# Value Line Inc: Form 10-Q for the period ended Oct 31, 2021

- Company: [Value Line Inc](/companies/valu.md) (CIK 717720)
- Form: 10-Q
- Filed: 2021-12-13
- Accepted by EDGAR: Dec 13, 2021, 20:44 ET
- Period: 2021-10-31
- Accession: 0001437749-21-028401
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/717720/000143774921028401/valu20211031_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/717720/000143774921028401/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2021-10-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2021-08-01 to 2021-10-31 | $10.0m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 6 months, 2021-05-01 to 2021-10-31 | $20.1m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Operating income | 3 months, 2021-08-01 to 2021-10-31 | $2.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2021-05-01 to 2021-10-31 | $5.0m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2021-08-01 to 2021-10-31 | $1.8m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2021-05-01 to 2021-10-31 | $3.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2021-08-01 to 2021-10-31 | $8.5m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2021-05-01 to 2021-10-31 | $14.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2021-08-01 to 2021-10-31 | $0.89 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted EPS | 6 months, 2021-05-01 to 2021-10-31 | $1.51 | us-gaap:EarningsPerShareBasicAndDiluted |
| Operating cash flow | 6 months, 2021-05-01 to 2021-10-31 | $11.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2021-05-01 to 2021-10-31 | $0 | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2021-05-01 to 2021-10-31 | $4.2m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 6 months, 2021-05-01 to 2021-10-31 | $517.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2021-10-31 | $25.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2021-10-31 | $55.4m | us-gaap:AssetsCurrent |
| Total assets | at 2021-10-31 | $124.7m | us-gaap:Assets |
| Current liabilities | at 2021-10-31 | $23.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2021-10-31 | $48.0m | us-gaap:Liabilities |
| Current portion of debt | at 2021-10-31 | $0 | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2021-10-31 | $76.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 36,610 characters.

### Cautionary Statement Regarding Forward-Looking Information

In this report, “Value Line,” “we,” “us,” “our” refers to Value Line, Inc. and “the Company” refers to Value Line and its subsidiaries unless the context otherwise requires.

This report contains statements that are predictive in nature, depend upon or refer to future events or conditions (including certain projections and business trends) accompanied by such phrases as “believe”, “estimate”, “expect”, “anticipate”, “will”, “intend” and other similar or negative expressions, that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995, as amended. Actual results for the Company may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to the following:

- maintaining revenue from subscriptions for the Company’s digital and print published products;
- changes in investment trends and economic conditions, including global financial issues;
- protecting intellectual property rights in Company methods and trademarks;
- protecting confidential information including customer confidential or personal information that we may possess;
- dependence on non-voting revenues and non-voting profits interests in EULAV Asset Management, a Delaware statutory trust (“EAM” or “EAM Trust”), which serves as the investment advisor to the Value Line Funds and engages in related distribution, marketing and administrative services;
- fluctuations in EAM’s and third party copyright assets under management due to broadly based changes in the values of equity and debt securities, redemptions by investors and other factors;
- possible changes in the valuation of EAM’s intangible assets from time to time;
- generating future revenues or collection of receivables from significant customers;
- dependence on key executive and specialist personnel;
- risks associated with the outsourcing of certain functions, technical facilities, and operations, including in some instances outside the U.S.;
- competition in the fields of publishing, copyright and investment management, along with associated effects on the level and structure of prices and fees, and the mix of services delivered;
- the impact of government regulation on the Company’s and EAM’s businesses;
- availability of free or low cost investment data through discount brokers or generally over the internet;
- terrorist attacks, cyber attacks and natural disasters;
- insufficiency in our business continuity plans or systems in the event of anticipated or unpredictable disruption;
- the coronavirus pandemic, which has drastically affected markets, employment, and other economic conditions, and may have additional unpredictable impacts on employees, suppliers, customers, and operations;
- other possible epidemics;
- changes in prices of materials and other inputs and services, such as freight and postage, required by the Company;
- other risks and uncertainties, including but not limited to the risks described in Item 1A, “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended April 30, 2021 and in Part II, Item 1A of the Quarterly Report on Form 10-Q for the period ended October 31, 2021; and other risks and uncertainties arising from time to time.

These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors which may involve external factors over which we may have no control or changes in our plans, strategies, objectives, expectations or intentions, which may happen at any time at our discretion, could also have material adverse effects on future results. Except as otherwise required by applicable law, we have no duty to update these statements, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, current plans, anticipated actions, and future financial conditions and results may differ from those expressed in any forward-looking information contained herein.

