request-2010 dm investor day presentation

8/8/2019 Request-2010 DM Investor Day Presentation

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June 29, 2010

James P. DolanChairman, President & CEO

Scott J. PolleiExecutive Vice President & COO

Vicki J. DuncombVice President & CFO

NYSE: DM

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In addition to historical information, this presentation contains forward-looking statements that reflect our current expectations and projections about future results,performance, prospects and opportunities. The words anticipates, expect, believes, continue, will, and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on information currently available to us and are subject to a number of risks, uncertainties and otherfactors that may cause actual results, performance, prospects or opportunities to be materially different from those expressed in, or implied by, such forward lookingstatements.

These risks, uncertainties and other factors include, but are not limited to, the following: our business operates in highly competitive markets and depends upon theeconomies and the demographics of the legal, financial and real estate sectors in the markets we serve and changes in those sectors could have an adverse effect on ourrevenues, cash flows and profitability; David A. Trott, the chairman and chief executive officer of NDeX, and certain other employees of NDeX, who are also shareholdersand principal attorneys of our law firm customers, may under certain circumstances have interests that differ from, or conflict with, our interests; NDeXs businessrevenues are very concentrated, as NDeX currently provides mortgage default processing services to eight law firm customers,and if the number of case files referred to usby our mortgage default processing service law firm customers, or loan servicers and mortgage lenders we serve directly for properties located in California, decreases orfails to increase, our operating results and ability to execute our growth strategy could be adversely affected; bills introduced and laws enacted, along with court orders, tomitigate foreclosures in states where we do business (including recently enacted legislation in Michigan, Indiana and Florida), the Hope for Homeowners Act, theEmergency Economic Stabilization Act, the Streamlined Modification Program, the Homeowner Affordability and Stability Plan (including the Making Home AffordableProgram), the Protecting Tenants at Foreclosure Act and voluntary foreclosure relief programs developed by lenders, loan servicers and the Hope Now Alliance, aconsortium that includes loan servicers, may have an adverse effect on, or restrict, our mortgage default processing services and public notice operations; we have ownedand operated DiscoverReady LLC for a very short period of time and we are highly dependent on the skills and knowledge of the individuals serving as chief executiveofficer and president of DiscoverReady, as none of our executive officers have managed or operateda discovery management and document review services company priorto this acquisition; DiscoverReadysbusiness revenues are very concentrated among a few customers and if these customers choose to manage their discovery with theirown staff or by engaging another provider and if we are unable to developnew customer relationships, ouroperating results andthe ability to execute our growth strategyat DiscoverReady may be adversely affected; the acquisition of DiscoverReady may expose us to particularbusiness and financial risks that include, but are not limited to:(1) diverting managements time, attention and resources from managing the business; (2) incurring significant additional capital expenditures and operating expenses toimprove, coordinate or integrate managerial, operational, financial and administrative systems; (3) failing to integrate the operations, personnel and internal controls ofDiscoverReady in our company or to manage DiscoverReady or our growth; and (4) facing operational difficulties in new markets or with new products and serviceofferings; we are dependent on our senior management team, especially James P. Dolan, our founder, chairman, president and chief executive officer; Scott J. Pollei, ourexecutive vice president and chief operating officer; Mark W.C. Stodder, our executive vice president Business Information; David A. Trott, chairman and chief executiveofficer, NDeX; and Vicki J. Duncomb, our vice president and chief financial officer; we intend to continue to pursue acquisition opportunities, which we may not do

successfully and which may subject us to considerable business and financial risk, and we may be required to incur additional indebtedness or raise additional capital tofund these acquisitions and this additional financing may not be available to us on satisfactory terms or at all; and growing our business may place a strain on ourmanagement and internal systems, processes and controls. Please also see Risk Factors contained in Item 1A of our annual report on Form 10-K filed with the SEC onMarch 8, 2010, which is available at the SECs web site at www.sec.gov, for a description of some of these and other risks, uncertainties and factors that could cause ouractualresults, performance, prospects or opportunities to differ materiallyfrom those expressed in,or implied by,forward lookingstatements.

You should not place undue reliance on any forward-looking statements. Except as required by federal securities law, we assume no obligation to update publicly or torevise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-lookingstatements,even if newinformation becomes available,new events occur or circumstances change in the future.

