Quick View
| Metric | Current | Prior | YoY |
|---|---|---|---|
| Revenue | ¥36.3B | ¥39.8B | −8.8% |
| Operating Income | ¥6.6B | ¥10.3B | −36.0% |
| Ordinary Income | ¥6.6B | ¥10.3B | −35.8% |
| Net Income | ¥4.6B | ¥6.6B | −30.5% |
| ROE | 10.0% | 15.3% | - |
Executive Summary
FY2026 Q3 cumulative results (nine months ended): Revenue 3,632 million yen (YoY -8.8%), Operating Income 659 million yen (YoY -36.0%), Ordinary Income 662 million yen (YoY -35.8%), Net Income 457 million yen (YoY -30.5%). The company experienced both revenue decline and significant profit deterioration. Revenue decreased by 350 million yen due to scope revisions in safety information management services at certain clients and reduced adverse event information collection volume. Despite new client projects commencing operations, they were insufficient to offset the decline. Operating margin contracted from 25.9% to 18.1% (down 7.7pt), primarily driven by increased cost of sales resulting from workforce expansion and strengthening of supervisory personnel, combined with lower utilization rates. The company maintains strong financial health with cash deposits of 3,661 million yen and minimal debt burden, though Q4 recovery is critical to achieving full-year guidance.
Performance Drivers
Revenue declined 8.8% YoY to 3,632 million yen, driven by a 350 million yen decrease in safety information management services due to scope revisions at certain major clients and reduced adverse event information collection volume. While multiple new client projects commenced operations during the period, they were insufficient to compensate for the existing client business decline.
Operating profit fell 36.0% to 659 million yen, with operating margin contracting 7.7pt to 18.1%. Cost of sales increased 28 million yen due to headcount expansion and strengthening of supervisory personnel to build future operational capacity. The gross profit margin declined 6.5pt as business volume reduction lowered utilization rates. Selling, general and administrative expenses also increased due to reinforcement of sales and indirect departments, further compressing profitability.
The gap between ordinary income (662 million yen) and net income (457 million yen) reflects an effective tax rate of 31.0%, with no material non-recurring items identified. Bonus reserve increased significantly by 107 million yen (+76.0% YoY), suggesting timing effects in expense recognition that temporarily impacted profitability.
This represents a "revenue down, profit down" pattern, with profit declining at a steeper rate than revenue due to fixed cost deleverage and strategic investments in organizational infrastructure.
Segment Analysis
The company operates as a single-segment business specializing in post-marketing Contract Research Organization (CRO) services. Revenue of 3,632 million yen and operating income of 659 million yen are entirely attributable to this core business.
The safety information management service, which constitutes the primary revenue driver, experienced a 350 million yen decline due to scope revisions at certain clients and reduced adverse event information volumes. Post-marketing surveillance (PMS) and clinical research services continue to contribute to the revenue mix, though specific breakdowns are not disclosed.
Operating margin for the core business declined from 25.9% to 18.1%, reflecting both top-line pressure and strategic cost investments. New client project wins provide a positive forward indicator, though their revenue contribution in Q3 was insufficient to offset existing client declines.
Key Metrics
Profitability: ROE 10.0% (company historical 5-period data not available for comparison), Operating Margin 18.1% (prior period 25.9%, down 7.7pt), Net Profit Margin 12.6%, Gross Profit Margin 33.8% (down 6.5pt)
Financial Health: Equity Ratio 83.0% (prior 76.9%), Current Ratio 683.6%, Debt-to-Equity Ratio 0.21x, Interest Coverage Ratio exceptionally high (minimal interest expense)
Efficiency: Total Asset Turnover 0.661x, Financial Leverage 1.21x, DuPont ROE decomposition indicates profitability decline primarily driven by margin compression rather than asset efficiency or leverage changes
Cash Position: Cash and deposits 3,661 million yen representing 66.6% of total assets, Working Capital 4,120 million yen
Earnings Quality: Ordinary Income to Net Income gap reflects normal tax burden (31.0% effective rate), no material extraordinary items, though bonus reserve increase of 107 million yen (+76.0%) suggests timing effects in expense recognition
Cash Flow Analysis
Operating CF and detailed cash flow statements are not provided in the available XBRL data for the nine-month period.