### Executive Summary of the Business

The Company's core business is producing investment periodicals and their underlying research and making available certain Value Line copyrights, Value Line trademarks and Value Line Proprietary Ranks and other proprietary information, to third parties under written agreements for use in third-party managed and marketed investment products and for other purposes. Value Line markets under well-known brands including *Value Line®, the Value Line* logo®, *The Value Line Investment Survey®, Smart Research, Smarter Investing™* and *The Most Trusted Name in Investment Research®.* The name "Value Line" as used to describe the Company, its products, and its subsidiaries, is a registered trademark of the Company. EULAV Asset Management Trust (“EAM”) was established to provide the investment management services to the Value Line Funds, institutional and individual accounts and provide distribution, marketing, and administrative services to the Value Line® Mutual Funds ("Value Line Funds"). The Company maintains a significant investment in EAM from which it receives payments in respect of its non-voting revenues and non-voting profits interests.

The Company’s target audiences within the investment research field are individual investors, colleges, libraries, and investment management professionals. Individuals come to Value Line for complete research in one package. Institutional licensees consist of corporations, financial professionals, colleges, and municipal libraries. Libraries and universities offer the Company’s detailed research to their patrons and students. Investment management professionals use the research and historical information in their day-to-day businesses. The Company has a dedicated department that solicits institutional subscriptions.

Payments received for new and renewal subscriptions and the value of receivables for amounts billed to retail and institutional customers are recorded as unearned revenue until the order is fulfilled. As the orders are fulfilled, the Company recognizes revenue in equal installments over the life of the particular subscription. Accordingly, the subscription fees to be earned by fulfilling subscriptions after the date of a particular balance sheet are shown on that balance sheet as unearned revenue within current and long-term liabilities.

The investment periodicals and related publications (retail and institutional) and Value Line copyrights and Value Line Proprietary Ranks and other proprietary information consolidate into one segment called Publishing. The Publishing segment constitutes the Company’s only reportable business segment.

### Asset Management and Mutual Fund Distribution Businesses

Pursuant to the EAM Declaration of Trust, the Company maintains an interest in certain revenues of EAM and a portion of the residual profits of EAM but has no voting authority with respect to the election or removal of the trustees of EAM or control of its business.

The business of EAM is managed by its trustees each owning 20% of the voting profits interest in EAM and by its officers subject to the direction of the trustees. The Company’s non-voting revenues and non-voting profits interests in EAM entitle it to receive a range of 41% to 55% of EAM’s revenues (excluding distribution revenues) from EAM’s mutual fund and separate account business and 50% of the residual profits of EAM (subject to temporary increase in certain limited circumstances). The Voting Profits Interest Holders will receive the other 50% of residual profits of EAM. Distribution is not less than 90% of EAM’s profits payable each fiscal quarter under the provisions of the EAM Trust Agreement.

### Business Environment

The nation's economy began the now-ending calendar year on a positive footing, and boosted by solid levels of consumer spending it grew by just over 6% during the opening six months of this year. However, COVID-19, never really out of the picture, intensified as a problem over the late summer, as the so-called Delta variant spread across the country, causing an upturn in infections. Business activity slowed, as a result.

In all, GDP rose by a pedestrian 2.1% in the third quarter, with growth being aided by gains in private inventory investment, personal consumption expenditures, and nonresidential building, but held back by decreases in residential construction. What did increase notably in the period was inflation, with pricing pressures lately showing few signs of abating. That reality is leading the Federal Reserve to tighten the monetary reins slightly, with some slowdown in the rate of bond purchases. It is quite likely the central bank will raise the federal funds interest rate sometime in 2022.

However, as the third quarter wound down, the economy seemed to get a second wind, and with better readings on the consumer and industrial fronts becoming apparent, our sense has been that GDP growth would move up into the 4%-5% range in the fourth quarter. Now, as we approach winter, a new challenge has arisen, with the appearance of the variant denominated Omicron. Should this strain or another prove as transmissible as now believed, it could become a depressant from an economic standpoint in the new year.

All things being equal, though, the business outlook remains relatively favorable, especially if the enactment of recent fiscal measures proves as rewarding as we think and the Fed is able to successfully balance its monetary initiatives, notably its bond-buying efforts. In that scenario, stocks should remain a rather promising investment alternative.

### Results of Operations for the Three and Six Months Ended October 31, 2021 and October 31, 2020

The following table illustrates the Company’s key components of revenues and expenses.