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Court & commercial media company

Business journal company

Mortgage default processing services

E-discovery services

Appellate services

1) Revenue mix is based on first quarter 2010 results

BUSINESSINFORMATION

27% of revenues(1)

PROFESSIONALSERVICES

73% of revenues(1)

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FIRST QUARTER2010 PROFESSIONAL SERVICES REVENUE MIX

76%17%

Q1 2010 Q1 2009 y/y growth

Revenue $56.0m $42.0m 33.3%

Operating Income $14.3m $10.9m 31.4%

Operating Margins 25.5% 25.9%

2009 2008 y/y growth

$172.5m $99.5m 73.4%

$42.3m $24.2m 74.3%

24.5% 24.4%

Professional Services:73% of total company

Q1 2010 revenues

7%

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More than 50% of all loans in foreclosure are in NDeX states(1)

#1

#2

#3#4

#7

#17

#22

NDeX STATES ANDRANKINGS IN LOANS

90+ DAYS PAST DUE(1)

1) Source: MBAs National Delinquency Survey for the quarter ended March 31, 2010

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$4 billion+ market,double-digit growth

Fortune 1000 companies

needing quality services,controllable cost

Rising litigation volumeand regulatory demands

Market share gains viatechnology innovations,synergistic sales/marketing

DiscoverReady Client Mix

Financial

Services23%

Law Firms27%

Technology23%

Healthcare 5%

Insurance14%

Other8%

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Fragmented sector,limited competition

Law firm outsourcing

driven by increasingvolumes, complexity

Largest, most

successful appellateservices provider

1) Cases filed by the 13 Circuits of the U.S. Court of Appeals in the twelve months ended March 31, 2009(Source: Administration Office of the U.S. Courts and United States Court of Appeals for the Federal Circuit)

2) Estimated appellate filings in all state courts in 2007 (Source: 2009 Court Statistics Project - National Center for State Courts)

Number of CasesHandled in 2009

Total U.S. Filings

~ 283,000

~ 8,900

~ 62,000

Counsel Press Federal(1) State(2)

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21 markets 64 titles 104 web sites

Business Information Division Markets

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18%

5%

55% 7%

18%6%

FIRST QUARTER2010

MortgageDefault

LitigationSupport

PublicNotice15%

Circulation& Other

Display & ClassifiedAdvertising

FIRST QUARTER2009

MortgageDefault

PublicNotice

Litigation Support

Circulation &Other

Display & ClassifiedAdvertising

11%60%

5%

Q1 2010 Q1 2009 y/y growth

Revenue $77.0m $63.9m 20.4%


Operating Margins 22.6% 22.6%


$262.9m $189.9m 38.4%

$55.4m $34.2m 61.9%

21.1% 18.0%

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65%35%

72%28%

Countercyclical Cyclical

FIRST QUARTER2010 FIRST QUARTER2009


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Name Title YearsExperience

Previous

Jim Dolan Chairman, President, CEO 36 News Corporation,Wall Street M&A

Scott Pollei EVP, COO 24 KPMG

Vicki J. Duncomb VP, CFO 27 McGraw-Hill

Mark Stodder EVP BusinessInformation

29 L.A. IndependentNewspapers,Post Newspaper Group

David Trott Chairman, CEO NDeX 26 Trott & Trott

Scott Goldstein President NDeX 24 Trott & Trott,

SchlumbergerJim Wagner CEO, DiscoverReady 18 Document

Technologies, Inc.

Steve Harber President, DiscoverReady 21 Palisades Advisors

Brian Robinson President, Counsel Press 8 Counsel Press

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Significant and consistent revenue and EBITDA growth

Strong cash flow conversion

Meaningful operating leverage

Successful acquisitions accretive to cash flow

Strong balance sheet

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$262.9

$111.6

$189.9

2006 2007 2009

Y/Y Growth 36.1% 25.0% 38.4%

2008

$152.0$63.9

Q1 09 Q1 10

Y/Y Growth 20.4%

Quarterly Revenue ($ in mm)

$77.0

Annual Revenue ($ in mm)

$308.5

2010Guidance

(1)

131) 2010 figure indicates mid-range of guidance provided in the earnings release dated February 23, 2010


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Y/Y Growth 14.6%

Quarterly Adj. EBITDA(1)

($ in mm)

$24.8

$21.6

Q1 09 Q1 10

1) See first quarter 2010 earnings release, issued on May 4, 2010, for a reconciliation to GAAP and the reasons we

consider Adjusted EBITDA an important measure of our financial performance.

1) 2) 2010 figure indicates mid-range of guidance provided in the earnings release dated February 23, 2010

Adjusted EBITDA(1)

($ in mm)

$82.8

$28.8

$55.4

2006 2007 20092008

$43.1

Y/y Growth 49.8% 28.5% 49.5%

$93.0

2010Guidance

(2)

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2007 2008 2009

$25.3

$18.9

$40.0

1) Please refer to the companys first quarter 2010 earnings release issued on May 4, 2010, for a reconciliation of cash earnings and cashearnings per diluted share to comparable GAAP measures, and the reasons we consider cash earnings and cash earnings per dilutedshare an important measure of our financial performance.