Cash and deposits position: 3,661 million yen (prior period 3,588 million yen), representing an increase of 73 million yen. This substantial cash balance provides strong liquidity cushion and represents 8.0x the quarterly average net income run-rate.
Working capital: 4,120 million yen with current ratio of 683.6% indicates exceptionally strong short-term financial flexibility.
Capital allocation: Planned annual dividend of 95 yen per share (up 15 yen from prior year) suggests continued commitment to shareholder returns despite profit decline.
Alert: Work-in-progress inventory represents 100% of total inventory (quality alert flag), warranting monitoring of project cycle times and potential revenue recognition timing issues.
Earnings Quality
The gap between Ordinary Income (662 million yen) and Net Income (457 million yen) is fully explained by normal income tax expense, with an effective tax rate of 31.0%. No material non-operating income or extraordinary items are present.
Bonus reserve increased 107 million yen (+76.0% YoY) to 248 million yen, representing a significant timing-related expense that temporarily impacts profitability. This increase aligns with headcount expansion and strengthening of supervisory personnel layers as disclosed in the presentation materials.
The 100% work-in-progress composition of inventory (quality alert) suggests potential earnings quality concerns related to revenue recognition timing and project cycle management. This warrants attention as it may indicate projects in process that have not yet been billed or completed.
With minimal non-operating items and no disclosed impairments or asset sales, earnings are primarily driven by core operating performance, though the margin compression and reserve increases indicate near-term pressure on earnings quality sustainability.
Guidance Update
Full-year guidance: Revenue 5,063 million yen (YoY -5.0%), Operating Income 1,112 million yen (-14.9%), Ordinary Income 1,112 million yen (-15.1%), Net Income 750 million yen (-17.8%)
Q3 cumulative progress rates: Revenue 71.8%, Operating Income 59.3%, Ordinary Income 59.5%, Net Income 60.9%
Against standard progress expectations (Q3=75%), revenue tracking is slightly behind at 71.8%, while operating income at 59.3% is significantly below the standard 75% benchmark. This indicates Q4 must deliver approximately 1,431 million yen in revenue (39.4% of full-year total) and 453 million yen in operating income (40.7% of full-year total) to achieve guidance.
The guidance assumes Q4 recovery driven by: (1) full-quarter contribution from new client projects that commenced during Q1-Q3, (2) improved utilization rates as business volume stabilizes, and (3) operating leverage benefits as fixed cost investments in supervisory and sales personnel begin to generate returns.
No revision to full-year guidance was announced, suggesting management confidence in Q4 recovery trajectory, though the below-standard progress rate through Q3 presents execution risk.
Shareholder Returns
Annual dividend forecast: 95 yen per share (up 15 yen from prior year 80 yen, +18.8%)
Dividend composition: Year-end dividend 80 yen (prior year 65 yen)
Based on full-year guidance of 750 million yen net income and 2,405 thousand outstanding shares (implied from EPS guidance of 311.87 yen), the dividend payout ratio is projected at 30.5%.
The company is increasing dividends despite profit decline, signaling commitment to progressive shareholder returns. The payout ratio of 30.5% remains conservative and sustainable given the strong cash position of 3,661 million yen and minimal debt burden (debt-to-equity ratio 0.21x).
No share buyback program is disclosed in the available materials.
The dividend increase represents a total return ratio (dividends only) of approximately 30.5%, leaving substantial retained earnings for reinvestment in organizational capacity building and future growth initiatives.