*($ in thousands, except earnings per share)*

|  | Three Months Ended October 31, 2021 | 2020 | Change | Six Months Ended October 31, 2021 | 2020 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Income from operations | $2,737 | $2,188 | 25.1% | $5,002 | $4,414 | 13.3% |
| Gain on forgiveness of SBA loan | 2,331 | - | 100.0% | 2,331 | - | 100.0% |
| Non-voting revenues and non-voting profits interests from EAM Trust | 4,892 | 4,214 | 16.1% | 9,697 | 7,858 | 23.4% |
| Income from operations plus non-voting revenues and non-voting profits interests from EAM Trust and gain on SBA loan forgiveness | $9,960 | $6,402 | 55.60% | $17,030 | $12,272 | 38.8% |
| Operating expenses | $7,236 | $8,022 | -9.8% | $15,137 | $16,124 | -6.1% |
| Investment gains | $368 | $138 | 166.7% | $762 | $1,308 | -41.7% |
| Income before income taxes | $10,328 | $6,540 | 57.9% | $17,792 | $13,580 | 31.0% |
| Net income | $8,504 | $4,919 | 72.9% | $14,401 | $10,193 | 41.3% |
| Earnings per share | $0.89 | $0.51 | 74.5% | $1.51 | $1.06 | 42.5% |

During the six months ended October 31, 2021, the Company’s net income of $14,401,000, or $1.51 per share, was 41.3% above net income of $10,193,000, or $1.06 per share, for the six months ended October 31, 2020. During the six months ended October 31, 2021, the Company’s income from operations of $5,002,000 was 13.3% above income from operations of $4,414,000 during the six months ended October 31, 2020. For the six months ended October 31, 2021, operating expenses decreased 6.1% compared to operating expenses during the six months ended October 31, 2020.

During the three months ended October 31, 2021, the Company’s net income of $8,504,000, or $0.89 per share, was 72.9% above net income of $4,919,000, or $0.51 per share, for the three months ended October 31, 2020. During the three months ended October 31, 2021, the Company’s income from operations of $2,737,000 was 25.1% above income from operations of $2,188,000 during the three months ended October 31, 2020. For the three months ended October 31, 2021, operating expenses decreased 9.8% compared to operating expenses during the three months ended October 31, 2020.

The largest factors in the increase in net income during the three and six months ended October 31, 2021, compared to the prior fiscal year, were a gain on forgiveness by the SBA of the Company’s PPP loan, an increase from revenues and profits interests in EAM Trust and well controlled expenses.

During the six months ended October 31, 2021, there were 9,557,333 average common shares outstanding as compared to 9,612,756 average common shares outstanding during the six months ended October 31, 2020.

#### Total operating revenues

*($ in thousands)*

| Investment periodicals and related publications: | Three Months Ended October 31, 2021 | 2020 | Change | Six Months Ended October 31, 2021 | 2020 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Print | $2,634 | $2,964 | -11.1% | $5,620 | $6,158 | -8.7% |
| Digital | 4,001 | 3,937 | 1.6% | 7,962 | 7,835 | 1.6% |
| Total investment periodicals and related publications | 6,635 | 6,901 | -3.9% | 13,582 | 13,993 | -2.9% |
| Copyright fees | 3,338 | 3,309 | 0.9% | 6,557 | 6,545 | 0.2% |
| Total publishing revenues | $9,973 | $10,210 | -2.3% | $20,139 | $20,538 | -1.9% |

Within investment periodicals and related publications, subscription sales orders are derived from print and digital products. The following chart illustrates the changes in the sales orders associated with print and digital subscriptions.

#### Sources of subscription sales

|  | Three Months Ended October 31, 2021 Print | Digital | 2020 Print | Digital | Six Months Ended October 31, 2021 Print | Digital | 2020 Print | Digital |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| New Sales | 14.1% | 13.2% | 13.5% | 15.9% | 15.2% | 14.8% | 15.2% | 15.4% |
| Renewal Sales | 85.9% | 86.8% | 86.5% | 84.1% | 84.8% | 85.2% | 84.8% | 84.6% |
| Total Gross Sales | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% |

During the six months ended October 31, 2021 new sales of print publications as a percent of the total gross print sales were the same as in the prior fiscal year. During the six months ended October 31, 2021 new sales of digital publications slightly decreased and renewal sales of digital publications increased as a percent of the total gross digital sales versus the prior fiscal year as customer migration to digital services continues gradually.

*($ in thousands)*

|  | As of October 31, 2021 | As of April 30, 2021 | As of October 31, 2020 | Change Oct-21 vs. Apr-21 | Oct-21 vs. Oct-20 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Unearned subscription revenue (current and long-term liabilities) | $22,600 | $25,088 | $22,789 | -9.9% | -0.8% |

Unearned subscription revenue as of October 31, 2021 is less than 1% below October 31, 2020 and is 9.9% below April 30, 2021. A certain amount of variation is to be expected due to the volume of new orders and timing of renewal orders, direct mail campaigns and large Institutional Sales orders.

#### Investment periodicals and related publications revenues

Investment periodicals and related publications revenues of $13,582,000 (excluding copyright fees) during the six months ended October 31, 2021, were 2.9% below publishing revenues in the prior fiscal year. The Company continued activity to attract new subscribers, primarily digital subscriptions through various marketing channels, primarily direct mail, e-mail, and by the efforts of our sales personnel. Total product line circulation at October 31, 2021, was 2.7% above total product line circulation at October 31, 2020. During the six months ended October 31, 2021, Institutional Sales department generated total sales orders of $5,610,000 and the retail telemarketing sales team generated total sales orders of $3,682,000.

