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

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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