Daily Journal Corporation Announces Financial Results for the six months ended March 31, 2024

Rhea-AI Summary

Daily Journal (NASDAQ:DJCO) reported financial results for the six months ended March 31, 2024. Consolidated revenues increased to $32.56 million from $28.45 million year-over-year. This growth was driven by Journal Technologies' higher license and maintenance fees and an uptick in public service fees. Conversely, consulting fees declined slightly.

The Traditional Business segment saw a pretax income decrease to $861,000, impacted by increased personnel costs. Meanwhile, Journal Technologies recorded an increase in pretax income, reversing a prior loss, primarily due to higher revenues.

At the end of March 2024, the company held marketable securities worth $297 million, with net pretax unrealized gains of $157.91 million. The company reduced its margin loan balance significantly, using proceeds from securities sales. Non-operating income dropped by $1.18 million due to lower unrealized gains and dividends but was partly offset by higher realized gains from securities sales.

Consolidated pretax income slightly decreased to $36.36 million, while net income rose to $28.03 million ($20.36 per share). The effective tax rate for this period was 22.9%.

Positive

• Consolidated revenues increased by $4.11 million year-over-year.
• Journal Technologies pretax income improved by $1.13 million, reversing a prior loss.
• Net income rose to $28.03 million, equating to $20.36 per share.
• Marketable securities valued at $297 million, with net unrealized gains of $157.91 million.
• Significant reduction in margin loan balance by $45.58 million during six months.

Negative

• Traditional Business pretax income decreased by $782,000 due to higher personnel costs.
• Non-operating income declined by $1.18 million due to reduced unrealized gains and dividends.
• Consolidated pretax income slightly decreased to $36.36 million from $37.20 million.

Financial Analyst

Daily Journal Corporation's recent financial report shows a notable increase in consolidated revenues to $32,564,000 from $28,455,000 in the same period last year. This growth stems largely from Journal Technologies’ license and maintenance fees and public service fees, despite a decline in consulting fees. Traditional Business advertising revenues saw a moderate rise of $209,000, though its pretax income dropped due to increased personnel costs.

One point of interest is the improvement in Journal Technologies' business segment, turning a pretax loss into a pretax income, largely driven by higher revenues and a strategic increase in operational expenses related to staffing and third-party hosting fees billed to clients. This signals a positive shift in operational efficiency and market demand for their products.

The company's strategic financial management is evident from the sale of marketable securities for $40,579,000, used to significantly reduce its margin loan. This move not only decreases financial liabilities but also reflects prudent asset management.

The decline in non-operating income due to lower net unrealized gains on marketable securities and decreased dividends and interest income is a concern, highlighting the volatility and dependency on market performance. However, realized net gains from the sale of securities indicate successful portfolio management.

Overall, the company's financial health appears stable with a slight increase in net income and EPS. The effective tax rate of 22.9% also aligns closely with industry norms, considering realized and unrealized gains on marketable securities.

Market Research Analyst

From a market perspective, the increase in Journal Technologies’ revenues suggests a growing market for case management software systems and related products within courts and justice agencies. The focus on strengthening operational efficiencies and product development is likely to enhance their competitive position in this niche market.

The Traditional Business segment's slight uptick in advertising revenues might indicate a stabilizing or slowly recovering market for traditional print and online media in California and Arizona. However, the decline in pretax income underscores the challenges faced by this segment, particularly in managing rising personnel costs.

The reduction in the margin loan through the sale of marketable securities enhances the company’s financial stability, lowering debt levels and potentially freeing up resources for further investments or operational improvements. This move is likely to be well-received by the market as it demonstrates sound financial strategy and risk management.

Investors should note the impact of fluctuations in marketable securities on the company's financial performance. The decrease in unrealized gains and dividends highlights potential volatility and the need for cautious optimism regarding future non-operating income.

The effective tax management, despite the complex tax structure due to investments, indicates robust financial planning. Investors might also find the company's consistent growth in net income per share a positive sign for long-term shareholder value.

LOS ANGELES, May 14, 2024 (GLOBE NEWSWIRE) -- During the six months ended March 31, 2024, Daily Journal Corporation (NASDAQ:DJCO) had consolidated revenues of $32,564,000 as compared to $28,455,000 in the prior year period. This increase of $4,109,000 was primarily from increases in (i) Journal Technologies’ license and maintenance fees of $3,337,000, and other public service fees of $904,000, partially offset by decreased consulting fees of $254,000, and (ii) the Traditional Business’ advertising revenues of $209,000.

