DJCO Stock Up 2% Despite Incurring Q1 Loss Due to Rising Costs

Shares of Daily Journal Corporation DJCO have gained 1.9% since the company reported its earnings for the quarter ended Dec. 31, 2025. This compares with the S&P 500 index’s 1% growth over the same time frame. However, over the past month, the stock has declined 18.9%, underperforming the S&P 500’s 1% drop.

For the first quarter of fiscal 2026, Daily Journal incurred a net loss of $5.79 per share against a net income of $7.91 per share in the prior-year period.

Total consolidated revenues of $19.5 million indicated a 10% increase from $17.7 million in the prior-year quarter. The growth was primarily driven by its Journal Technologies segment. 

Despite higher revenues, income from operations fell to $0.5 million from $0.7 million a year earlier, reflecting increased operating expenses. The company incurred a net loss of $8 million against a net income of $10.9 million in the prior-year period. The swing was largely attributable to net unrealized losses on marketable securities during the quarter, compared with sizable unrealized gains a year ago.

Segment Performance and Revenue Mix

Journal Technologies, which provides case management software and related services, generated revenues of $15.2 million in the quarter, up 12% from $13.6 million a year earlier. Growth was driven by increases in other public service fees and recurring license and maintenance fees, partially offset by lower consulting fees. Licensing and maintenance fees rose to $8.5 million from $7.5 million, while other public service fees increased to $4.5 million from $3.5 million. Consulting fees declined to $2.2 million from $2.6 million.

The Traditional Business, which includes advertising and circulation revenue from its publications, reported $4.4 million in advertising and circulation revenues, up 6% from $4.1 million in the year-ago quarter. Advertising revenues rose to $3.3 million from $3 million, while circulation revenues were largely flat at approximately $1.1 million.

Profitability and Expense Trends

Total operating expenses increased to $19.1 million from $17 million in the prior-year period. Salaries and employee benefits climbed to $13 million from $11.9 million, reflecting annual compensation adjustments and incremental staffing. Outside services expenses rose to $2.6 million from $1.8 million, and other general and administrative expenses increased to $2.1 million from $1.4 million.

Management attributed the decline in operating income primarily to higher personnel costs, increased accounting fees related to strengthening and modernizing the accounting function and internal controls, and higher legal and professional expenses associated with proxy solicitation and stockholder outreach activities.

Below the operating line, net realized and unrealized losses on marketable securities totaled $11.7 million compared with gains of $13.4 million in the prior-year quarter. This volatility in the investment portfolio had a significant impact on reported net results. Dividends and interest income rose modestly to $1.3 million from $1.2 million, while interest expense declined to $0.3 million from $0.4 million.

Management Commentary

Chairman and chief executive officer Steven Myhill-Jones said Journal Technologies delivered solid year-over-year growth, driven by higher e-filing and other public service fees and recurring license and maintenance revenues. He emphasized the company’s focus on expanding recurring revenue, maintaining low churn, and investing in modernization and implementation capacity. He also noted that reported net results were materially impacted by mark-to-market changes in the investment portfolio.

Balance Sheet and Cash Flow

As of Dec. 31, 2025, Daily Journal held marketable securities with a fair value of $481.3 million, including accumulated pretax unrealized gains of $342.2 million. Cash and cash equivalents totaled $16.6 million, down from $20.6 million at Sept. 30, 2025.

Net cash used in operating activities was $1.9 million during the quarter, compared with net cash provided of $2.2 million in the prior-year quarter, reflecting the shift to a net loss and changes in working capital.