KLDiscovery Inc. Q1 2023 Earnings Call
Please wait the conference will begin shortly.
[music].
Ladies and gentlemen, good morning, My name is Abby and I will be your conference operator today.
At this time I would like to welcome everyone to be killed discovery first quarter 2023 financial results Conference call.
Today's conference is being recorded in all lines have been placed on mute to prevent any background noise.
Thank you and I will now turn the conference over to John Welch Chief Financial Officer, you may begin.
Thank you operator.
Welcome to KL discoveries Q1, 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.
Ill 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 in 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 a 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 call I will now turn the call over to our CEO Chris Wheeler.
Thanks, Don and thanks for joining us today for Kale Discovery's first quarter.
2023 financial results Conference call. My name is Chris Weiler, and I am the CEO and cofounder of <unk> discovery.
In March we reported outstanding Q4, 2022 results and we knew that Q1 was off to a great start.
I'm now proud to report that Q1 2023.
Okay.
Okay.
Please standby as we recouped our speaker.
Okay.
Okay.
Yes.
And we have Mr. Wyler reconnected.
Apologies I'm now proud to report that Q1 2023.
It was yet another record quarter for K L. D. As the team continues to deliver stellar results.
<unk> continues to build an incredible culture of hardworking dedicated global professionals committed to excellence. We are also executing on our multifaceted strategic plan and consistently achieving our quarterly strategic goals across all departments.
The working capital required to integrate our global corporate business systems develop client portal and constantly improve our nebuly ecosystem is paying off and we have begun the year is 2022 ended with great momentum and improvement in revenue and adjusted EBITDA.
In the first quarter of 2023, we delivered the highest revenue quarter in company history with $90 7 million, which is an 11% increase over our revenue from the first quarter of 2022, and a 6% increase over our previous record quarter Q4 2022.
Our strong revenue momentum is also reflected in our bottom line, our net loss in the first quarter of 2023.
Was also a record low as we reduced our net loss to $4 5 million. This is a 53% improvement year over year.
Our Q1, 2023 EBITDA of $18 2 million.
It was in line sequentially with the fourth quarter of 2022 and was up 61% compared to the first quarter of 2022 adjusted.
Adjusted EBITDA of $20 9 million in the first quarter of 2023 represents a 49% increase year over year for Q1 2023 versus Q1 2022 is another all time high for the company and marks the second quarter in a row with adjusted EBITDA greater than 20 million.
<unk>.
Our Q1 2023, adjusted EBITDA margin of 23% is also a 34% improvement over Q1 2022.
While these incredible results speak for themselves I'm equally pleased with the strength of our earnings and sales pipeline.
90% of KL. These revenue comes from our legal technology business on a reoccurring usage based model.
We are a trusted partner to many large blue chip clients with an average tenure of 15 years within our top 25 clients and we have quickly become <unk>.
A household name in the industry with the Sterling track record of successfully handling the largest and most complex it matters such as regulatory and cyber incident response engagements.
Customer feedback gathered by independent third party shows a very high level of satisfaction.
Which is a positive reflection of the efforts our team puts forth daily to Wow our clients.
Okay.
Our document review business continues to perform exceptionally well with Q1 2023 results up 17% over Q1 2022 scale continues to build upon its strong reputation for excellent performance.
During high value engagement, we expect our differentiated technology enabled review offerings remain a cornerstone of our value proposition, we are well positioned to win new market share as well as grow our existing relationships through repeat business fueled by service excellence quality execution and technological strength.
Speaking of K L. D technology I continue to be very excited about <unk> fully integrated end to end E Discovery review solutions.
Nebulous already.
Ali valued by our clients.
As it offers a streamlined practical platform to meet <unk> needs without adding complexity, we are aggressively enhancing that value proposition as we execute our strategic development roadmap and continue to adding features that allows nebula to become the solution of choice for large and complex matters.
Adoption rates and growth potential are evidenced with nebulous financial results for the second quarter in a row, we achieved our highest revenue quarter for nebula with revenue up 34% compared to Q1 of 2022.
Our client portal has also been an absolute success for our clients are.
Our clients can access critical case in financial metrics across the Edr and including up to date reporting under current period working progress spending and overall project to date cost relative to budget. We are very close to making client portal available to our European clients, and we will be adding new and valuable feature is each quarter as we.
Look to position this as an indispensable case and portfolio management tool for our clients.
This type of holistic business intelligence platform truly has a unicorn in this industry and as a result of millions of dollars of investment in our corporate business systems integration as well as years of operational and project management systems integration and process development in.
In addition to being the backbone to our client portal <unk> advanced corporate business systems are also a key component to our recently announced franchise programs.