Catalysts
Near-term:
- Q4 performance recovery critical to achieving full-year guidance; revenue must reach 1,431 million yen (up 39.4% vs Q3 quarterly average) and operating income 453 million yen
- Utilization rate improvement as new client projects ramp to full operational capacity
- Online investor briefing scheduled for February 26, 2026, providing management commentary on Q3 results and Q4 outlook
Long-term:
- New client project wins beginning to contribute; full-year impact expected in FY2027 as projects mature
- Organizational capacity expansion through supervisory personnel strengthening positions company for larger project scale and scope
- Sales and indirect department reinforcement to drive new business development and enhance existing client relationships
- Market expansion opportunities in post-marketing CRO services leveraging Tokyo, Kobe, and Okinawa operational centers
Industry Benchmark (Reference - Proprietary Data)
Industry Position (Reference - Proprietary Analysis)
Profitability: Operating Margin 18.1% vs. Industry Median 8.0% (significantly above median; company ranks in upper quartile). Net Profit Margin 12.6% vs. Industry Median 5.6% (substantially exceeds median). ROE 10.0% vs. Industry Median 8.2% (above median despite YoY decline). Despite Q3 margin compression, the company maintains superior profitability versus industry peers.
Efficiency: Asset Turnover 0.661x vs. Industry Median 0.68x (slightly below median). Revenue Growth -8.8% vs. Industry Median +10.5% (underperforming; company in lower quartile for growth).
Financial Health: Equity Ratio 83.0% vs. Industry Median 59.5% (significantly stronger capital structure). Current Ratio 683.6% vs. Industry Median 2.13x (exceptionally high liquidity). Net Debt/EBITDA not meaningful due to net cash position; industry median -2.85x indicates sector-wide low leverage.
Overall Assessment: The company maintains industry-leading profitability margins and financial strength but faces near-term growth headwinds. Margin compression trend warrants monitoring, though absolute levels remain well above industry standards.
Industry: IT and Telecommunications Services (99 companies for most metrics), Comparison period: 2025-Q3, Source: Proprietary analysis
Risk Factors
Client concentration and scope risk: Revenue declined 350 million yen due to scope revisions at certain major clients and reduced adverse event information volumes. Further scope reductions or client losses could materially impact revenue sustainability, particularly if diversification efforts fail to offset existing client declines.
Utilization rate and operating leverage risk: Headcount expansion and supervisory personnel strengthening increased fixed costs while business volume declined, causing utilization rate deterioration and 7.7pt operating margin compression to 18.1%. Prolonged low utilization rates could further erode profitability and threaten the company's industry-leading margin position.
Work-in-progress management risk: Inventory composition of 100% work-in-progress (quality alert) suggests potential project cycle delays or revenue recognition timing issues. Extended project cycles or write-offs could impact both earnings quality and cash conversion, particularly if clients reduce scope or terminate projects before completion.
Key Takeaways from Earnings
Superior profitability foundation under near-term pressure: Operating margin of 18.1% remains more than 2x the industry median of 8.0%, and net profit margin of 12.6% significantly exceeds the 5.6% industry median. While margins compressed 7.7pt YoY due to fixed cost investments and utilization rate decline, the company retains substantial profitability advantage. The margin compression reflects strategic organizational capacity building rather than fundamental business model deterioration, though sustained revenue weakness could threaten this advantage.
Financial strength enables growth investment through cycle: Equity ratio of 83.0% (vs. 59.5% industry median), cash position of 3,661 million yen (66.6% of assets), and minimal leverage (0.21x debt-to-equity) provide exceptional financial flexibility. The company is strategically investing in supervisory personnel and sales infrastructure during a revenue downturn, positioning for recovery when new client projects mature. Dividend increase to 95 yen (payout ratio 30.5%) despite profit decline signals management confidence and commitment to shareholder returns.