2) Excluding an acquisition break-up fee of $1.5m ($0.9m tax effected), and net life insurance proceeds of $1.4m, which the companyreported in the third quarter of 2008 and first quarter of 2009, respectively.

3) Excluding $2.4 million (Q4 2009) and $3.8 million (full year 2009) from the gain on the sale of our interest in GovDelivery.

Q1 09 Q1 10

$10.5

$12.2

2007 2008 2009

Cash EPS(2)(3) $1.19 $0.93 $1.34

Diluted Sharesoutstanding

15.9m 27.1m 29.9m

Q1 2009 Q1 2010

Cash EPS $0.35 $0.40

Diluted Sharesoutstanding

29.9m 30.2m

Cash Earnings(1)

($ in mm) Quarterly Cash Earnings(1)

($ in mm)

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Note: Free Cash Flow Conversion is defined as Cash Flow from Operations Capex / Adjusted EBITDA.

$27.9

2007 2008 2009

$20.0

$58.2

Q1 09 Q1 10

$7.7

$19.3

Annual Free Cash Flow ($ in millions) Quarterly Free Cash Flow ($ in millions)

Superior FCF Conversion of 78% in Q1 2010

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2.7x

2.3x2.1x

1.9x 1.8x 1.8x 1.7x

Q3 Q4 Q1 Q2 Q3 Q4 Q1

2008 2009 2010

CAPITAL SOURCES(IN MILLIONS) 3/31/2010

Cash &Equivalents

$3.8

SeniorTerm Loan@ 2.9%

Due2014

$140.4

RevolvingDebtFacility

Due2012

$40 .0unused

capacity

Leverage Ratios *

* Defined as the ratio of outstanding indebtedness to trailing pro-forma EBITDA as of March 31, 2010


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NYSE: DM

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Mark W.C. StodderExecutive Vice President


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21 markets 64 titles 104 web sites

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Circulation & Other

Public Notice

Display & ClassifiedBusiness Information:27% of total company

Q1 2010 revenues

Q1 2010 Q1 2009 y/y growth

Revenue $21.0m $21.9m -4.3%

Operating Income $5.3m $6.1m -13.4%

Operating Margin 25.4% 28.0%


$90.4m $90.5m -0.1%

$25.9m $21.6m 19.9%

28.7% 23.9%

FIRST QUARTER2010 BUSINESS INFORMATION REVENUE MIX

56% 18%

26%26%

18%56%

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Driving Future Investment

$48.4

$25.0

$41.5

2006 2007 2009

Y/Y Growth 32.3% 25.5% 16.8%

2008

$33.1

$11.3

Q1 09 Q1 10

Y/Y Growth 4.4%

Quarterly Public Notice Revenues ($ mm)

$11.8

Annual Public Notice Revenues ($ mm)

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High Barriers to Entry

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305 types of public notice

Qualified to carry publicnotice in 14 of 21 markets

90% retention rate

Strong synergies withmortgage default business

Postal Permit

Paid Circulationwithin Jurisdiction

Adjudication by

Public Body

Editorial Content

Uninterrupted Publicationfor 1-5 Years

Print Publication


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Online Opportunities


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Targeted, high-value

information

News breaking and

news making

Media agnostic

Journalistic excellence

High prices, high

renewal rates


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She is abrasive,unpleasant andpedantic. She makestrying a case amost unpleasantexperiencefor all counsel.


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Balanced revenues provide solid

platforms for growth

Economic recovery brings renewedadvertising growth opportunities

Above-average cash flow drivescontinued investments in new products,

new business models

Building for the Future

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NYSE: DM

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David A. TrottChairman & CEO, NDeX


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LawFirm

LawFirm

LawFirm

LawFirm

LawFirm

LawFirm

LawFirm

Fees paid by servicers to law firms benchmarkedby GSEs and government agencies:

Fannie Mae, Freddie Mac, FHA, VA

California


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$1.6b Market Opportunity(1)

1) Based on our estimated volume of mortgages in foreclosure and the average revenue we derived per f ile in 2009, which we believe would begenerally representative of rates charged for mortgage default processing services throughout the United States

2) Seasonally-adjusted total delinquent loans as a percentage of mortgages outstanding, according to the Mortgage Bankers Association3) Seriously delinquent loans (90+ days) as a percentage of mortgages outstanding by state, according to the Mortgage Bankers Association

> 100K 20K- 100K < 20K

4.70%4.95%

5.82%

7.88%

2005 2006 2007 2008 2009%

SeriouslyDelinquentLoans

Q1 2010

9.47%

10.06%

Seriously Delinquent Loans Q1 2010

Historical Delinquency Trends(2)

Seriously Delinquent Loans(3)

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Total Delinquency Rate (Seasonally Adjusted)

