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The Dolan Company Reports Second Quarter 2012 Results

(1) 2012 includes fair value and other adjustments on earnout liabilities in the amount of $10.4 million

Professional Services Division Results

The Professional Services Division provides specialized processing services to the legal profession through its subsidiaries, NDeX, Counsel Press, and DiscoverReady. National Default Exchange or NDeX, is a leading provider of mortgage default processing services in the United States. Together, Counsel Press and DiscoverReady comprise the company’s litigation support services segment. Counsel Press is the largest provider of appellate services in the United States, and DiscoverReady provides outsourced discovery management, including document review and data hosting and processing services, to major corporations and law firms.

Division revenues for the second quarter were $44.3 million, a decline of 8.5% from $48.4 million in the second quarter of 2011. The decline was primarily the result of lower NDeX file volume.

NDeX received 63,100 mortgage default files for processing during the second quarter and generated $28.1 million in revenues. This compares to 80,800 files received for processing and $32.7 million in revenues in the second quarter of 2011. The total number of foreclosure files received in the second quarter decreased by 16% from last year.

Litigation Support contributed $16.2 million in revenues during the second quarter of 2012, an increase of 3.1%, with the e-discovery business growing 6.4% during the quarter.

Direct operating expenses within the Professional Services Division were down roughly 6% during the quarter as lower volumes and cost reduction efforts at NDeX were offset, in part, by the addition of ACT and investments in DiscoverReady. Selling, general and administrative expenses increased 10.8% on a year-over-year basis to $16.7 million. Once again, a modest decrease at NDeX was offset by the additional expense associated with the addition of ACT Litigation Services and investments in DiscoverReady. Excluding the impact of fair value and other adjustments on earn-out liabilities, total Professional Services Division operating expenses as a percentage of division revenues increased to 98.7% for the quarter, from 87.5% in the second quarter of 2011. The increase in operating expense was the result of negative operating leverage due to the revenue declines at NDeX, and lower than expected revenue at DiscoverReady.

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