Q4 execution critical for trajectory validation: Revenue must reach 1,431 million yen in Q4 (39.4% of full-year guidance) to meet targets, requiring significant sequential acceleration from the 1,211 million yen quarterly average in Q1-Q3. Operating income must recover to 453 million yen (vs. 220 million yen quarterly average), implying meaningful margin recovery. Q4 results will determine whether recent weakness represents temporary client-specific adjustments with new project offset, or signals broader structural headwinds. The February 26 investor briefing provides near-term catalyst for management to articulate recovery pathway and new client pipeline visibility.
This report was automatically generated by AI integrating XBRL earnings data and PDF presentation materials as an earnings analysis tool. This is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled from publicly available earnings data. Please make investment decisions at your own responsibility and consult professionals as needed.
AI Analysis (Earnings Presentation)
AI analysis of PDF earnings presentation
Summary
WDB Coco Co., Ltd.’s Q3 FY March 2026 results showed declines in both revenue and earnings: net sales of 3,632 million yen (YoY ▲8.8%), operating income of 659 million yen (▲36.0%), ordinary income of 662 million yen (▲35.8%), and net income of 457 million yen (▲30.5%). The primary driver of lower sales was a review of outsourced work scopes by certain clients in the safety information management services and a decrease in the number of collected adverse event reports. Although there was ramp-up of contracted projects from new clients, lower workload led to a decline in utilization, and together with higher cost of sales stemming from increased headcount and reinforcement of the managerial layer, margins deteriorated. For the full year, the company forecasts net sales of 5,063 million yen (▲5.0%) and operating income of 1,112 million yen (▲14.9%), and plans to increase the annual dividend to 95 yen (+15 yen YoY). Cash and deposits are ample and financial soundness is high, but a recovery in Q4 will be key to achieving the full-year guidance.
Key Highlights
Sales decreased by 350 million yen due to reviews of outsourced work scopes and a decline in the number of adverse event reports collected for certain clients in safety information management services. While contracted projects from multiple new clients have begun operating, they were insufficient to offset the sales decline, resulting in an 8.8% YoY decrease in revenue. An increase in headcount and reinforcement of the managerial layer raised cost of sales by 28 million yen; combined with lower utilization, gross margin declined by 6.5pt. SG&A also increased due to investments to strengthen sales and indirect divisions, and operating margin fell by 7.7pt from 25.9% to 18.1%. The company forecasts an annual dividend of 95 yen (+15 yen YoY) and, with a payout ratio of 30.5%, continues to reinforce shareholder returns.
Business Outlook
For the full year, the company forecasts net sales of 5,063 million yen (▲5.0% YoY), operating income of 1,112 million yen (▲14.9%), ordinary income of 1,112 million yen (▲15.1%), and net income of 750 million yen (▲17.8%). Cumulative progress through Q3 stands at 71.8% for sales and 59.3% for operating income, making a recovery in sales and profits in Q4 a prerequisite for achieving the full-year targets. While the impact of reviews of outsourced work scopes and fewer adverse event reports in safety information management services is expected to persist, the company anticipates improved profitability in the second half through full-scale ramp-up of new projects and better utilization.
Management Guidance
Management upholds the corporate philosophy of solving client challenges and contributing to the future of healthcare by “guaranteeing outcomes” and “delivering new value.” In the short term, reduced workloads from existing clients and lower utilization are challenges; however, the company is reinforcing the managerial layer to build an execution structure for contracted operations and strengthening sales and indirect divisions, focusing on fortifying the foundation for medium- to long-term growth. To enhance corporate value, the company intends to continue bolstering shareholder returns and has indicated a policy of raising the payout ratio. An online briefing is scheduled for February 26, 2026.
Strategic Initiatives
Strengthen the organizational foundation for future order expansion by reinforcing the managerial layer to build an execution structure for contracted operations. Enhance new client acquisition and proposal capabilities to existing clients by strengthening sales and indirect divisions. Bolster expertise as a post-marketing operations-focused CRO centered on safety information management, post-marketing surveillance (PMS), and clinical research. Accelerate corporate value enhancement by raising the payout ratio (30.5% forecast) and maintaining a stable dividend to strengthen shareholder returns. Maintain nationwide coverage leveraging operation centers in Tokyo, Kobe, and Okinawa.
