increased to ¥13m. Cash and deposits remained substantial at ¥15.67bn, equivalent to 61.1% of assets. Against the full-year forecast, Q1 achieved 24.6% of revenue but only 16.5% of operating income and 15.4% of profit attributable to owners. The revenue progress rate is close to the straight-line Q1 benchmark of 25%, whereas profit progress is meaningfully behind it. Meeting the unchanged operating-income forecast requires a considerably higher margin over the remaining three quarters. The principal issues for subsequent results are whether SG&A growth moderates and whether the Q1 tax-rate increase persists.

Profitability Analysis

The provided three-factor DuPont analysis gives a 9.3% net margin × 0.989x annualized asset turnover × 1.18x financial leverage, producing approximately 10.9% annualized ROE. Using the supplied prior-period balances and annualizing prior Q1 revenue, comparable prior asset turnover was approximately 0.850x and indicative ROE was approximately 11.3%. Turnover therefore improved, partly alongside a smaller asset base, but the net-margin decline more than offset that benefit; leverage was broadly stable. The gross margin improved approximately 860 basis points to 54.8%, while SG&A increased ¥718m against a ¥698m gross-profit increase. That negative operating leverage reduced the operating margin approximately 110 basis points to 14.1%. The five-factor analysis shows a 0.660 tax burden and 1.005 interest burden: taxation, rather than financing cost, was the more important below-operating-profit influence. Sustainability depends on whether the SG&A increase supports future revenue or remains a recurring cost.

Growth Assessment

Revenue rose ¥332m year on year, but operating income declined ¥20m. Q1 revenue represents 24.6% of the ¥25.80bn full-year forecast, close to the standard 25% Q1 pace. Operating income represents 16.5% of the ¥5.40bn forecast, ordinary income 16.3% of ¥5.50bn, and profit attributable to owners 15.4% of ¥3.85bn; each profit measure is more than 10% below the standard pace on a relative basis. To meet guidance, the remaining three quarters must generate ¥19.46bn of revenue and ¥4.51bn of operating income, implying a 23.2% operating margin versus 14.1% in Q1. This raises the importance of seasonal earnings patterns and cost control. Weathernews reports one weather-information and content-services segment.

Financial Health

Liquidity is strong: current assets of ¥21.27bn cover current liabilities of ¥3.40bn by 6.26x, and working capital is ¥17.87bn. Cash of ¥15.67bn alone substantially exceeds current liabilities, limiting near-term maturity-mismatch risk. The reported 0.18x liabilities-to-equity measure and 84.8% owners’ equity ratio indicate a conservative balance sheet; the former should not be interpreted as an interest-bearing-debt ratio. Relative to the supplied prior-period balance sheet, cash declined ¥3.17bn and total equity ¥2.15bn. Retained earnings declined ¥2.18bn, while the treasury-stock contra-equity balance increased in magnitude by ¥725m; these movements warrant attention when assessing capital allocation. Asset retirement obligations of ¥390m equal approximately 10.0% of liabilities, as flagged. Such obligations can arise from premises or equipment restoration, but they represent future settlement costs; their impact is moderated by their approximately 1.5% share of assets and the substantial cash balance.

Notable B/S Changes

Cash and deposits: −¥3.17bn, approximately −16.8% versus the supplied prior-period balance; the decline merits assessment alongside future cash movements. Treasury stock: contra-equity balance increased from ¥792m to ¥1.52bn, a ¥725m increase in magnitude; monitor its capital-allocation effect without treating the balance change as Q1 repurchase cash flow. Retained earnings: −¥2.18bn, approximately −10.6%; the decline materially contributed to the lower equity balance. Total equity: −¥2.15bn, approximately −9.0%; capitalization remains strong at an 84.8% owners’ equity ratio. Contract assets: −¥454m, approximately −42.9%; a potentially meaningful change in billing or settlement balances. Other accounts payable: +¥527m, approximately +98.2%; a material increase in near-term obligations.

Cash Flow Quality

The ¥592m quarterly profit attributable to owners cannot be independently cash-validated from the supplied figures. Receivables were broadly stable relative to the supplied prior-period balance sheet, while contract assets declined approximately ¥454m; these balance-sheet movements do not by themselves establish cash collection. The ¥3.17bn decline in cash, alongside a ¥790m reduction in income taxes payable and changes in equity accounts, makes the composition of cash movements important to subsequent earnings-quality assessment. Non-operating income of ¥23m was below 1% of revenue, and ordinary income was close to operating income. The ¥80m year-on-year fall in profit attributable to owners was driven predominantly by the higher tax charge rather than extraordinary items.

Dividend Sustainability

The unchanged full-year dividend forecast is ¥50 per share. Relative to forecast EPS of ¥85.78, the forecast dividend payout ratio is approximately 58.3%, just below the 60% reference threshold. Cash of ¥15.67bn provides substantial balance-sheet capacity, but the forecast assumes a significant profit pickup after Q1. The larger treasury-stock balance also merits monitoring when evaluating aggregate shareholder returns; its movement alone does not establish the cash spent on repurchases during Q1. The prior-year dividend figures require split-adjusted treatment because of the March 2026 two-for-one share split.

Risk Assessment

Business risks include Weather-information and content services face technology-obsolescence and competitive-pricing risks, particularly as alternative weather-data and AI-enabled products develop., The single-segment business depends on service reliability, data integrity and cybersecurity; outages or data breaches could impair customer retention., A 23.2% operating margin is required across the remaining three quarters to meet the full-year forecast, making execution and seasonality important..

Financial risks include SG&A rose 38.6% against 5.5% revenue growth, compressing the operating margin despite stronger gross profitability., The effective tax rate rose approximately 720 basis points to 33.7%, contributing materially to the net-profit decline., Asset retirement obligations of ¥390m represent 10.0% of liabilities, above the flagged 5% threshold, although they are modest relative to cash and total assets., Cash and deposits declined ¥3.17bn relative to the supplied prior-period balance sheet..

Key concerns include The HIGH_WIP_RATIO alert states that work in process is 100% of its inventory measure. Reported work in process is ¥68m versus supplies of ¥223m, however, so the alert appears sensitive to which inventory accounts its denominator includes. Work in process is only approximately 0.3% of assets; the alert does not, on these figures, establish material inventory concentration., The HIGH_ARO_RATIO alert reflects a genuine concentration within the relatively small liability base. Future restoration costs should be assessed alongside the company’s substantial liquidity., Profit guidance requires a substantial improvement from Q1 margins, while the increase in SG&A has not yet produced operating-profit growth..

Investment Implications

Key takeaways include Gross-margin improvement was substantial, but higher SG&A prevented operating-profit growth., The balance sheet remains highly liquid despite a decline in cash., The unchanged full-year profit forecast requires materially stronger profitability in the remaining quarters..

Metrics to watch include Quarterly SG&A growth and operating margin, Progress against full-year operating-income and net-income forecasts, Effective tax rate, Cash movements, contract assets and receivables, Treasury-stock and retained-earnings movements.

Regarding relative positioning, The 14.1% operating margin falls in the supplied benchmark’s 8–15% 'good' range, while 10.9% annualized ROE falls in its 10–15% range. Liquidity and capitalization are stronger than the supplied minimum benchmarks; near-term profit conversion is the principal counterweight.