Dolan Company Reports $140M Net Loss

The Dolan Company on Thursday announced a net loss of $140 million for its second quarter—a loss attributed in large part to the weak performance from two of its mortgage default-related businesses, which it sold in its third quarter—while revenue increased 13.6 percent.
 
Minneapolis-based Dolan is a provider of professional services and business information to the legal, financial, and real estate industries.
 
For the quarter that ended June 30, Dolan reported a net loss of $140.4 million, or $4.62 per share, compared to net income of $4.9 million, or $0.16 per share, during the same period in 2012. The company said its loss from continuing operations totaled $76.85 million. 
 
Its adjusted net earnings, however, which exclude certain one-time costs, totaled $8.4 million, or $0.10 per share, up 14.6 percent from $7.3 million, or $0.05 per share, during the same period in 2012.
 
President and CEO James Dolan said the $140.4 million net loss “includes total non-cash impairment charges of $86.1 million, of which $58.4 million was in discontinued operations, and tax expense of $49.6 million, primarily related to a non-cash valuation allowance against all of our deferred tax assets.”
 
Revenue, meanwhile, totaled $47.5 million, up 13.6 percent from $41.8 million in the second quarter of 2012. Second-quarter revenue fell short of analysts’ projections of $53.3 million.
 
Shares of Dolan’s stock were trading down about 5.1 percent at $2.41 during Thursday afternoon trading, although they are up nearly 30 percent over the last month.
 
The company’s National Default Exchange (NDeX) business unit has performed poorly as the state has experienced a reduction in foreclosure rates. The NDeX unit deals with a case management software system that assists clients in processing foreclosures, bankruptcies, evictions, and litigation case files for residential mortgage defaults.
 
NDeX received 10,400 mortgage default files for processing during its second quarter and generated $4.9 million in revenue, versus 17,400 files and $7.3 million in revenue during the second quarter of 2012, down 30 percent, the company said.
 
Dolan sold two of its NDeX businesses earlier this month for $17.5 million to law firms that were clients of the businesses.
 
“Once again, our mortgage default-related businesses remained depressed as the industry continues to experience a reduced pace of foreclosure referrals from the largest servicers,” Dolan said in a statement. “Given the lack of visibility and growing losses at NDeX, we have decided to sell certain of those businesses, including NDeX South and NDeX Indiana, which were sold early in the third quarter.”
 
“The sale of its NDeX companies incurred a large loss, which was expected; however these were the businesses that continually underperformed for Dolan,” George Sutton, a senior analyst at Minneapolis-based Craig-Hallum, told Twin Cities Business.
 
While the company’s NDeX businesses were hurt, its litigation support segment revenue grew by about 60 percent, according to the company, driven primarily by nearly 75 percent growth in its “e-discovery” business—which handles document review and discovery for legal professionals.
 
“The selling of the NDeX units is good news. Now that they’ve sold most of their mortgage default-related businesses, they are able to focus on their much more successful e-discovery segment,” said Sutton. “Even the handful of NDeX businesses they have left are under consideration for sale, if the right scenario presented itself.”