All loans except foreclosures

10.06% 94 b.p. from 9.12% in Q1 2009

Seriously Delinquent rate

90+ days delinquent

9.54% 230 b.p. from 7.24% in Q1 2009

Foreclosure Starts Rate

1.23% 14 b.p. from 1.37 % in Q1 2009

Foreclosure Inventory Rate

4.63% 78 b.p. from 3.85% in Q1 2009


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Q1 2010 Q1 2009 y/y growth

Revenue $42.4m $38.3m 10.8%


Operating Margin 25.3% 26.5%


$151.5m $84.6m 79.2%

$37.5m $21.1m 77.4%

24.7% 25.0%

$151.5

$24.7

$84.6

2006 2007 2009

Y/Y Growth 110.3% 62.9% 79.2%

2008

$51.9$38.3

Q1 09 Q1 10

NDeX: Annual Revenues ($ mm)

$42.4

NDeX: Quarterly Revenues ($ mm)

Y/Y Growth 10.8%


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0.00%

2.00%

4.00%6.00%

8.00%

10.00%

12.00%

National AverageNDeX States

Source: Total past due loans as a percentage of mortgages outstanding by state, according to the Mortgage Bankers Association


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More than half of all loans in foreclosure are in NDeX states(1)

#1

#2#3

#4

#7

#22

NDeX STATES

RANKINGS IN LOANS90+ DAYS PAST DUE(1)

1) Source: MBAs National Delinquency Survey for the quarter ended March 31, 2010

37

#17


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NDeX States with HighestForeclosure Start Volume (1)

1) Foreclosure starts and foreclosurestarts as a percentage of mortgages outstanding by state according to the MBAsNational Delinquency Survey for the quarter ended March 31, 2010

Foreclosure StartVolume (1)

< 10,000 10,000 -20,000

> 20,000

Foreclosure Starts by State: Q1 2010

1. Florida

2. California3. Texas

4. Georgia

7. Michigan

16. Indiana

19. Minnesota

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Home Affordability Modification Program (HAMP)

Home Affordability Foreclosure Program (HAFA)

Treasury Supplemental Directives

GSE Moratoriums

State Mediation Requirements

New Federal Eviction Law Political Pressures


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0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

Actual Loans Modified HAMP Goal

Established in 2009 Goal: Modify 4 million

loans by 2012

Loans permanently

modified through May,2010: 340,000

(1)

1/3 of participants havedropped out so far

Fitch Ratings estimate:up to 75% of HAMPmodifications will fail

340,000(1)

4,000,000

1) Source: U.S. Dept. of the Treasury


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0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,0003,500,000

Q105

Q305

Q106

Q306

Q107

Q307

Q108

Q308

Q109

Q309

Q110

90+ DaysDelinquent

ForeclosureStarts

1) Data according to the MBAs National Delinquency Surveyfor the quarter ended March 31, 2010


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EXPANDGEOGRAPHIC

FOOTPRINT

MANDATEDADDITIONAL

STEPS

PRICEINCREASES

MORE BUSINESS

FROM EXISTING

CLIENTS

TUCK-INACQUISITIONS

Five Ways to Win

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NYSE: DM

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James K. Wagner, CEODiscoverReady


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45* Source: Electronic Discovery Reference Model /2009 / v2.0 / edrm.net


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DiscoveryStrategy

TechnologyManagement

ProjectManagement

ReviewProfessionals

NO FORCED SOLUTIONS:CLIENT NEEDS DETERMINE DISCOVERYMIX


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Eliminates waste and improves quality over traditional

hourly billable model

Enables counsel to accurately budget for review

Increases productivity of both in-house and outside

counsel

Quality assurance built into price per document and

process

Increased efficiency reduces risk of sanctions, such as fines

and dismissals with prejudice

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FinancialServices

23%

Law Firms

27%Technology

23%

Healthcare 5%

Insurance

14%

Other8%

Chart is based on number of clients 50


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TechnologyNeutral

Constantlyevaluating

tools onmarket

Client-centeredsolutions

ThoughtLeadership

Industry-recognized

discoveryprofessionals

Dedicatedpractice groups

Experts indesigningprocesses

Innovation

PrivBank

TM

i-DecisionTM


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Fortune 1000 companies sensitive to cost

Rising litigation volume

Increased regulatory demands

Law firms losing control of review business

Market acceptance of automated review

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Currently

Socha-Gelbmann Survey: $4.67 billion

Long-Term

For every $1 spent on technology and

processing, $5 is spent on downstream review


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NYSE: DM

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$0

$50

$100

$150$200

$250

$300

$350

Millions

35.8% CAGR 1993-2009

* 2010 figure indicates mid-range of guidance provided in the earnings release dated February 23, 2010

Divestiture of

public records

division to

Reed ElsevierJuly 2003


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NYSE: DM

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