Daily Journal Corporation Announces Financial Results for Fiscal Year ended September 30, 2024

Rhea-AI Summary

Daily Journal (NASDAQ:DJCO) reported consolidated revenues of $69.93 million for fiscal 2024, up from $67.71 million in the previous year. The company's Journal Technologies segment saw increased license and maintenance fees of $4.76 million and public service fees of $1.58 million, though consulting fees decreased by $4.69 million. The Traditional Business segment experienced a slight pretax income decline to $1.58 million.

The company held marketable securities valued at $358.69 million, including pretax unrealized gains of $219.60 million. During March 2024, DJCO sold securities for $40.58 million, realizing gains of $14.26 million, and reduced its margin loan to $27.5 million. The company reported consolidated net income of $78.11 million ($56.73 per share) for fiscal 2024, compared to $21.45 million ($15.58 per share) in the previous year.

Positive

• Revenue increased by $2.22 million to $69.93 million
• Journal Technologies' license and maintenance fees grew by $4.76 million
• Marketable securities portfolio valued at $358.69 million with $219.60 million in unrealized gains
• Net income increased significantly to $78.11 million ($56.73 per share)
• Reduced margin loan by $47.5 million to $27.5 million

Negative

• Journal Technologies' consulting fees decreased by $4.69 million
• Traditional Business pretax income declined by $102,000
• Operating expenses increased by $4.13 million
• Dividends and interest income decreased by $1.24 million

Insights

Financial Analyst

The fiscal 2024 results reveal a complex financial picture for Daily Journal Consolidated revenues increased by $2.22 million to $69.93 million, driven by Journal Technologies' license fees growth. However, the core operational performance shows mixed signals - Journal Technologies' pretax income declined by $2.48 million due to higher operating expenses, while the Traditional Business saw a slight decrease in pretax income.

The most striking aspect is the company's investment portfolio performance. With marketable securities valued at $358.69 million and unrealized gains of $219.60 million, DJCO's investment strategy has been remarkably successful. The strategic sale of securities for $40.58 million and subsequent reduction of margin loan to $27.5 million demonstrates prudent balance sheet management. The dramatic increase in non-operating income to $100.21 million, primarily from realized and unrealized gains, resulted in a substantial boost to the bottom line, with earnings per share jumping to $56.73 from $15.58.

The effective tax rate of 25.1% reflects efficient tax management, particularly considering the significant investment gains. The reduction in margin loan exposure by $47.5 million indicates a conservative approach to leverage, strengthening the company's financial position amid market volatility.

Market Research Analyst

The earnings report demonstrates DJCO's evolving business model, where investment activities increasingly drive profitability while core operations face margin pressures. Journal Technologies, despite revenue growth, shows signs of significant investment in operational infrastructure, with increased personnel costs and technical development expenses potentially positioning for future growth.

The company's market position remains strong, with the Traditional Business maintaining stable performance despite industry headwinds. The strategic focus on operational efficiencies and product development in Journal Technologies suggests a long-term vision for sustainable growth. The substantial investment portfolio, now at $358.69 million, provides a significant buffer against operational uncertainties and represents approximately 48% of the company's market capitalization, making it a key value driver for investors.

The reduction in margin loan exposure is particularly noteworthy in the current high-interest-rate environment, potentially saving significant interest expenses and reducing financial risk. This conservative financial management, combined with strong investment returns, positions DJCO well for continued stability and potential growth opportunities.

LOS ANGELES, Dec. 30, 2024 (GLOBE NEWSWIRE) -- During fiscal 2024, Daily Journal Corporation (NASDAQ:DJCO) had consolidated revenues of $69,931,000 as compared to $67,709,000 in the prior year. This increase of $2,222,000 was primarily from increases in (i) Journal Technologies’ license and maintenance fees of $4,762,000, and other public service fees of $1,577,000, partially offset by decreased consulting fees of $4,690,000, and (ii) the Traditional Business’ advertising revenues of $370,000 and advertising service fees and other of $144,000.

