No. of Recommendations: 12
Apologies as this is not Berkshire related.
Found a transcript of last years Daily Journal meeting posted by Rational Walk. A lot more detail on how the new CEO is running and changing the software business.
https://rationalwalk.com/daily-journal-annual-meet...I bought more DJCO today. I am loving what the new CEO is doing. Making the software more scalable and configurable and using implementation partners for example, is an great move to increase margins and grow the business. Lots of very positive new business being discussed last year. As noted previously, the recurring revenues are growing at over 20% and that is a very healthy sign.
There will hopefully be a 2025 AGM transcript online at some point but no sign of it yet. Meeting was last week I think.
Valuation:
Today you are paying $538m for the firm.
You get about $400m in equities, cash, RE less margin debt (Bank of America, Wells Fargo, Alibaba, US Bank Corp, Posco and probably BYD and Tencent, some real estate).
You get Journal Technologies for about $140m.
These numbers are back of an envelop really and others might have better information. Do your own research.
What are Journal Technologies numbers like?
In 2024 the recurring revenues (excluding implementation fees) were $38m. FCF was nil but that's because they are expensing all the development work. If you put a EBIT margin of 30% on the 2024 recurring revenues and pay tax, you are paying about 16 times 2024 pro forma FCF for JT. In this hypothetical scenario, you are assuming all development work stops and they just cash cow the existing customers. That's not the plan and this is just for illustration purposes.
By 2030, if they keep growing like they are at 20%, they get to over $100m in recurring revenues. Again applying a 30% EBIT margin and tax. That gets you to a 5 PE multiple on 2030. It does look like they are on track to get to this and then you are in a situation where you own a very profitable software business with customers that don't want to move. And reading the linked transcript from the 2024 AGM, you hear them talk about the international market opportunity that they are working on. It looks to me they are on track and are speeding up.
I learned yesterday that Warren Buffett owns 20 shares. All that Charlie would allow him to own. Not significant but he obviously reads the reports and keeps an eye on it.
What I like about Daily Journal, despite it being a venture capital type investment. You have the downside protection from the equity portfolio. You have this organisation that has lots of little Charlie Munger finger prints all over it, that suggest to me that you can buy it and sit back for 10 or 20 years and enjoy watching all these qualities eventually produce shareholder returns. And now you have this new CEO, that has done exactly this kind of thing before and has been selected by Charlie Munger. He is already moving the business forward.
