Value Line, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended January 31, 2021 (fiscal 2021 third quarter); comparisons are to the periods ended January 31, 2020. Amounts below are in millions unless stated otherwise.
Business context
Value Line publishes investment research and licenses its copyrights, trademarks, and proprietary rankings. It also holds non-voting revenue and profit interests in Eulav Asset Management Trust (EAM), which manages and distributes the Value Line funds. The company accounts for EAM under the equity method and does not control its operations.
Financial performance
| Metric | Three months 2021 | Three months 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Publishing revenue | $10.130 | $10.803 | $30.668 | $30.500 |
| Operating income | $2.283 | $3.129 | $6.697 | $7.783 |
| EAM revenue and profit interests | $4.734 | $3.455 | $12.592 | $9.384 |
| Income from securities transactions | $0.424 | $0.167 | $1.705 | $0.451 |
| Net income | $6.029 | $4.952 | $16.202 | $12.853 |
| Diluted earnings per share | $0.63 | $0.51 | $1.69 | $1.33 |
Nine-month publishing revenue was nearly flat, up 0.6%, while operating income fell 14.0%. Net income rose 26.1%, reflecting higher EAM interests, copyright fees, and realized investment gains. Operating margin was approximately 22.5% for the quarter and 21.8% for the nine months, versus approximately 29.0% and 25.5% in the comparable periods.
- For the quarter, publishing revenue declined 6.2%; periodicals and related publications fell 3.9%, and copyright fees fell 10.7%. Management said the prior-year quarter included an extra week of print-product servings; excluding it, the periodicals decline was 1.2%.
- For the nine months, digital publication revenue increased 2.1%, while print revenue declined 5.3%. Copyright fees rose 4.6%.
- EAM-related income increased 34.2% for the nine months. Assets managed and/or distributed by EAM were $4.90 billion at January 31, 2021, up 30.7% year over year.
Cash flow, liquidity, and capital
- Nine-month operating cash flow was $10.355 million, versus $6.856 million a year earlier. Investing activities provided $7.954 million, compared with $3.426 million used in the prior-year period. Financing activities used $7.081 million, including $6.056 million of dividends and $1.045 million of share repurchases.
- At January 31, 2021, cash and cash equivalents were $16.182 million and available-for-sale securities were $23.517 million; together, cash and short-term securities were $39.699 million. Working capital was $20.813 million.
- Total assets were $115.567 million, total liabilities $51.998 million, and shareholders’ equity $63.569 million. Loan obligations totaled $2.331 million ($0.583 million current and $1.748 million long term); operating lease obligations totaled $8.704 million. The company reported no anticipated borrowing in the next 12 months.
- Quarterly dividends were $0.21 per share, compared with $0.20 a year earlier. The board’s $2.0 million repurchase authorization had $0.955 million remaining at January 31, 2021.
Outlook, risks, and notable items
- Management said liquid resources, expected operating cash flows, and EAM interests should cover forecast liquidity needs for the next 12 months; it expects dividend payments to continue. No quantified earnings or revenue guidance was provided.
- Management described an economic recovery but identified uncertainty around the pandemic, employment, markets, and inflation. The filing highlights subscription retention, competition, intellectual-property protection, EAM performance and market-driven assets, regulation, cybersecurity, and customer collections as risks.
- A single customer generated 32.1% of nine-month publishing revenue. The company also noted that restructuring fees for its largest ETF license could reduce copyright fees by about 10%, depending importantly on the ETF’s assets under management; those assets had recently reached new highs after quarter-end.
- The company received a $2.331 million Paycheck Protection Program loan in April 2020. The filing states forgiveness is not assured; the outstanding obligation is included in reported loan balances.
- Management reported effective disclosure controls and no material change in internal control over financial reporting. No legal proceedings were reported, and the filing states there were no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether subscription trends, including print declines and the modest reduction in unearned revenue, continue in subsequent periods.
- How the largest ETF customer’s fee restructuring and asset levels affect copyright revenue.
- Whether EAM’s asset growth and related distributions persist, given market exposure and the company’s reliance on these interests.
- The status and accounting treatment of PPP loan forgiveness, and remaining share-repurchase authorization.
- Whether investment gains and changes in market values materially affect reported earnings and equity in future periods.