Total print circulation at October 31, 2021 was 1.9% above the total print circulation at October 31, 2020. Print publication revenues of $5,620,000 decreased 8.7% below the prior fiscal year. Total digital circulation at October 31, 2021 was 3.8% above total digital circulation at October 31, 2020. Digital revenues of $7,962,000 were up 1.6% as compared to the prior fiscal year.

Value Line serves primarily individual and professional investors in stocks, who pay mostly on annual subscription plans, for basic services or as much as $100,000 or more annually for comprehensive premium quality research, not obtainable elsewhere. The ongoing goal of adding new subscribers has led us to introduce publications and packages at a range of price points. Further, new services and new features for existing services are regularly under consideration. Prominently introduced in fiscal 2020 and 2021 were new features in the *Value Line Research Center*, which are *The New Value Line ETFs Service*, new monthly publication *Value Line Information You Should Know Wealth Newsletter, The Value Line M & A Service,* and our *Value Line Climate Change Investing Service.*

The Value Line Proprietary Ranks (the “Ranking System”), a component of the Company’s flagship product, *The Value Line Investment Survey*, is also utilized in the Company’s copyright business. The Ranking System is made available to EAM for specific uses without charge. During the six month period ended October 31, 2021, the combined Ranking System “Rank 1 & 2” stocks’ increase of 6.1% outperformed the Russell 2000 Index’s increase of 1.4% during the comparable period. During the twelve month period ended October 31, 2021, the combined Ranking System “Rank 1 & 2” stocks’ increase of 39.2% underperformed the Russell 2000 Index’s increase of 49.3% during the comparable period.

#### Copyright fees

During the six months ended October 31, 2021, copyright fees of $6,557,000 were comparable to those during the corresponding period in the prior fiscal year. The Company negotiated in fiscal 2020 with the sponsor of the largest exchange traded fund (“ETF”) in the program, the restructuring of the Company’s asset based fees and overall fees of the ETF in light of the competitive market.

#### Investment management fees and services – (unconsolidated)

The Company has substantial non-voting revenues and non-voting profits interests in EAM, the asset manager to the Value Line Mutual Funds. Accordingly, the Company does not report this operation as a separate business segment, although it maintains a significant interest in the cash flows generated by this business and will receive ongoing payments in respect of its non-voting revenues and non-voting profits interests.

Total assets in the Value Line Funds managed and/or distributed by EAM at October 31, 2021, were $5.0 billion, which is $500 million, or 12.5%, above total assets of $4.5 billion in the Value Line Funds managed and/or distributed by EAM at October 31, 2020. The increase reflects successful investment selection capturing market appreciation and positive net flows for the Value Line Funds, partially offset by net redemptions in nine of the ten Funds during the twelve month period ended October 31, 2021.

Shares of Value Line Strategic Asset Management Trust (“SAM”) and Value Line Centurion Fund (“Centurion”) are only distributed within certain variable annuity and variable life insurance contracts offered by Guardian Insurance & Annuity Company (“GIAC”).

#### Value Line Mutual Funds

*($ in millions)*

|  | As of October 31, 2021 | 2020 | Change |
| --- | ---: | ---: | ---: |
| Variable annuity assets ("GIAC") | $443 | $395 | 12.2% |
| All other open end equity and hybrid fund assets | 4,528 | 3,964 | 14.2% |
| Total equity and hybrid funds | 4,971 | 4,359 | 14.0% |
| Fixed income funds | 50 | 104 | -51.9% |
| Total EAM managed net assets | $5,021 | $4,463 | 12.5% |

As of October 31, 2021 three of six Value Line equity and hybrid mutual funds, excluding SAM and Centurion, held an overall four or five star rating by Morningstar, Inc. The Advisor/Independent Broker Dealer channel has successfully become the largest channel for sales and distribution of The Value Line Funds. This is a growing channel as EAM continues to add more advisers each year.

#### EAM Trust - Results of operations before distribution to interest holders

The gross fees and net income of EAM’s investment management operations during the six months ended October 31, 2021, before interest holder distributions, included total investment management fees earned from the Value Line Funds of $15,679,000, 12b-1 fees and other fees of $4,941,000 and other net income of $119,000. For the same period, total investment management fee waivers were $218,000 and 12b-1 fee waivers for three Value Line Funds were $342,000. During the six months ended October 31, 2021, EAM's net income was $2,570,000 after giving effect to Value Line’s non-voting revenues interest of $8,412,000, but before distributions to voting profits interest holders and to the Company in respect of its 50% non-voting profits interest.

