Q4 2021 KLDiscovery Inc Earnings Call

Good morning, My name is Chris and I'll be your conference operator today at this time I'd like to welcome everyone to the KL Discovery Q4, 2021 financial results conference call.

All lines have been placed on mute to prevent any background noise.

Don Wilson, Chief Financial Officer, you May begin.

Thank you operator, welcome to KL discoveries Q4, and full year 2021 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 deep.

Our earnings press release issued yesterday and filings with the SEC.

Hey, Al Discovery undertakes no obligation to amend update or clarify these forward looking statements made as of today.

During this call. We will also present non-GAAP financial measures, which were not prepared in accordance with GAAP.

Reconciliation to the most directly comparable GAAP measure to the non-GAAP financial measures discussed on this call, including EBITDA and adjusted EBITDA are shown in detail in our press release issued last night, along with definitions for those terms.

Matt believes that our presentation of non-GAAP financial measures provide useful supplemental information to investors regarding our results of operations. Our non-GAAP financial measures should only be considered in addition to and not as a substitute for or superior to any GAAP measure. Please refer to our press release on how to access the replay of this.

Carl I will now turn the call over to our CEO , Chris Weiler.

Thanks, Todd and thank you very much for joining tail discovery's fourth quarter in.

And full year 2021 financial results conference call.

My name is Chris Wilder, and I'm, the CEO and co founder of KL discovery. Thank you all for joining.

We had an exceptional year in 2021, as we continue to deliver strong results.

And build momentum in all areas of our business.

The <unk> team has done an amazing job of staying focused.

Working hard and delivering tremendous results despite the challenging macro environment.

It is an honor leading this amazing organization every day.

<unk>, we have been focusing on what we can control and the results demonstrate that both financially and from a business perspective.

I am so proud of the fact that we arent established and trusted partner for over 5400 clients around the world, including many large blue chip customers.

We achieved our highest revenue quarter in our company history with $83 million.

This is up 10% year over year and for the third quarter row, we have exceeded $80 million of revenue demonstrating our consistency in difficult times.

We grew nebula Rev.

Revenue to $26 million in 2021, an increase of 38% versus 2020.

This is particularly impressive since many of the nebula product features.

Only became available late in the year.

Just two years, we have grown the number of terabyte close to a nebula from 43 to 240 at the end of 2021.

In 2021, we increased our investment in our people.

And our technology focused on Nebula, we are excited about the initial adoption of the nebula platform experience for 2021 and two.

Land to increase our investment in 2022 to further accelerate growth.

Nebulous sales and overall usage.

We have a winner in this transformative platform and have very high hopes for nebula in 2022 and beyond.

Even with increased investment our net loss improved by 25% year over year and is down over 50% from the first quarter of 2021 to.

To the lowest level, we've seen since 2018.

We also generated higher adjusted EBITDA in 2021 compared to 2020.

Our cash position and liquidity continue to be strong as we ended 2021.

$46 million in cash and cash equivalents.

We remain undrawn on our $40 million revolving credit facility.

In the future.

We intend to access the equity markets.

Help us grow even more obviously market conditions are not conducive for a capital raise at this time, but.

But we will continue to look for an appropriate time to go to market.

Late last year, we filed an S. One for potential share offering.

I encourage you to read it because it contains an excellent overview of our business.

What you will find is that <unk> had so much going forward, we already have global scale and a large customer.

Real customer base. This means there is a significant opportunity to cross sell nebula.

Even before expanding our relationships with our customers the market opportunity is very large and continues to grow as data increases exponentially.

We have exceptional proprietary technology and our powerful end to end solution with nebula.

We are client centric and can deliver our product and services wherever and however, our clients what.

Through nebulous singularity, one price covers all delivery models, making it extremely easy for clients to capitalize on our usage based model.

Importantly, our clients are just thrilled as we are which is evidenced by nebulous tremendous growth.

I couldnt be more excited about what we've accomplished so far we will continue to focus on growing this great company.

We have demonstrated that we can deliver strong consistent financial results by pioneering transport transformational shifts in legal technology since our inception in 2005, we are excellently positioned for long term growth and profitability and we will build upon the great momentum we have already achieved.

I'll now turn the call over to our CFO Don Wilson.

Thank you Chris.

As Chris said 2021 was an exceptional year for KL discovery revenue in the fourth quarter of 2021 was $82 3 million up 10% compared to the fourth quarter of 2020. This is the highest year of revenue in our company history for the full year 2021, we generated 320.

$5 million versus $289 5 million in 2020, which represents an 11% increase.

For the full year, our nebula ecosystem revenue grew 38% to $25 9 million in 'twenty, one versus $18 8 million in 2020, we are seeing excellent traction from this proprietary platform that we believe will be a significant contributor to revenue in the future.

As a result, we made responsible investments in research and development to support the revenue growth of Nebula, and we expect to continue to invest in 2022, and R&D and sales and marketing to further accelerate future Nebula revenues. This investment and Nebula in 2022 will result in declines in our EBITDA.

Margins in 2022 in favor of longer term accelerated growth in the future.

In the fourth quarter of 2021, we significantly decreased our net loss to $7 3 million an improvement of 25% compared to the fourth quarter of 2020. This is our lowest net loss since 2018.

For the full year 2021, our net loss was $60 5 million, which includes a $22 5 million charge for an impairment of an intangible asset in the third quarter.

<unk> did not impact EBITDA or adjusted EBITDA.

EBITDA in the fourth quarter of 2021 was $13 8 million down slightly from Q4 2020, EBITDA of $14 3 million. Our EBITDA margin was 17% in Q4, 'twenty, one compared to 19% in Q4 'twenty for the full year 2021, EBITDA was $57 2 million compared to.

$49 4 million in 2020, an increase of 15, 8%.

Q4, 2021, adjusted EBITDA was $15 3 million down from Q4 2020, due primarily due to the 2021 restoration of temporary COVID-19 reductions implemented in 2020 as well as differences in mix of revenue quarter over quarter for the full year 2021, adjusted EBITDA was 64.

$5 2 million up from $63 3 million in 2020.

Liquidity continues to be strong as our cash and cash equivalents was $46 5 million on December 31, 2021, and we have nothing drawn on our $40 million revolving credit facility.

In closing over the past two years since the beginning of the pandemic, we have been managing our expenses, while investing in R&D to position <unk> for the future. We have been able to do so while increasing revenue lowering net loss and delivering growth in EBITDA and adjusted EBITDA.

We'll continue to invest in R&D and sales and marketing in 2022, resulting in short term declines in adjusted EBITDA in favor of longer term accelerated growth.

I will now turn the call over to Chris for final comments.

Just want to thank everybody for joining I appreciate I appreciate that Don.

<unk>.

It's really fantastical lead such a great group of people globally.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.

Please wait the conference will begin shortly.

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