KLDiscovery Q2 2023 Earnings Call Transcript

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August 10, 2023

There are 3 speakers on the call.

Operator

You for standing by. My name is Enrique, and I will be your conference operator today. At this time, I would like to welcome everybody to the KLA Discovery Q2 2023 Financial Results Conference Call. All participants have been placed on mute to prevent any background noise. I would like now to turn the call over to Dawn Wilson, CFO.

Operator

Please go ahead.

Speaker 1

Thank you, operator. Welcome to KL Discovery's Q2 2023 conference call. Today's call contains forward looking statements. These statements are not guarantees of future performance. Actual results may differ materially from these forward looking statements due to assumptions, risks and uncertainties that are described in more detail in our earnings press release issued yesterday and filings with the SEC.

Speaker 1

KLA Discovery undertakes no obligation to amend, update or clarify these forward looking statements made as of today unless required by law. During this call, we will also present non GAAP financial measures such as EBITDA and adjusted EBITDA, which were not prepared in accordance with GAAP. Reconciliation to the most directly comparable GAAP measure to the non GAAP financial measures are shown in detail in our press release issued last night, along with definitions for those terms and a discussion of certain limitations. Management believes that our presentation of non GAAP Financial Measures provides useful supplemental information to investors regarding our results of operations. Our non GAAP financial measure I will now turn the call over to our CEO, Chris Wyler.

Speaker 2

Thanks, Dawn. Thanks for joining us today for KLA Discovery's 2nd quarter 2023 Financial Results Conference Call. My name is Chris Wyler, and I am the CEO and Co Founder of KLA Discovery. Our strong momentum continues as we had yet another outstanding quarter of financial results in Q2 2023 as the KLD team delivered amazing results. I am incredibly proud to lead and be surrounded by an incredible team of professionals from around the globe that have an amazing commitment to delivering excellent products and services to our global client base.

Speaker 2

Our 20 fourseven, 365 client service when combined with innovative tools such as client portal and our Nebula ecosystem are changing the way our clients can manage their data to legal matters, resulting in increased revenue and improved improving profitability. The combination is creating a clear unmatched competitive advantage for KLD. In the first half of twenty twenty three, We generated a record $181,000,000 of revenue. In the Q2, we delivered $90,000,000 of revenue, which is 20% increase compared to the Q2 of 2022. Our strong revenue momentum is also reflected in our bottom line.

Speaker 2

We reduced our net loss by 58% in the Q2 of 2023 compared to the Q2 of 2022. EBITDA for the same period increased 91%, while adjusted EBITDA increased 63%. As we move into the second half of twenty twenty three, it's hard for me to contain my excitement about the business. Our momentum, which began in our Q4 of 2022 has carried through the first half of this year and is a reflection of our successful execution of our strategic initiatives. I believe our strong performance is proof positive that KLD is evolving the client experience and creating practical, real world solutions that not only create incredible value for our clients, but help them gain greater levels of control, efficiency and quality.

Speaker 2

Our team's commitment to KLD's strategic vision is further evidenced with the increasing numbers of high value engagements such as regulatory investigations and cyber incident response. The Nebula ecosystem is solidifying itself as a platform of choice for our clients. Client adoption is growing at a tremendous rate and we currently use Nebula Processing for virtually every legal technology engagement worldwide. The Nebula Ecosystems already expansive library of technology enabled solutions will continue to grow as we pave the way for additional cutting edge AI that will put even more automation and efficiency in our clients' hands. Client portal is another solution we developed to disrupt the status quo of client engagement.

Speaker 2

We have spent years creating a highly integrated back office, including our one of a kind business process automation platform that was custom built for e discovery and our clients are now reaping the rewards. We believe client portal is the only offering available that gives users the level of real instant real time visibility into their portfolio matters and then it will only get better over time. As you may recall, we also launched our first of a kind franchise program in Q2. We are quickly working to complete the registration process in all key states and expect to ramp up marketing efforts in Q3. This program is an exciting and innovative opportunity for revenue and EBITDA growth that is garnering significant industry interest from qualified entrepreneurs and existing business owners.

Speaker 2

Across the board, we remain incredibly bullish and where KLD is heading with all of our proprietary technology and are excited to execute our strategic and engineering roadmaps to bring more innovation and a differentiated client experience in the market. We are in prime position to capitalize on the favorable industry tailwinds created by expanding data volumes and increased regulatory scrutiny and believe we are well equipped to continue forging our own path forward backed by the strength of our fully integrated back office, one of a kind technology in 24x7x365 customer service. I will now turn the call over to our CFO, Dawn Wilson.

Speaker 1

Thank you, Chris. Q2 2023 was another outstanding quarter as we continue to deliver strong financial results. We have $90 plus 1,000,000 in revenue each of the last two quarters and $20 plus 1,000,000 in adjusted EBITDA in the last three quarters. Our Q2 2023 revenue of $90,000,000 was the 2nd highest revenue quarter in our history with Q1 of 2023 being the highest. Revenue was up 20% compared to the $75,200,000 of revenue in the Q2 of 2022.

Speaker 1

Nebula generated $10,900,000 of revenue in the Q2 of 2023, up 40% compared to the Q2 of 2022. Our continued efforts Q2 2023 EBITDA was $18,500,000 compared to Q2 2022 EBITDA of 9,700,000 a 91% increase. As I mentioned earlier, we posted our 3rd consecutive quarter of adjusted EBITDA over $20,000,000 with Q2 2023 adjusted EBITDA of $20,100,000 compared to Q2 2022 adjusted EBITDA of 12,400,000 an increase of 63% year over year. Our liquidity remains strong as our cash and cash equivalents were $21,000,000 on June 30, 2023, and we have nothing drawn on our $40,000,000 revolving credit facility. In closing, we were very happy with our strong financial results and the great job our colleagues at KLD do every day.

Speaker 1

We will continue to be diligent, agile and build upon our strong foundation and momentum. I will now turn the call over to Chris for final comments. Chris?

Speaker 2

Thank you, Don, and thanks everyone for joining our call this morning and have a great rest of the summer.

Operator

This concludes our conference call. You may now disconnect.

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Earnings Conference Call
KLDiscovery Q2 2023
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