The gross fees and net income of EAM’s investment management operations during the six months ended October 31, 2020, before interest holder distributions, included total investment management fees earned from the Value Line Funds of $13,491,000, 12b-1 fees and other fees of $4,755,000 and other income of $115,000. For the same period, total investment management fee waivers were $119,000 and 12b-1 fee waivers for three Value Line Funds were $322,000. During the six months ended October 31, 2020, EAM's net income was $1,698,000 after giving effect to Value Line’s non-voting revenues interest of $7,009,000, but before distributions to voting profits interest holders and to the Company in respect of its 50% non-voting profits interest.

As of October 31, 2021 and October 31, 2020, three of the Value Line Funds have all or a portion of the 12b-1 fees being waived, and one fund has partial investment management fee waivers in place. Although, under the terms of the EAM Declaration of Trust, the Company does not receive or share in the revenues from 12b-1 distribution fees, the Company could benefit from the fee waivers to the extent that the resulting reduction of expense ratios and enhancement of the performance of the Value Line Funds attracts new assets.

The Value Line equity and hybrid funds’ assets represent 90.2%, variable annuity funds issued by GIAC represent 8.8%, and fixed income fund assets represent 1.0%, respectively, of total fund assets under management (“AUM”) as of October 31, 2021. At October 31, 2021, equity, hybrid and GIAC variable annuities AUM increased by 14.0% and fixed income AUM decreased by 51.9% as compared to the prior fiscal year.

*EAM - The Company’s non-voting revenues and non-voting profits interests*

The Company holds non-voting revenues and non-voting profits interests in EAM which entitle the Company to receive from EAM an amount ranging from 41% to 55% of EAM's investment management fee revenues from its mutual fund and separate accounts business, and 50% of EAM’s net profits, not less than 90% of which is distributed in cash every fiscal quarter. The applicable recent non-voting revenues interest percentage for the second quarter of fiscal 2022, that is, the fiscal quarter ended October 31, 2021, was 53.87%.

The Company recorded income from its non-voting revenues interest and its non-voting profits interest in EAM as follows:

*($ in thousands)*

|  | Three Months Ended October 31, 2021 | 2020 | Change | Six Months Ended October 31, 2021 | 2020 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Non-voting revenues interest | $4,263 | $3,729 | 14.3% | $8,412 | $7,009 | 20.0% |
| Non-voting profits interest | 629 | 485 | 29.7% | 1,285 | 849 | 51.4% |
|  | $4,892 | $4,214 | 16.1% | $9,697 | $7,858 | 23.4% |

### Operating expenses

*($ in thousands)*

|  | Three Months Ended October 31, 2021 | 2020 | Change | Six Months Ended October 31, 2021 | 2020 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Advertising and promotion | $676 | $817 | -17.3% | $1,723 | $1,872 | -8.0% |
| Salaries and employee benefits | 4,303 | 4,554 | -5.5% | 8,960 | 9,062 | -1.1% |
| Production and distribution | 1,311 | 1,392 | -5.8% | 2,527 | 2,665 | -5.2% |
| Office and administration | 946 | 1,259 | -24.9% | 1,927 | 2,525 | -23.7% |
| Total expenses | $7,236 | $8,022 | -9.8% | $15,137 | $16,124 | -6.1% |

Expenses within the Company are categorized into advertising and promotion, salaries and employee benefits, production and distribution, office and administration. Operating expenses of $7,236,000 and $15,137,000 during the three and six months ended October 31, 2021, decreased 9.8% and 6.1%, respectively, as compared to those during the three and six months ended October 31, 2020, as a result of cost controls in fiscal 2022.

#### Advertising and promotion

During the three and six months ended October 31, 2021, advertising and promotion expenses of $676,000 and $1,723,000 decreased 17.3% and 8.0%, respectively, as compared to the prior fiscal year, primarily due to a decrease in direct mail campaigns’ volume based on more precise targeting.

#### Salaries and employee benefits

During the three and six months ended October 31, 2021, salaries and employee benefits of $4,303,000 and $8,960,000 decreased 5.5% and 1.1%, respectively, as compared to the prior fiscal year.

#### Production and distribution

During the three and six months ended October 31, 2021, production and distribution expenses of $1,311,000 and $2,527,000 decreased 5.8% and 5.2%, respectively, as compared to the prior fiscal year.

#### Office and administration

During the three and six months ended October 31, 2021, office and administrative expenses of $946,000 and $1,927,000 decreased 24.9% and 23.7%, respectively, as compared to the prior fiscal year, primarily due to a favorable settlement of a disputed fee with a contractor and decreases in professional fees.

#### Concentration

During the six months ended October 31, 2021, 32.6% of total publishing revenues of $20,139,000 were derived from a single customer.