Disclosed Risks
Risk that reviews of outsourced work scopes and declines in the number of adverse event reports collected in safety information management services will continue to impact sales. Risk that lower utilization due to decreased workloads will pressure margins. Risk that increased fixed costs from higher headcount and reinforcement of the managerial layer will worsen short-term profitability. Risk that the timing of new project ramp-ups and the size of orders will fall short of expectations. Risk that changes in economic conditions, shifts in client needs and user preferences, competition, and regulatory changes could cause significant variances between full-year forecasts and actual results (explicitly stated on page 16 of the materials).
AI Financial Analysis
Executive Summary
WDB COCO’s FY2026 Q3 earnings were weak relative to the prior-year period, with revenue contraction amplified by substantial margin compression. Cumulative Q3 revenue was ¥3.632bn, down 8.8% year on year. Operating income fell 36.0% to ¥659m, a materially sharper decline than sales. Ordinary income declined 35.8% to ¥662m. Net income decreased 30.5% to ¥457m, equivalent to EPS of ¥190.22. Gross profit fell 23.6% to ¥1.228bn as cost of sales increased 1.2% despite lower revenue. The gross margin compressed 654bp year on year to 33.8% from 40.4%. SG&A expense declined 1.3% to ¥569m, but did not fall sufficiently to offset the gross-profit shortfall. Consequently, the SG&A-to-sales ratio rose 118bp to 15.7%. Operating margin contracted 771bp to 18.1% from 25.9%, although it remains above the 15% profitability benchmark. Net margin declined 394bp to 12.6% from 16.5%, while remaining above the 10% benchmark. Non-operating items were immaterial, with ¥3m of interest income and only ¥0.1m of interest expense, so the earnings decline was fundamentally operational rather than financing-driven. The effective tax rate was 31.0%, producing a tax burden of 0.690 and contributing modestly to the difference between pretax and net profit. The balance sheet remains exceptionally liquid, supported by ¥3.661bn of cash and deposits, equal to 66.6% of total assets. Financial leverage is low at 1.21x and the current ratio is 683.6%, limiting near-term financial-stress risk. The full-year plan requires a Q4 operating margin of roughly 31.7%, versus 18.1% achieved cumulatively through Q3, making the profit forecast dependent on a pronounced fourth-quarter recovery. The FY2026 forecast dividend of ¥95 per share implies a 30.5% payout ratio based on forecast EPS of ¥311.87, which appears conservative relative to forecast earnings.
Profitability Analysis
The reported annualized DuPont ROE is 13.4%, decomposed into a 12.6% net profit margin, 0.881x annualized asset turnover, and 1.21x financial leverage. The principal driver of the year-on-year earnings deterioration is margin, rather than leverage: operating margin declined to 18.1% and net margin to 12.6%. Gross margin was the largest underlying pressure point, declining 654bp to 33.8% as cost of sales rose to ¥2.404bn while revenue declined to ¥3.632bn. SG&A fell modestly to ¥569m, but its 1.3% reduction lagged the 8.8% revenue decline, raising the SG&A ratio to 15.7% from 14.5%. This negative operating leverage explains why operating income declined 36.0%, far more than the revenue decrease. The 5-factor analysis shows an interest burden of 1.005, confirming that financing costs have no meaningful effect on returns. The tax burden of 0.690 is slightly below the 0.70 normal-reference level, consistent with the 31.0% effective tax rate. Financial leverage remains restrained and does not appear to be artificially elevating ROE. An annualized ROE of 13.4% is within the 10–15% “good” range, but below the 15% “excellent” threshold. Sustainability of the current return profile depends primarily on restoring gross margin and improving fixed-cost absorption through renewed revenue growth.
