Dolan Company’s Stock Dives As Revenue Drops 20%
The Dolan Company’s stock fell nearly 50 percent Tuesday morning after the company reported a continued quarterly loss and a 20 percent drop in sales.
Minneapolis-based Dolan provides professional services and business information to the legal, financial, and real estate industries.
For the quarter that ended September 30, the company reported a net loss of $27.5 million, or $0.91 per share, compared to a net loss of $103.5 million, or $3.41 per share, during the same period in 2012. Its latest loss narrowed significantly from the prior-year period, which included now-discontinued operations.
Revenue, meanwhile, totaled $35.5 million, down from $44.7 million in the third quarter of 2012. Third-quarter revenue fell short of analysts’ projections of $43.8 million.
Dolan Company pointed out that it recently amended its credit agreement with U.S. Bank and Wells Fargo, which requires Dolan Company to come up with $50 million in cash to pay down its outstanding loans.
“The third quarter was a period of change as we work on building for the future,” CEO and President James Dolan said in a statement. “We were able to sell our largest NDeX mortgage default processing operations during the quarter, which eliminated the negative cash flows from these businesses, while providing some cash to pay down debt as well as a more predictable cash flow stream in the future.”
Dolan Company announced the $17.5 million sale of two of its struggling mortgage default businesses in July. The company attributed its net loss of $140 million in this year’s second quarter largely to those businesses. At the time, an analyst told Twin Cities Business that the sale would help Dolan focus on its more successful “e-discovery” business—which handles document review and discovery for legal professionals.
Dolan Company’s e-discovery business, however, saw a 33 percent decline in revenue in the third quarter. However, Dolan pointed out that the decline was exaggerated due to the business’ record performance in the third quarter of 2012.
The company attributed a portion of its overall quarterly loss to a continued decline in mortgage default public notice advertising, part of its information division. The company said that due to the decline, it recorded a “goodwill impairment charge” of $35.4 million. A goodwill impairment charge is used when assets’ worth are lower than previous valuations, so the company takes a charge on the loss in value of the assets.
Dolan Company’s revenue has been falling year after year—from $294 million in 2010 to $269 million in 2011 to $254 million in 2012. Now, the company expects its 2013 revenue to be between $150 and $154 million—almost half what it was three years before.
In September, Dolan adopted a so-called “shareholder rights plan,” which is meant to limit the amount of the company’s stock a shareholder or potential shareholder might purchase. The move was ultimately made to allow Dolan to pay lower income taxes in the coming years.
Shares of Dolan Company’s stock were trading down about 47 percent at $1.10 during late Tuesday morning trading.
Minneapolis-based Dolan is one of Minnesota’s 60 largest public companies based on its annual revenue, although it may drop a few spots by the end of 2013.