#### Investment gains / (losses)

*($ in thousands)*

|  | Three Months Ended October 31, 2021 | 2020 | Change | Six Months Ended October 31, 2021 | 2020 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Dividend income | $210 | $137 | 53.30% | $406 | $258 | 57.40% |
| Interest income | - | 44 | n/a | 1 | 100 | n/a |
| Investment gains/(losses) recognized on sale of equity securities during the period | 47 | 144 | -67.40% | 47 | 444 | -89.40% |
| Unrealized gains/(losses) recognized on equity securities held at the end of the period | 111 | (187) | n/a | 309 | 508 | -39.20% |
| Other | - | - | n/a | (1) | (2) | n/a |
| Total investment gains | $368 | $138 | 166.70% | $762 | $1,308 | -41.70% |

During the six months ended October 31, 2021, the Company’s investment gains, primarily derived from dividend income, investment gains recognized on sales of equity securities during the period and unrealized gains recognized on equity securities held at the end of the period in fiscal 2022, were $762,000. During the six months ended October 31, 2020, the Company’s investment gains, primarily derived from dividend and interest income, investment gains recognized on sales of equity securities during the period and unrealized gains recognized on equity securities held at the end of the period in fiscal 2021, were $1,308,000. Proceeds from maturities and sales of government debt securities classified as available-for-sale during the six months ended October 31, 2021 and October 31, 2020, were $2,496,000 and $5,214,000, respectively. Proceeds from the sales of equity securities during the six months ended October 31, 2021 and October 31, 2020 were $687,000 and $5,529,000, respectively.

#### Effective income tax rate

The overall effective income tax rates, as a percentage of pre-tax ordinary income for the six months ended October 31, 2021 and October 31, 2020 were 19.05% and 24.94%, respectively. The decrease in the effective tax rate during six months ended October 31, 2021 as compared to October 31, 2020, is primarily a result of the non-taxable revenue derived from forgiveness of the PPP loan by the SBA (see note 16) and a decrease in the state and local income taxes from 4.22% to 1.11% as a result of changes in state and local income tax allocations, such as the effect of the reduction in the New York State and New York City tax allocation factors, on deferred taxes in fiscal 2022. The Company's annualized overall effective tax rate fluctuates due to a number of factors, in addition to changes in tax law, including but not limited to an increase or decrease in the ratio of items that do not have tax consequences to pre-income tax, the Company's geographic profit mix between tax jurisdictions, taxation method adopted by each locality, new interpretations of existing tax laws and rulings and settlements with tax authorities.

#### Lease Commitments

On November 30, 2016, Value Line, Inc. received consent from the landlord at 551 Fifth Avenue, New York, NY to the terms of a new sublease agreement between Value Line, Inc. and ABM Industries, Incorporated commencing on December 1, 2016. Pursuant to the agreement Value Line leased from ABM 24,726 square feet of office space located on the second and third floors at 551 Fifth Avenue, New York, NY (“Building” or “Premises”) beginning on December 1, 2016 and ending on November 29, 2027. Base rent under the sublease agreement is $1,126,000 per annum during the first year with an annual increase in base rent of 2.25% scheduled for each subsequent year, payable in equal monthly installments on the first day of each month, subject to customary concessions in the Company’s favor and pass-through of certain increases in utility costs and real estate taxes over the base year. The Company provided a security deposit represented by a letter of credit in the amount of $469,000 in October 2016. The sublease agreement provided for the reduction of the LOC and restricted cash to $305,000 as of November 30, 2021. It is to be fully refunded after the sublease ends. This Building became the Company’s new corporate office facility. The Company is required to pay for certain operating expenses associated with the Premises as well as utilities supplied to the Premises. The sublease terms provide for a significant decrease (23% initially) in the Company’s annual rental expenditure taking into account free rent for the first six months of the sublease. Sublandlord provided Value Line a work allowance of $417,000 which accompanied with the six months free rent worth $563,000 was applied against the Company’s obligation to pay rent at our NYC headquarters, delaying the actual rent payments until November 2017.

On February 29, 2016, the Company’s subsidiary VLDC and Seagis Property Group LP (the “Landlord”) entered into a lease agreement, pursuant to which VLDC has leased 24,110 square feet of warehouse and appurtenant office space located at 205 Chubb Ave., Lyndhurst, NJ (“Warehouse”) beginning on May 1, 2016 and ending on April 30, 2024 (“Lease”). Base rent under the Lease is $192,880 per annum payable in equal monthly installments on the first day of each month, in advance during fiscal 2017 and will gradually increase to $237,218 in fiscal 2024, subject to customary increases based on operating costs and real estate taxes. The Company provided a security deposit in cash in the amount of $32,146, which will be fully refunded after the lease term expires. The lease is a net lease requiring the Company to pay for certain operating expenses associated with the Warehouse as well as utilities supplied to the Warehouse.