Growth Assessment
Revenue contracted 8.8% year on year to ¥3.632bn in FY2026 Q3, indicating that the current earnings pressure is associated with lower business volume as well as weaker gross profitability. Gross profit declined 23.6% to ¥1.228bn, materially underperforming revenue because gross margin fell to 33.8%. Operating income declined 36.0% and net income 30.5%, demonstrating adverse operating leverage. The full-year sales forecast is ¥5.063bn, implying Q3 cumulative progress of 71.7%, 3.3 percentage points below the standard 75% Q3 progress level. Full-year operating-income progress is 59.3%, 15.7 percentage points below the standard pace. Net-income progress is 60.9%, 14.1 percentage points below the standard pace. Achieving the plan requires Q4 revenue of approximately ¥1.431bn, operating income of approximately ¥453m, and net income of approximately ¥293m. This implies a required Q4 operating margin of about 31.7%, substantially above the 18.1% cumulative Q3 margin. Accordingly, the forecast outcome is highly sensitive to a sharp recovery in project mix, pricing, utilization, or cost absorption during Q4. Profit quality at the income-statement level is supported by the fact that ordinary income of ¥662m was closely aligned with operating income of ¥659m, indicating limited dependence on non-operating income.
Financial Health
Financial health is strong. Total assets were ¥5.497bn, of which current assets represented 87.8% and cash and deposits represented 66.6%. Cash and deposits increased by ¥182m year on year to ¥3.661bn, providing a substantial liquidity buffer. The current ratio and quick ratio were both 683.6%, far exceeding healthy reference levels and indicating no apparent short-term maturity mismatch. Working capital was ¥4.120bn. Total liabilities declined by ¥353m year on year to ¥937m, while total equity increased by ¥265m to ¥4.561bn. The equity ratio improved to 83.0% from 76.9%. Debt-to-equity was a conservative 0.21x, well below the 2.0x level that would warrant a leverage warning. Interest expense was only ¥0.1m and interest coverage was 5,401.6x, confirming negligible debt-service pressure. Current liabilities declined to ¥706m from ¥1.080bn, while noncurrent liabilities rose modestly to ¥231m from ¥210m. The ¥247m provision for bonuses is a meaningful component of obligations and increased from ¥140m in the prior period. Asset retirement obligations were ¥56m, equal to 6.0% of total liabilities; this is a notable long-dated obligation, though the overall liability base and liquidity position are strong. Intangible assets accounted for only 3.4% of total assets, limiting balance-sheet exposure to intangible-asset valuation risk.
Notable B/S Changes
Cash and deposits: +¥182m (+5.2%) to ¥3.661bn - strengthens already ample liquidity and represents 66.6% of total assets. Total liabilities: -¥353m (-27.4%) to ¥937m - improves solvency and contributed to the rise in the equity ratio to 83.0%. Current liabilities: -¥374m (-34.6%) to ¥706m - materially reduces near-term obligations and supports the 683.6% current ratio. Provision for bonuses: +¥107m (+76.0%) to ¥247m - a significant increase in workforce-related accrued obligations that warrants monitoring against revenue recovery. Total equity: +¥265m (+6.2%) to ¥4.561bn - retained earnings growth reinforced the capital base despite weaker year-on-year net income.
Cash Flow Quality
Dividend Sustainability
The company’s full-year forecast calls for DPS of ¥95. Based on forecast EPS of ¥311.87, the forecast dividend payout ratio is approximately 30.5%. This is well below the 60% sustainability reference level and leaves substantial earnings retention capacity. Retained earnings stood at ¥4.002bn, exceeding 87% of total equity and providing a strong capital base. Cash and deposits of ¥3.661bn are also substantially greater than the forecast aggregate dividend requirement of roughly ¥228m, calculated using 2.405 million issued shares. The balance-sheet profile therefore supports the stated dividend level. The absence of material interest expense and low debt-to-equity further reduces pressure on distributions. Dividend sustainability should nevertheless be assessed against delivery of the full-year earnings plan, because Q3 operating-income progress was below the normal seasonal pace.
