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INVESTOR RELATIONS - Press Release
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|The Dolan Company Reports Third Quarter 2010 Results|
MINNEAPOLIS, Nov 03, 2010 (BUSINESS WIRE) --
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 Sept. 30, 2010. The results are preliminary pending the filing of the company's Form 10-Q with the U.S. Securities and Exchange Commission.
"Our diversified business model served us well in the third quarter, allowing us to deliver more than 25% revenue growth and greater than 40% cash EPS growth amid a challenging business environment," said James P. Dolan, chairman, chief executive officer and president. "For the quarter, our professional services division revenues grew by 40.9% on the strength of both our DiscoverReady and NDeX businesses.
"We are pleased with the growth of the Professional Services Division and we continue to work hard to diversify the results of our business, keeping in mind our long-term goals of growth with stability," added Dolan. "DiscoverReady doubled its revenue to $10.9 million from last year on a pro-forma basis, while NDeX grew its revenue by 14.6% compared to last year.
"Our Business Information Division continues to generate strong margins. Steady circulation and public notice business helped to offset a difficult market for display and classified advertising.
"Our strong revenue growth during the quarter led to significant free cash flow, allowing for continued reduction in net debt as well as the flexibility to pursue a number of attractive acquisition opportunities," Dolan said.
Full Year 2010 Guidance
Based on third quarter results and management's outlook for 2010, the company is raising its full-year revenue guidance to $309-$312 million from $307-$310 million. In addition the company is tightening its adjusted EBITDA guidance to $93-$95 million from $91-$95 million, its guidance for net income attributable to The Dolan Company to $1.13-$1.17 per share from $1.11-$1.18 per share, and its cash earnings guidance to $1.55-$1.59 per share from $1.54-$1.60 per share.
This guidance excludes the effect of any businesses that may be acquired in 2010 and assumes that there will be no material effect on results of operations from current or future foreclosure-related government legislation or programs, or from investor- or lender-based programs. These include, but are not limited to, programs and legislation detailed in "Regulatory Environment" and "Risk Factors" in the company's annual report on Form 10-K for 2009, in the company's Form 10-Q for the second quarter of 2010, and in the company's Form 10-Q to be filed for the third quarter of 2010.
Third Quarter 2010
Financial results for the three months ended Sept. 30, 2010, and 2009 are as follows:
Total revenues for the three months ended Sept. 30, 2010, were $78.5 million, up 25.8% from $62.3 million in the same period of 2009. Spurred by the strength of its DiscoverReady and NDeX businesses, the Professional Services Division revenue increased 40.9% during the third quarter, while Business Information Division revenues were $22.1 million, down 1% from the third quarter of 2009.
DiscoverReady, which was acquired in November 2009, contributed $10.9 million in revenues during in the third quarter, which was double the revenue generated a year ago on a pro-forma basis. NDeX grew by 14.6%, including 7% organic growth, and contributed $41.2 million of revenue due to market share gains and an increase of file volume from existing customers.
Reflecting the company's increased emphasis on services, Professional Services Division revenues grew to 71.8% of total revenues for the three months ended Sept. 30, 2010, from 64.2% for the same prior-year period. Business Information Division revenues for the third quarter comprised 28.2% of total revenues, compared to 35.8% in the third quarter of 2009.
Total operating expenses for the third quarter of 2010 increased 22.4% to $63.2 million, from $51.6 million in the third quarter of 2009. Total operating expenses as a percentage of total revenues decreased 230 basis points, from 82.8% for the three months ended September 30, 2009, to 80.5% for the three months ended Sept. 30, 2010. This decrease was largely attributable to robust revenue growth within the litigation support services segment as well as strong growth at NDeX.
Operating income for the three months ended Sept. 30, 2010, was $16.4 million, an increase of 43.2% from $11.5 million in the third quarter of 2009. Adjusted EBITDA increased 34.6% year-over-year to $24.2 million due to operating leverage from the strong revenue growth in the Professional Services Division.
Professional Services Division Results
The Professional Services Division provides specialized services to the legal profession through its subsidiaries, NDeX, Counsel Press, and, since Nov. 2, 2009, DiscoverReady. NDeX is a leading provider of mortgage default processing services in the United States. Together, Counsel Press and DiscoverReady comprise the litigation support services segment. Counsel Press is the largest appellate services company in the United States, and DiscoverReady provides outsourced discovery management and document review services to major corporations and law firms across the United States.