### Liquidity and Capital Resources

The Company had working capital, defined as current assets less current liabilities, of $32,398,000 as of October 31, 2021 and $23,312,000 as of April 30, 2021. These amounts include short-term unearned revenue of $17,453,000 and $19,162,000 reflected in total current liabilities at October 31, 2021 and April 30, 2021, respectively. Cash and short-term securities were $52,240,000 and $45,353,000 as of October 31, 2021 and April 30, 2021, respectively.

The Company’s cash and cash equivalents include $24,459,000 and $18,209,000 at October 31, 2021 and April 30, 2021, respectively, invested primarily in commercial banks and in Money Market Funds at brokers, which operate under Rule 2a-7 of the 1940 Act and invest primarily in short-term U.S. government securities.

#### Cash from operating activities

The Company had cash inflows from operating activities of $11,260,000 during the six months ended October 31, 2021, compared to cash inflows from operations of $7,668,000 during the six months ended October 31, 2020, respectively. The increase in cash flows from fiscal 2021 to fiscal 2022 is primarily attributable to higher net income and an increase in cash receipts from EAM.

#### Cash from investing activities

The Company had cash outflows from investing activities of $749,000 during the six months ended October 31, 2021, compared to cash inflows from investing activities of $508,000 for the six months ended October 31, 2020, respectively. Cash outflows for the six months ended October 31, 2021, were higher than in fiscal 2021 primarily due to decrease in sales of equity and fixed income securities in fiscal 2022.

#### Cash from financing activities

During the six months ended October 31, 2021, the Company’s cash outflows from financing activities were $4,724,000, compared to cash outflows from financing activities of $4,441,000 for the six months ended October 31, 2020. During the six months ended October 31, 2021, cash outflows for financing activities included $517,000 for the repurchase of 16,589 shares of the Company’s common stock under the April 17, 2020 and July 16, 2021 board approved common stock repurchase programs. Quarterly dividend payments of $0.22 per share during fiscal 2022 aggregated $4,207,000. Quarterly regular dividend payments of $0.21 per share during fiscal 2021 aggregated $4,039,000.

At October 31, 2021 there were 9,546,581 common shares outstanding as compared to 9,601,051 common shares outstanding at October 31, 2020. The Company expects financing activities to continue to include use of cash for dividend payments for the foreseeable future.

### Debt and Liquid Assets

Management believes that the Company’s cash and other liquid asset resources used in its business together with the proceeds from the SBA PPP loan, which has been forgiven and the future cash flows from operations and from the Company’s non-voting revenues and non-voting profits interests in EAM will be sufficient to finance current and forecasted liquidity needs for the next twelve months. Management does not anticipate making any additional borrowings during the next twelve months. As of October 31, 2021, retained earnings and liquid assets were $82,700,000 and $52,240,000, respectively. As of April 30, 2021, retained earnings and liquid assets were $72,502,000 and $45,353,000, respectively. There are no off-balance-sheet arrangements, so none affect the interpretations of reported assets, liquidity, and debt.

### Seasonality

Our publishing revenues are comprised of subscriptions which are generally annual subscriptions. Our cash flows from operating activities are minimally seasonal in nature, primarily due to the timing of customer payments made for orders and subscription renewals.

### Critical Accounting Estimates and Policies

The Company prepares its Consolidated Financial Statements in accordance with Generally Accepted Accounting Principles as in effect in the United States (U.S. “GAAP”). The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent, and the Company evaluates its estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions. Our disclosures of critical accounting policies are reported in the Company’s Annual Report on Form 10-K for fiscal year ended April 30, 2021.

## Market risk

As filed, 5,566 characters.

### Market Risk Disclosures

The Company’s Consolidated Condensed Balance Sheet includes a substantial amount of assets whose fair values are subject to market risks. The Company’s market risks are primarily associated with interest rates and equity price risk. The following sections address the significant market risks associated with the Company’s investment activities.

### Interest Rate Risk

The Company’s strategy has been to acquire debt securities with low credit risk. Despite this strategy management recognizes and accepts the possibility that losses may occur. To limit the price fluctuation in these securities from interest rate changes, the Company’s management invests primarily in short-term obligations maturing within one year.

The fair values of the Company’s fixed maturity investments will fluctuate in response to changes in market interest rates. Increases and decreases in prevailing interest rates generally translate into decreases and increases in fair values of those instruments. Additionally, fair values of interest rate sensitive instruments may be affected by prepayment options, relative values of alternative investments, and other general market conditions.

Fixed income securities consist of securities issued by federal, state and local governments within the United States. As of October 31, 2021 the aggregate cost and fair value of fixed income securities classified as available-for-sale were $598,000 and $597,000, respectively. As of April 30, 2021 the aggregate cost and fair value of fixed income securities classified as available-for-sale were $2,596,000 and $2,600,000, respectively.