For anyone who hasn't seen that announcement, yet Pld's franchise program makes our business model and proprietary technology stack available to entrepreneur and Ediscovery space.
The global Ediscovery industry is still extremely fragmented with large opportunities for companies like <unk> to increase market share.
E Discovery has always been an attractive market for serial entrepreneur and we believe <unk> is the perfect incubator for not only season business centers, but also the next generation of entrepreneurs, who are ready to take the next steps and invest in themselves.
We also believe that many existing boutique organizations such as computer forensic.
Cyber incident response and language translation businesses run across numerous E discovery opportunities each year and half to turn down these projects due to lack of business systems to handle E discovery and expertise required to complete these projects in house.
Okay. All these franchise programs. These companies are immediately prepare to handle their clients work through one of the largest and most respected E discovery companies in the world.
This bold new Avenue for revenue growth is a unique opportunity for <unk> to capture a larger portion of our fragmented industry and adds yet another growth lever to already dynamic path of revenue and earnings growth.
We are clearly developed a key competitive advantage.
Over other providers by developing our fully integrated and comprehensive proprietary technology, providing world class 20, $473 65 client service and technical support for large complex cases and.
And by creating a brand new revenue opportunities via our franchise program.
As more clients adopt nebula across the globe.
And we continue to grow our proprietary technology advantage for strategic investments, we expect to Opportunistically seized every opportunity for revenue and margin growth in the areas of technology sales client portal adoption cyber incident response, and regulatory services at our recently announced franchise program.
<unk> moves into Q2 momentum is in our favor as we continue to execute our strategic plan to strengthen the company I believe that as the economy recovers, we will be in a greater position to continue to grow profitably invest further in the business and remain committed to customer excellence.
I will now turn the call over to our CFO Don Wilson.
Thank you Chris.
As Chris mentioned Q1, 2023 was an outstanding quarter as we achieved excellent top line and profit margin results and continued the momentum from our strong Q4 2022 corner.
First quarter 2023 revenue of $90 7 million was the highest revenue in our history and was up 11% compared to the $81 9 million revenue of the first quarter of 2022.
<unk> generated $8 2 million in the first quarter of 2023 up 34% compared to the first quarter of 2022.
We have continued to seek operating efficiencies focused on reducing costs and improving our profitability and we are seeing the results of several years of hard work.
Q1, 2023 net loss of $4 5 million was up 53% improvement from Q1 2022 net loss of $9 6 million Q1, 2023, EBITDA was $18 2 million compared to Q1 2022, EBITDA of $11 3 million a 61.
1% increase.
We posted our second consecutive quarter of adjusted EBITDA over $20 million with Q1 2023, adjusted EBITDA of $20 9 million compared to Q1 2022, adjusted EBITDA of 14.1 90 <unk>.
Increase of 49% year over year Q1, 2023, adjusted EBITDA is the highest in our history.
As Chris mentioned, we are excited about our recently announced new franchise program. We are still in the nascent stages of operating this opportunity to entrepreneurs in the Ediscovery space.
And we'll keep you posted as we have further developments.
Liquidity is strong as our cash and cash equivalents were $26 3 million on March 31, 2023, and we have nothing drawn on our $40 million revolving credit facility.
In closing the momentum we saw in 2022 continued into 2023 as we started the year with outstanding financial results with all time high quarterly revenue and adjusted EBITDA combined with a significant reduction in net loss because the macro environment is still uncertain. We are continuing to not provide guidance for 2023.
At this time.
We are thrilled with our strong financial results, which reflect years of cost cutting efforts innovation and strategic investments, we will continue to be diligent and agile and build upon our strong foundation.
I'll now turn the call back over to Chris for final comments.
Thanks, Don and thanks, everyone for joining us this morning for our conference call and I'd like to thank the.
<unk> global family for everything that you do.
Second to none.
Fantastic group and really appreciate all the efforts that you've put forth every day.
<unk> unique fingerprint and we'll be talking with you soon thanks.
Ladies and gentlemen, this concludes today's conference call and we thank you for your participation you may now disconnect.
Please wait the conference will begin shortly.
Yes.
Sure.
[music].
Okay.
Yes.
[music].
Okay.
Okay.
Okay.
Yes.
Okay.
Yes.
Yes.
Okay.
[music].
Okay.
Okay.
Yes.
[music].
Yes.
Okay.
Yes.
Okay.
Okay.
Yeah.
[music].
Yes.
Yes.
Okay.
Yes.
[music].
Yes.
Sure.
Okay.
Thanks.
Yeah.
Okay.
[music].
[music].
Yes.