Division revenues for the third quarter were $56.3 million, up 40.9% from $40.0 million in the third quarter of 2009. This $16.3 million increase was a result of higher NDeX file volume and increased DiscoverReady revenues. DiscoverReady generated $10.9 million in third quarter revenues, compared to revenues of $5.3 million for the third quarter of 2009, when it was not owned by The Dolan Company.
NDeX received approximately 99,700 mortgage default files for processing during the third quarter, an increase of 19.7%, and generated $41.2 million in revenues. This compares to roughly 83,300 files received for processing and $35.9 million in revenues in the third quarter of 2009. In addition to the growth due to NDeX's Florida operations, NDeX saw increased file volume from existing customers and, the company believes, from market share gains.
Direct operating expenses within the Professional Services Division increased to $22.8 million during the third quarter of 2010, from $15.6 million for the same period in 2009. Selling, general and administrative expenses increased $4.7 million on a year-over-year basis to $15.2 million. The increases were largely the result of higher operating costs related to the 2009 acquisitions of DiscoverReady and NDeX's Florida operations, as well as increased sales and marketing investments at DiscoverReady. Total Professional Services Division operating expenses as a percentage of division revenues decreased 50 basis points to 76.4% for the quarter, from 76.9% in the third quarter of 2009. The decrease is the result of operating leverage due to strong revenue growth at DiscoverReady and NDeX, offset in part by investments in the DiscoverReady business.
The company also disclosed that its NDeX foreclosure processing subsidiary now is doing sufficient amounts of business in Nevada to be identified as a state served by NDeX, making it the eighth such state (after Michigan, Indiana, Minnesota, Texas, California, Georgia and Florida). This continues the company's practice of disclosing default processing work in a state only when management believes that it has sustainable and sufficient volume of business in that state.
Business Information Division Results
The Business Information Division publishes business journals, court and commercial media and other highly focused information products and services, operates web sites and produces events for targeted professional audiences in each of the 21 geographic markets that we serve across the United States.
Business Information Division revenues for the third quarter of 2010 were $22.1 million, a slight decrease from the $22.3 million recorded in the third quarter of 2009. The addition of Federal News Service and revenue from public notice helped offset continued weakness in traditional advertising.
Total operating expenses within the Business Information Division rose 2.1% to $17.4 million from the third quarter of 2009, due primarily to new product initiatives begun in the first quarter of 2010. On a year-over-year basis, direct operating expenses increased 4.0% to $7.2 million while selling, general and administrative expenses for the division increased 2.0% year-over-year to $8.9 million.
Balance Sheet and Liquidity
As of Sept. 30, 2010, the company held $9.6 million of cash and cash equivalents, compared to $2.9 million at the end of 2009. During the third quarter of 2010, the company generated $12.7 million of cash from operating activities and $10.0 million of free cash flow, which is defined as net cash provided by operating activities minus capital expenditures (which were $2.7 million). For the nine months ended Sept. 30, 2010, cash from operations increased 37.1% to $44.0 million. The company's days sales outstanding were at 84 days for the first nine months of 2010 due in part to longer collection cycles at DiscoverReady and also due to DiscoverReady's overall growth as a larger part of The Dolan Company.
Total debt outstanding at the end of the third quarter was $139.5 million, of which $133.7 million was under a term loan facility at a weighted-average interest rate of 2.3%. The company's leverage ratio at the end of the quarter was 1.4 times total debt to trailing twelve month pro forma adjusted EBITDA, down from 1.6 times as of June 30, 2010, and 1.8 times as of December 31, 2009. The leverage ratio remained well below the maximum of 3.5 times allowed in the senior debt covenants.
Non-GAAP Financial Measures
Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for financial accounting in the United States. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions, and in the preparation of financial statements. In addition to reporting financial results in accordance with GAAP, The Dolan Company reports the following non-GAAP measures:
The Dolan Company provides these measures because it believes that they are helpful to investors in comparing year-over-year performance in light of certain non-recurring charges, and to better understand its operating performance and profitability, competitive position and future prospects. Non-GAAP measures should be considered in conjunction with the GAAP financial presentation and should not be considered in isolation or as a substitute for GAAP net income attributable to The Dolan Company. In addition, it should be noted that companies' calculations of adjusted EBITDA, cash earnings and cash earnings per diluted share may differ, and thus The Dolan Company's presentation of these measures may not be comparable to the calculations of such measures by other companies.