Risk Assessment
Business risks include Profitability and execution risk: revenue declined 8.8% while gross margin fell 654bp, causing operating income to decline 36.0%. Restoring sales volume without further pricing or delivery-margin pressure is the central operating issue., Fourth-quarter concentration risk: achieving full-year operating income of ¥1.112bn requires approximately ¥453m in Q4 operating income and a roughly 31.7% Q4 operating margin, materially above the 18.1% cumulative Q3 level., Project-delivery and estimation risk: work in process was ¥8m and represented 100% of inventory. Although the absolute amount is small at around 0.1% of total assets, a fully work-in-process inventory profile is consistent with project-based delivery and requires accurate progress, cost-to-complete, and loss-provision estimates., Industry-specific clinical-development support risk: demand, project timing, client budget decisions, and staffing utilization in clinical-research and safety-information support services can affect revenue recognition and gross-margin recovery..
Financial risks include Asset retirement obligation risk: asset retirement obligations of ¥56m equal 6.0% of total liabilities, above the 5% quality-alert threshold. This raises exposure to eventual restoration and settlement costs, although the obligation is covered by a large cash balance and low leverage., Bonus-provision risk: the provision for bonuses increased 76.0% year on year to ¥247m. This may reflect compensation accruals or workforce-related commitments and could weigh on near-term cost flexibility if revenue remains soft., Return dilution risk: annualized ROE of 13.4% is healthy but below the 15% excellent benchmark, and further margin weakness would reduce retained-earnings efficiency despite the company’s strong capital base..
Key concerns include The operating-margin decline of 771bp is more severe than the sales decline alone would suggest, highlighting unfavorable cost absorption and/or project mix., Forecast operating-income progress is 15.7 percentage points below the standard Q3 progress rate, increasing reliance on a strong final quarter., The HIGH_WIP_RATIO alert is a monitoring item because all inventory is work in process; its current financial impact is limited by the small ¥8m balance., The HIGH_ARO_RATIO alert reflects asset retirement obligations at 6.0% of liabilities. It is a structural obligation rather than a near-term liquidity threat given the 683.6% current ratio and ¥3.661bn cash balance..
Investment Implications
Key takeaways include Revenue of ¥3.632bn, operating income of ¥659m, and net income of ¥457m were all below the prior-year period, with profit falling substantially faster than revenue., Operating margin remains strong in absolute terms at 18.1%, but the 771bp year-on-year contraction is the critical earnings trend., The balance sheet is a major stabilizer, with an 83.0% equity ratio, ¥3.661bn cash balance, 683.6% current ratio, and 0.21x debt-to-equity., The full-year forecast requires a material Q4 margin rebound, making quarterly execution and project profitability the main determinants of the FY2026 outcome., The forecast ¥95 DPS corresponds to a moderate 30.5% payout ratio and appears well supported by earnings and the capital base..
Metrics to watch include Quarterly revenue growth and the pace of recovery toward the ¥5.063bn full-year sales target, Gross margin, which was 33.8% in Q3 versus 40.4% in the prior-year period, Operating margin relative to the approximately 31.7% implied requirement for Q4 to meet full-year guidance, Provision for bonuses, which increased to ¥247m, Work-in-process balances and provision for loss on orders, currently ¥8m and ¥4m respectively, Asset retirement obligations, currently ¥56m and 6.0% of liabilities.
Regarding relative positioning, WDB COCO combines above-benchmark absolute profitability with an unusually conservative balance sheet: the 18.1% operating margin and 12.6% net margin remain strong, while the 83.0% equity ratio and 0.21x debt-to-equity indicate limited financial risk. Relative positioning is weakened, however, by the sharp year-on-year margin contraction and by the extent of the implied Q4 earnings recovery required to achieve full-year guidance.