The Traditional Business’ pretax income decreased by $782,000 to $861,000 from $1,643,000 in the prior fiscal year period, primarily due to increased personnel costs of $674,000 to $5,173,000 from $4,499,000, partially offset by an increased reduction of $100,000 to the long-term supplemental compensation accrual to arrive at a reduction of $800,000 as compared with a reduction of $700,000 in the prior fiscal year period. Journal Technologies’ business segment pretax income increased by $1,129,000 to pretax income of $395,000 from a pretax loss of $734,000 in the prior fiscal year period primarily resulting from increased revenues of $3,987,000. These revenue increases were partially offset by increased operating expenses of $2,858,000 mostly due to (i) increased personnel costs because of salary adjustments, (ii) additional contractor services and the hiring of additional staff members to strengthen operational efficiencies, conduct product development and 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.

At March 31, 2024, the Company held marketable securities valued at $297,003,000, including net pretax unrealized gains of $157,909,000, and accrued a deferred tax liability of $40,490,000, for estimated income taxes due only upon the sales of the net appreciated securities. During March 2024, the Company sold certain of its marketable securities for approximately $40,579,000, realizing net gains of $14,261,000, and used these proceeds to further pay down the margin loan balance to $29,421,000 from $75,000,000 at September 30, 2023. After including last quarter’s paydown of $5,000,000 with excess cash from operations, there were total paydowns of approximately $45,579,000 to the margin loan during the six months ended March 31, 2024.

The Company’s non-operating income, net of expenses, decreased by $1,182,000 to $35,104,000 from $36,286,000 in the prior fiscal year period primarily because of (i) the recording of net unrealized gains on marketable securities of $20,193,000 as compared with $32,669,000 in the prior fiscal year period, and (ii) decreases in dividends and interest income of $2,274,000 to $2,858,000 from $5,132,000. These decreases were partially offset by the recording of realized net gains on sales of marketable securities of $14,261,000 as compared with $422,000 in the prior fiscal year period.

Consolidated pretax income was $36,360,000, as compared to $37,195,000 in the prior fiscal year period. There was consolidated net income of $28,030,000 ($20.36 per share) for the six months ended March 31, 2024, as compared with $27,260,000 ($19.80 per share) in the prior fiscal year period.

For the six months ended March 31, 2024, the Company recorded an income tax provision of $8,330,000 on the pretax income of $36,360,000. The income tax provision consisted of tax provisions of $3,660,000 on the realized gains on marketable securities, $5,180,000 on the unrealized gains on marketable securities, $40,000 on income from foreign operations, and $480,000 on income from US operations and dividend income, partially offset by a tax benefit of $210,000 for the dividends received deduction and other permanent book and tax differences, and a tax benefit of $820,000 for the effect of a change in state apportionment on the beginning of the year’s deferred tax liability. Consequently, the overall effective tax rate for the six months ended March 31, 2024 was 22.9%, after including the taxes on the realized and unrealized gains on marketable securities.

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Daily Journal Corporation publishes newspapers and web sites covering California and Arizona, and produces several specialized information services. Journal Technologies, Inc. supplies case management software systems and related products to courts and other justice agencies.

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 were Daily Journal 's consolidated revenues for the six months ending March 31, 2024?

Daily Journal 's consolidated revenues for the six months ending March 31, 2024, were $32.56 million.

How did Journal Technologies impact Daily Journal 's revenues in the reported period?

Journal Technologies significantly boosted revenues with increased license, maintenance, and public service fees.

What was Daily Journal 's net income for the six months ending March 31, 2024?

The net income for the six months ending March 31, 2024, was $28.03 million, equating to $20.36 per share.

How did the Traditional Business segment perform in terms of pretax income?

The Traditional Business segment saw a pretax income decrease to $861,000 due to higher personnel costs.

What was the value of Daily Journal 's marketable securities at the end of March 2024?

At the end of March 2024, Daily Journal held marketable securities valued at $297 million.

What was Daily Journal 's effective tax rate for the six months ended March 31, 2024?

The effective tax rate for the six months ended March 31, 2024, was 22.9%.

How did Daily Journal reduce its margin loan balance?

Daily Journal reduced its margin loan balance by $45.58 million using proceeds from securities sales and excess operational cash.

What caused the decline in Daily Journal 's non-operating income?

The decline in non-operating income was due to reduced net unrealized gains on marketable securities and lower dividends and interest income.