The Traditional Business’ pretax income decreased by $102,000 to $1,579,000 from $1,681,000 in the prior fiscal year. This decrease was primarily resulting from increased merchant discount fees, additional promotional expenses, postage and press repairs and maintenance, partially offset by an increase in revenues of $573,000. Journal Technologies’ business segment pretax income decreased by $2,480,000 to $2,491,000 from $4,971,000 in the prior fiscal year primarily resulting from increased operating expenses of $4,129,000, mostly due to (i) increased personnel costs because of annual salary adjustments, (ii) additional contractor services and the hiring of additional staff members to strengthen operational efficiencies, conduct product development, address technical debt, and bolster teams working on the Company’s installation projects, and (iii) increased third-party hosting fees which were billed to clients. These increases in expenses were partially offset by increased operating revenues of $1,649,000.

At September 30, 2024, the Company held marketable securities valued at $358,691,000, including net pretax unrealized gains of $219,597,000, and accrued a deferred tax liability of $57,100,000, for estimated income taxes due only upon the sales of the net appreciated securities. During March 2024, the Company sold a portion of its marketable securities for approximately $40,579,000, realizing net gains of $14,261,000, and used these proceeds and excess cash from operations to pay down the Company’s margin loan balance to $27,500,000 from $75,000,000 at September 30, 2023, aggregating a paydown of approximately $47,500,000 during fiscal 2024.

The Company’s non-operating income, net of expenses, increased by $78,758,000 to $100,208,000 from $21,450,000 in the prior fiscal year primarily because of the recording of net realized and unrealized gains on marketable securities of $96,142,000 as compared with $17,446,000 in the prior fiscal year. These increases were partially offset by a decrease in dividends and interest income of $1,238,000 to $7,102,000 from $8,340,000.

Consolidated pretax income was $104,278,000, as compared to $28,102,000 in the prior fiscal year. There was consolidated net income of $78,113,000 ($56.73 per share) for fiscal 2024, as compared with $21,452,000 ($15.58 per share) in the prior fiscal year.

During fiscal 2024, the Company recorded an income tax provision of $26,165,000 on pretax income of $104,278,000.   The income tax provision consisted of tax expense of $24,534,000 on the realized and unrealized gains on marketable securities, and $2,175,000 on operating income, partially offset by a tax benefit of $544,000 for the dividends received deduction and other permanent differences.  Consequently, the overall effective tax rate for fiscal 2024 was 25.1%, after including the taxes on the realized and unrealized gains on marketable securities.

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Certain statements contained in this press release are “forward-looking” statements that involve risks and uncertainties that may cause actual future events or results to differ materially from those described in the forward-looking statements. Words such as “expects,” “intends,” “anticipates,” “should,” “believes,” “will,” “plans,” “estimates,” “may,” variations of such words and similar expressions are intended to identify such forward-looking statements. We disclaim any intention or obligation to revise any forward-looking statements whether as a result of new information, future developments, or otherwise. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in documents we file with the Securities and Exchange Commission.

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FAQ

What was Daily Journal's (DJCO) revenue for fiscal year 2024?

Daily Journal reported consolidated revenues of $69,931,000 for fiscal year 2024, an increase of $2,222,000 from the previous year.

How much did DJCO reduce its margin loan in fiscal 2024?

DJCO reduced its margin loan by approximately $47.5 million, from $75 million to $27.5 million during fiscal 2024.

What was Daily Journal's (DJCO) earnings per share in FY 2024?

DJCO reported earnings of $56.73 per share for fiscal year 2024, compared to $15.58 per share in the previous year.

How much were DJCO's marketable securities worth at the end of FY 2024?

At September 30, 2024, DJCO held marketable securities valued at $358,691,000, including net pretax unrealized gains of $219,597,000.

What was Daily Journal's effective tax rate for fiscal 2024?

The overall effective tax rate for fiscal 2024 was 25.1%, which included taxes on realized and unrealized gains on marketable securities.