The Dolan Company Reports Third Quarter 2012 Results

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Nov 27, 2012 at 6:46 AM

Third quarter revenues decreased 3.0% year-over-year to $68.1 million
Net loss attributable to The Dolan Company was ($103.5) million, or ($2.98) per diluted share. Excluding impairment and other one-time charges, net income was $1.6 million, or $0.05 per diluted share (See “Third Quarter 2012 financial results” below for one-time charges)

Cash earnings were $4.2 million, or $0.14 per diluted share (See “Non-GAAP Financial Measures” below)
Adjusted EBITDA was $12.6 million (See “Non-GAAP Financial Measures” below)
Company revises guidance for 2012

MINNEAPOLIS--(BUSINESS WIRE)--Nov. 2, 2012-- The Dolan Company (NYSE: DM), a leading provider of professional services and business information to legal, financial and real estate sectors in the United States, today announced financial results for the three months ended September 30, 2012.

“Third quarter operating trends were mixed, as we saw record e-discovery revenue and steady performance from our business information segment, but challenging volumes in our foreclosure processing business,” said James P. Dolan, chairman, chief executive officer and president. "As we anticipated, our e-discovery business rebounded from the second quarter, with a broad base of new matters being processed from both new and existing clients. In our default processing business, we saw a continuation of suppressed referrals as political considerations weigh on the industry, and regulatory standards get implemented.”

“After the end of the quarter, we successfully amended our bank agreement, which gives us greater flexibility going forward. Furthermore, we restructured our NDeX Florida operations, which improves our profitability while maintaining the opportunity for us to expand in the Florida market,” Dolan added.

“Litigation Support Services, led by our e-discovery business, had its best quarter ever. Litigation Support revenue grew by 11%, including 13% growth in our e-discovery business. However, this revenue growth doesn’t tell the whole story, since our record e-discovery revenue this quarter compares against the previously record-setting third quarter last year. Sequentially, revenue from the e-discovery business grew by 77% from the second quarter of 2012, showing a marked improvement from the depressed levels experienced during the first half of the year. Importantly, new clients accounted for more than 25% of the quarter’s Litigation Support revenue, while some of our traditionally larger clients generated strong revenues as well. We remain optimistic about the growth potential of our e-discovery business and are encouraged that the DiscoverReady team’s hard work to expand our client base is producing such remarkable results,” Dolan said.

“Our Business Information segment remained steady and tracked to our expectations,” Dolan said. “The public notice advertising business showed modest growth once again. This segment continues to be a consistent cash flow generator.”

“In the third quarter, revenues at our National Default Exchange, or NDeX, declined by 16% compared to last year. Previously, we expressed a cautious view regarding our third quarter results given political considerations and the uncertainty about how large mortgage servicers would react to new OCC guidelines. The political uncertainty continues, and some major servicers have begun implementing newly required procedures that begin with a mandatory borrower notification period at the very beginning of the process for new foreclosures. This further slows an already stretched-out process. We remain cautious about volumes in our foreclosure-processing business heading into the fourth quarter. However, we have negotiated a double-digit price increase with the majority of our law firm partners, which should start to have an impact in 2013. Further, we believe there may be future opportunities to license our NDeX technology and infrastructure on a recurring fee basis in both new and existing markets,” Dolan said.

“Due to the previously announced restructuring of our NDeX Florida operations, in the third quarter we took a non-cash pre-tax charge of $20.2 million on these operations. Accordingly, the financial impact of our NDeX Florida operations is no longer included in our results since it is now a discontinued operation,” Dolan added.

Full Year 2012 Guidance

Based on third quarter results and the outlook for the remainder of 2012, the company is revising its full-year financial guidance as follows:

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