The following table summarizes the estimated effects of hypothetical increases and decreases in interest rates on assets that are subject to interest rate risk. It is assumed that the changes occur immediately and uniformly to each category of instrument containing interest rate risks. The hypothetical changes in market interest rates do not reflect what could be deemed best or worst case scenarios. Variations in market interest rates could produce significant changes in the timing of repayments due to prepayment options available. For these reasons, actual results might differ from those reflected in the table.

Fixed Income Securities

| As of October 31, 2021 | Estimated Fair Value after Hypothetical Change in Interest Rates (in thousands) (bp = basis points) Fair Value | 1 year 50 bp increase | 1 year 50 bp decrease | 1 year 100 bp increase | 1 year 100 bp decrease |
| --- | ---: | --- | --- | --- | --- |
| Investments in securities with fixed maturities | $597 | n/a | n/a | n/a | n/a |
| As of April 30, 2021 |  |  |  |  |  |
| Investments in securities with fixed maturities | $2,600 | n/a | n/a | n/a | n/a |

Management regularly monitors the maturity structure of the Company’s investments in debt securities in order to maintain an acceptable price risk associated with changes in interest rates.

### Equity Price Risk

The carrying values of investments subject to equity price risks are based on quoted market prices as of the balance sheet dates. Market prices are subject to fluctuation and, consequently, the amount realized in the subsequent sale of an investment may significantly differ from the reported market value. Fluctuation in the market price of a security may result from perceived changes in the underlying economic characteristics of the issuer, the relative price of alternative investments and general market conditions. Furthermore, amounts realized in the sale of a particular security may be affected by the relative quantity of the security being sold.

The Company’s equity investment strategy has been to acquire equity securities across a diversity of industry groups. The portfolio consists of ETFs held for dividend yield that attempt to replicate the performance of certain equity indexes and ETFs that hold preferred shares primarily of financial institutions. In order to maintain liquidity in these securities, the Company’s policy has been to invest in and hold in its portfolio, no more than 5% of the approximate average daily trading volume in any one issue.

As of October 31, 2021 and April 30, 2021, the aggregate cost of the equity securities, which consist of investments in the SPDR Series Trust S&P Dividend ETF (SDY), First Trust Value Line Dividend Index ETF (FVD), Invesco Financial Preferred ETF (PGF), ProShares Trust S&P 500 Dividend Aristocrats ETF (NOBL), iShares Preferred & Income Securities ETF (PFF), and other Exchange Traded Funds and common stock equity securities was a combined total $21,887,000 and $19,105,000, respectively, and the fair value was $26,685,000 and $23,582,000, respectively.

*($ in thousands)*

| Equity Securities |  | Fair Value | Hypothetical Price Change | Estimated Fair Value after Hypothetical Change in Prices | Hypothetical Percentage Increase (Decrease) in Shareholders’ Equity |
| --- | --- | ---: | --- | ---: | ---: |
| As of October 31, 2021 | Equity Securities and ETFs held for dividend yield | $26,685 | 30% increase | $34,692 | 7.72% |
|  |  |  | 30% decrease | $18,680 | -7.72% |

*($ in thousands)*

| Equity Securities |  | Fair Value | Hypothetical Price Change | Estimated Fair Value after Hypothetical Change in Prices | Hypothetical Percentage Increase (Decrease) in Shareholders’ Equity |
| --- | --- | ---: | --- | ---: | ---: |
| As of April 30, 2021 | Equity Securities and ETFs held for dividend yield | $23,582 | 30% increase | $30,657 | 7.81% |
|  |  |  | 30% decrease | $16,507 | -7.81% |

31

## Controls and procedures

As filed, 1,591 characters.

(a) The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) that are designed to ensure that information required to be disclosed in the Company’s reports filed with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding disclosure.

The Company’s management has evaluated, with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, the effectiveness of the Company’s disclosure controls and procedures, (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

(b) The registrant’s Principal Executive Officer and Principal Financial Officer have determined that there have been no changes in the registrant’s internal control over financial reporting that occurred during the registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

## Risk factors

As filed, 468 characters.

In Part II, Item 1A of this Quarterly Report on Form 10-Q for the period ended October 31, 2021 new risk factors have been added to the risk factors disclosed in Item 1A - Risk Factors in the Company's Annual Report on Form 10-K for the year ended April 30, 2021 filed with the SEC on July 29, 2021. The new risk factors reflect management's continuing analysis of developments in the Company's business environment, rather than any specific event or particular issue.

Filed Dec 13, 2021.
Source: SEC EDGAR, the filing index for accession 0001437749-21-028401. Last ingested by Listed: Oct 24, 2026, 14:56 ET. No prices; not investment advice.