Equity Investments

9 Months Ended

Apr. 30, 2024

Cash and Cash Equivalents [Abstract]

Equity Investments

Note 7—Equity Investments

Equity investments consist of the following:

	April 30, 2024		July 31, 2023
	(in thousands)
Zedge, Inc. Class B common stock, 42,282 shares at April 30, 2024 and July 31, 2023	$	102	$	89
Rafael Holdings, Inc. Class B common stock, 278,810 shares at April 30, 2024 and July 31, 2023		443		558
Other marketable equity securities		169		1,497
Fixed income mutual funds		4,130		4,054
Current equity investments	$	4,844	$	6,198
Visa Inc. Series C Convertible Participating Preferred Stock (“Visa Series C Preferred”)	$	1,425	$	1,263
Convertible preferred stock—equity method investment		1,565		2,784
Hedge funds		2,915		3,002
Other		725		2,825
Noncurrent equity investments	$	6,630	$	9,874

Howard S. Jonas, the Chairman of the Company and the Chairman of the Company’s Board of Directors, is also the Vice-Chairman of the Board of Directors of Zedge, Inc. and the Chairman of the Board of Directors and Executive Chairman of Rafael Holdings, Inc.

The changes in the carrying value of the Company’s equity investments without readily determinable fair values for which the Company elected the measurement alternative was as follows:

	Three Months Ended April 30,					Nine Months Ended April 30,
	2024			2023		2024			2023
	(in thousands)
Balance, beginning of period	$	1,719		$	1,594	$	1,632		$	1,501
Adjustment for observable transactions involving a similar investment from the same issuer		(25	)		13		162			106
Upward adjustment		—			—		130			—
Redemption		—			—		(230	)		—
Impairments		—			—		—			—
Balance, end of the period	$	1,694		$	1,607	$	1,694		$	1,607

The Company adjusted the carrying value of the shares of Visa Series C Preferred it held based on the fair value of Visa Class A common stock, including a discount for lack of current marketability, which is classified as “Adjustment for observable transactions involving a similar investment from the same issuer” in the table above. In addition, in connection with the acquisition of Regal Bancorp by SR Bancorp, the Company received cash of $0.2 million in December 2023 in exchange for its shares of Regal Bancorp common stock.

Unrealized losses for all equity investments measured at fair value included the following:

	Three Months Ended April 30,						Nine Months Ended April 30,
	2024			2023			2024			2023
	(in thousands)
Net losses recognized during the period on equity investments	$	(78	)	$	(480	)	$	(280	)	$	(2,649	)
Less: net gains recognized during the period on equity investments sold during the period		—			—			130			18
Unrealized losses recognized during the period on equity investments still held at the reporting date	$	(78	)	$	(480	)	$	(410	)	$	(2,667	)

The unrealized losses for all equity investments measured at fair value in the table above included the following:

	Three Months Ended April 30,						Nine Months Ended April 30,
	2024			2023			2024			2023
	(in thousands)
Unrealized (losses) gains recognized during the period on equity investments:
Rafael Class B common stock	$	(61	)	$	11		$	(115	)	$	20
Zedge Class B common stock	$	(36	)	$	(9	)	$	13		$	(33	)

Equity Method Investment

The Company has an investment in shares of convertible preferred stock of a communications company (the equity method investee, or “EMI”). As of April 30, 2024 and July 31, 2023, the Company’s ownership was 33.4% and 33.3%, respectively, of the EMI’s outstanding shares on an as converted basis. The Company accounts for this investment using the equity method since the Company can exercise significant influence over the operating and financial policies of the EMI but does not have a controlling interest.

The Company determined that on the dates of the acquisitions of the EMI’s shares, there were differences between its investment in the EMI and its proportional interest in the equity of the EMI of an aggregate of $8.2 million, which represented the share of the EMI’s customer list on the dates of the acquisitions attributed to the Company’s interest in the EMI. These basis differences are being amortized over the 6-year estimated life of the customer list. In the accompanying consolidated statements of income, amortization of equity method basis difference is included in the equity in the net loss of investee, which is recorded in “Other expense, net” (see Note 17).

In February 2024, each of the EMI’s shareholders (including the Company) agreed to purchase additional shares of the EMI’s convertible preferred stock. The Company paid an aggregate of $0.5 million in the three months ended April 30, 2024 to purchase the additional shares.

In April 2024, each of the EMI’s shareholders (including the Company) agreed to purchase additional shares of the EMI’s convertible preferred stock. The Company paid $0.3 million in May 2024 and is committed to pay $0.2 million to purchase the additional shares.

The following table summarizes the change in the balance of the Company’s equity method investment:

	Three Months Ended April 30,						Nine Months Ended April 30,
	2024			2023			2024			2023
	(in thousands)
Balance, beginning of period	$	1,932		$	(374	)	$	2,784		$	1,001
Purchase of convertible preferred stock		504			168			1,513			168
Conversion of secured promissory notes into convertible preferred stock		—			4,038			—			4,038
Equity in the net loss of investee		(529	)		(532	)		(1,704	)		(1,544	)
Amortization of equity method basis difference		(342	)		(236	)		(1,028	)		(599	)
Balance, end of the period	$	1,565		$	3,064		$	1,565		$	3,064

Summarized financial information of the EMI was as follows:

	Three Months Ended April 30,						Nine Months Ended April 30,
	2024			2023			2024			2023
	(in thousands)
Revenues	$	3,351		$	2,115		$	11,156		$	5,806
Costs and expenses:
Direct cost of revenues		2,477			1,693			9,013			4,921
Selling, general and administrative		2,366			2,080			6,892			5,488
Total costs and expenses		4,843			3,773			15,905			10,409
Loss from operations		(1,492	)		(1,658	)		(4,749	)		(4,603	)
Other income (expense), net		20			(266	)		20			(1,108	)
Net loss	$	(1,472	)	$	(1,924	)	$	(4,729	)	$	(5,711	)