Executive Summary

Q2 FY2014 consolidated results (prelim.) show revenue strength from acquired tech businesses, offset by continued declines in trustee sale notices; six-month revenues rose 19% to $20.78M, but the company posted a six-month net loss of $0.37M due to higher intangible amortization and tech segment losses .
Quarterly trajectory improved: Q1 FY2014 had a consolidated pretax loss of $0.59M, while Q2 implied pretax profit of ~$0.12M and net income of ~$0.04M (six-month totals less Q1), driven by higher tech revenues and lower losses; however, EPS detail for Q2 was not disclosed in filings .
No formal guidance was provided; management reiterated that results are preliminary pending completion of Ernst & Young’s audit, and NASDAQ granted an exception to regain listing compliance by June 30, 2014 contingent on filings .
Key near-term stock narrative catalysts: continued ramp of Journal Technologies (New Dawn/ISD) revenues vs. amortization drag, trajectory of public notice advertising declines, and the sizable marketable securities portfolio with large unrealized gains and associated tax accrual .

What Went Well and What Went Wrong

What Went Well

Technology revenue growth from New Dawn and ISD drove consolidated revenue up $3.33M (+19%) in the six months, with the tech segment contributing $10.78M vs. $5.01M in the prior year period .
Segment trajectory improved: implied Q2 tech pretax loss narrowed to ~~$0.91M from Q1’s $1.85M; traditional pretax remained profitable (~~$1.03M in Q2 implied), supporting an improving sequential mix .
Strategic focus affirmed: “Sustain Technologies, Inc., New Dawn Technologies, Inc. and ISD Technologies, Inc. … supply case management software systems and related products to courts and other justice agencies,” highlighting the transition beyond legacy print .

What Went Wrong

Traditional segment headwinds persisted: trustee sale notice and related service fee revenues fell by $2.55M over six months, driving a 56% decline in traditional pretax income vs. prior year period .
Acquisition-related amortization weighed on profitability: six-month intangible amortization totaled $2.62M (vs. $0.64M prior year), contributing to a consolidated pretax loss of $0.47M .
Preliminary status and audit delays increased uncertainty: filings remained outstanding, with results subject to change pending auditor completion; listing compliance depended on meeting the June 30 deadline .

Financial Results

Metric	Q1 2014	Q2 2014 (Derived)	6M FY2014	6M FY2013
Revenue ($USD Millions)	$9.951	$10.828 (20.779 – 9.951)	$20.779	$17.446
Pretax Income (Loss) ($USD Millions)	$(0.591)	$0.118 (−0.473 − (−0.591))	$(0.473)	$2.925
Net Income (Loss) ($USD Millions)	$(0.416)	$0.043 (−0.373 − (−0.416))	$(0.373)	$1.985
EPS ($USD)	$(0.30)	N/A (not disclosed)	$(0.27)	$1.44
Net Income Margin %	−4.2% (−0.416/9.951)	~0.4% (0.043/10.828)	−1.8% (−0.373/20.779)	11.4% (1.985/17.446)

Segment breakdown (Quarterly, derived from reported Q1 and six-months):

Segment	Q1 2014 Revenue ($M)	Q2 2014 Revenue ($M, Derived)	Q1 2014 Pretax ($M)	Q2 2014 Pretax ($M, Derived)
Traditional Business	$5.064	$4.933 (9.997 − 5.064)	$1.262	$1.031 (2.293 − 1.262)
Technology (Sustain/New Dawn/ISD)	$4.887	$5.895 (10.782 − 4.887)	$(1.853)	$(0.913) (−2.766 − (−1.853))

KPIs and Balance Sheet-Related

KPI	Q1 2014	Q2 2014
Marketable Securities Value ($M)	$150.747	$168.028
Unrealized Gains ($M)	$102.770	$120.051
Accrued Tax on Unrealized Gains ($M)	$39.956	$46.917
Intangible Amortization ($M)	$1.309 (quarter)	$1.309 (implied; six months total 2.618 less Q1 1.309)
Comprehensive Income ($M)	$7.990 (quarter)	$18.352 (six months)

Notes:

Q2 2014 quarterly figures are derived from six-month totals less Q1 actuals disclosed in filings; EPS for Q2 was not disclosed .
Estimate comparisons are not provided due to unavailability of S&P Global consensus for Q2 FY2014 at time of analysis.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY2014	N/A	N/A	Maintained: No guidance provided
Margins (EBIT/Net)	FY2014	N/A	N/A	Maintained: No guidance provided
OpEx/Intangible Amortization	FY2014	N/A	Highlighted amortization impact, not formal guidance	Informational only
OI&E / Tax Rate	FY2014	N/A	Not guided; tax accrual tied to unrealized gains	Informational only
Dividends	FY2014	N/A	Not discussed	N/A

Management provided no formal quantitative guidance; results were explicitly noted as preliminary pending audit completion .