The following is a reconciliation of net income attributable to The Dolan Company to adjusted EBITDA (in thousands):
The following is a reconciliation of net income attributable to The Dolan Company to cash earnings and cash earnings per diluted share (in thousands, except share and per share data):
The company has scheduled a conference call today, Nov. 3, 2010, at 8:30 a.m. U.S. Eastern Time (7:30 a.m. U.S. Central Time). The call will be hosted by James P. Dolan, chairman, chief executive officer and president; Scott J. Pollei, executive vice president and chief operating officer; and Vicki J. Duncomb, vice president and chief financial officer. It will be broadcast live over the Internet and will be accessible through the investor relations section of the company's Web site at http://www.thedolancompany.com. Interested parties should access the webcast approximately 10 to 15 minutes before the scheduled start time to register and download any necessary software needed to listen to the call. Prior to the conference call start, a slide presentation highlighting points discussed in the third quarter conference call will be available through the investor relations section of the company Web site at http://www.thedolancompany.com. The webcast and slide presentation will be archived online and will be available at the investor relations section of the company Web site for a period of 21 days after the call.
Safe Harbor Statement
This release contains forward-looking statements, including under "Full Year 2010 Guidance," that reflect the company's current expectations and projections about future results, performance, prospects and opportunities. The words "outlook," "may," "anticipate," "expect," "believe," "continue," "will," "estimate," and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on information currently available to the company and are subject to many risks, uncertainties and other factors that may cause actual results, performance, prospects or opportunities to be materially different from those expressed in, or implied by, such forward looking statements. These risks, uncertainties and other factors include, but are not limited to, the following: the company operates in highly competitive markets and depends upon the economies and the demographics of the legal, financial and real estate sectors in the markets served, and changes in those sectors could have an adverse effect on revenues, cash flows and profitability; David A. Trott, the chairman and chief executive officer of NDeX, and certain other employees of NDeX who are also shareholders and principal attorneys of the company's law firm customers, may under certain circumstances have interests that differ from, or conflict with, the company's interests; NDeX's business revenues are very concentrated, as NDeX currently provides mortgage default processing services to eight law firm customers, and if the number of case files referred by its mortgage default processing service law firm customers, or loan servicers and mortgage lenders served directly for properties located in California and Nevada, decreases or fails to increase, the company's operating results and ability to execute its growth strategy could be adversely affected; regulations, laws, bills introduced, court orders, investigations by state or federal officials, and voluntary programs or moratoria seeking to review foreclosure processes or mitigate foreclosures in states where the company does business may have an adverse effect on, restrict, or slow the company's mortgage default processing services and public notice operations (including legislation in Michigan, Indiana and Florida, the Hope for Homeowners Act, the Emergency Economic Stabilization Act, the Streamlined Modification Program, the Homeowner Affordability and Stability Plan, the Making Home Affordable Program, the Home Affordable Modification Program, the Home Affordable Foreclosure Alternatives Program, the Protecting Tenants at Foreclosure Act, investigations by state attorneys general, and voluntary foreclosure relief programs developed by lenders, loan servicers and the Hope Now Alliance); The Dolan Company has owned and operated DiscoverReady LLC just one year and is highly dependent on the skills and knowledge of the individuals serving as chief executive officer and president of DiscoverReady; DiscoverReady's business revenues are very concentrated among a few customers and if these customers choose to manage their discovery with their own staffs or engage another provider and if DiscoverReady is unable to develop new customer relationships, operating results and the ability to execute growth strategies for DiscoverReady may be adversely affected; The Dolan Company is dependent on its senior management team; the company intends to continue to pursue acquisition opportunities, which it may not do successfully and which may subject the company to considerable business and financial risk, and the company may be required to incur additional indebtedness or raise additional capital to fund these acquisitions and this additional financing may not be available on satisfactory terms or at all; and growing the company may place a strain on management and internal systems, processes and controls. Please also see "Risk Factors" contained in Item 1A of the company's annual report on Form 10-K filed with the SEC on March 8, 2010, which is available at the SEC's Web site at http://www.sec.gov, for a description of some of these and other risks, uncertainties and factors that could cause actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, forward looking statements. Investors or prospective investors should not place undue reliance upon any forward-looking statements. Except as required by federal securities law, the company assumes no obligation to update publicly or revise any forward-looking statements for any reason, nor to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available, new events occur or circumstances change in the future.
SOURCE: The Dolan Company
The Dolan Company