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Clayton Holdings Turns to Loss

Clayton Holdings, a provider of analytics, consulting and outsourced services for capital market firms, lending institutions, fixed-income investors and loan servicers, reported a net loss despite posting $500,000 in earnings from continuing operations in the second quarter.

But the company reported a net loss of $400,000, or $0.02 per diluted share, once discontinued operations are taken into account.

Clayton said its gross profit margin from continuing operations was 41.4%, up from 35.1% in the year-earlier period.

"As expected, the continuing turmoil in the subprime market significantly reduced our transaction management volumes and revenues in the quarter. Subprime securitization volumes have declined 42% from last year and our volumes declined similarly," said Frank Filipps, chairman and chief executive officer of Clayton, in a news release.

"Our gross profit margin, however, continued to be strong, reaffirming the effectiveness of our variable-cost business model and the shift in our revenue mix to higher margin products. We also had strong revenue growth in our surveillance business. We will continue to emphasize our recurring-revenue businesses, surveillance and special servicing. Finally, we are encouraged by the early results of our European acquisition. Existing Clayton clients have already given us new international assignments, and we hope to introduce surveillance offerings to U.K. and European investors by year-end."

Clayton said that centralized underwriting represented almost 50% of its due diligence business in the second quarter.

Clayton's MBS surveillance group was monitoring $465 billion of assets, primarily for investment banks and institutional investors. That was up 32% from a year earlier. (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.bondbuyer.com/ http://www.sourcemedia.com/

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