Earnings Call Themes & Trends

No Q2 FY2014 earnings call transcript was available in the document catalog, limiting call-based theme tracking for this period. Narrative themes are drawn from press releases.

Topic	Previous Mentions (Q1 FY2014)	Current Period (Q2 FY2014)	Trend
Technology revenue ramp (New Dawn/ISD)	+$3.98M tech revenue uplift; tech pretax loss $(1.85)M	Six-month tech revenues $10.78M; implied Q2 tech pretax loss narrowed to ~$0.91M	Improving revenue momentum; loss narrowing
Public notice advertising / trustee sale revenues	Declines expected to continue	Six-month decline of $2.55M; traditional pretax down 56% vs PY	Ongoing structural decline
Acquisition amortization drag	$1.31M intangible amortization in Q1	$2.62M in six months (ISD $1.67M; New Dawn $0.95M)	Elevated amortization persists
Marketable securities portfolio	Value $150.75M; unrealized gains $102.77M	Value $168.03M; unrealized gains $120.05M; tax accrual $46.92M	Larger portfolio; higher gains and accrual

Management Commentary

“This increase of $3,333,000 (19%) was primarily from additional New Dawn … and ISD … revenues of $5,833,000, partially offset by a reduction in trustee sale notice and related service fee revenues of $2,548,000, which is consistent with the recent trend in those revenues.”
“The Company’s traditional business segment pretax income decreased by $2,875,000 (56%) … primarily resulting from the reduction in trustee sale notice and related service fee revenues.”
“The Company’s technology business segment had a pretax loss of $2,766,000 … [with] $2,618,000 of intangible amortization expenses related to the two acquisitions.”
“Meanwhile, NASDAQ has granted the Company an exception to regain compliance … by June 30, 2014 provided that all required reports are filed by then.”

Q&A Highlights

No Q2 FY2014 earnings call transcript was available; therefore, analyst Q&A themes, guidance clarifications, or tone changes cannot be assessed from a call record for this quarter [earnings call transcript not found in catalog].

Estimates Context

Wall Street consensus (S&P Global) for Q2 FY2014 EPS and revenue was unavailable at time of retrieval due to data access limitations; as such, no beat/miss assessment vs. consensus can be provided for this quarter. This limits estimate-based narrative and may dampen immediate sell-side revision catalysts until audited filings are posted and third-party data updates propagate [GetEstimates error].

Key Takeaways for Investors

Revenue mix is transitioning toward Journal Technologies; sequential improvement in implied Q2 profitability suggests operating leverage as tech revenues scale, despite amortization drag .
Legacy public notice advertising remains a headwind; traditional segment profitability is pressured by structurally lower trustee sale notice volumes .
Elevated amortization from ISD/New Dawn will continue to suppress GAAP earnings near term; monitor cash margins and contract wins for Journal Technologies to gauge underlying health .
The sizable securities portfolio and unrealized gains (with a large tax accrual) add non-operating volatility to comprehensive income; changes in portfolio value can influence reported results and investor sentiment .
Audit completion and timely SEC filings by June 30, 2014 are critical near-term catalysts for listing compliance and for unlocking more detailed, audited quarterly data for analysts .
Without formal guidance or consensus comparisons, focus on sequential tech segment loss narrowing and revenue growth as leading indicators for medium-term margin expansion .
Watch for continued decline in trustee sale revenues; an accelerating tech backlog/licensing and lower amortization over time would support the medium-term thesis of a successful transition from print to software .

Citations

Q2 FY2014 8-K 2.02 and press release (six months ended March 31, 2014):
Q1 FY2014 8-K 2.02 and press release (three months ended December 31, 2013):

DAILY JOURNAL CORP (DJCO)·Q2 2014 Earnings Summary