KLDiscovery Inc. Announces Second Quarter 2024 Financial Results
Nebula adoption accelerating with Nebula revenue up 29% quarter-over-quarter and 51% year-over- year
EBITDA1 for the second quarter of 2024 was
As announced on
“Our financial results have been solid through this period with consistent revenue in the first two quarters of 2024,” said
Weiler continued, “Last month, we reached a significant milestone with our capital partners that strengthens our balance sheet and will allow us to build upon our long history of excellent client service, which is the industry standard. In our never-ending quest for delivering innovation, later this year we will be adding further customization for Nebula in the regulatory and medical records area.”
2023-2024 Quarterly Results | ||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
2023 (unaudited) | 2024 (unaudited) | |||||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | |||||||||||||||||||
Revenue |
|
90.7 |
|
|
90.0 |
|
|
79.3 |
|
|
85.8 |
|
|
80.2 |
|
|
79.0 |
|
||||||
Net loss |
|
(4.5 |
) |
|
(4.7 |
) |
|
(11.4 |
) |
|
(14.3 |
) |
|
(16.9 |
) |
|
(25.3 |
) |
||||||
Net loss per share (basic and diluted) |
$ |
(0.11 |
) |
$ |
(0.11 |
) |
$ |
(0.26 |
) |
$ |
(0.33 |
) |
$ |
(0.39 |
) |
$ |
(0.58 |
) |
||||||
Weighted average outstanding shares (basic and diluted) |
|
42.9 |
|
|
43.0 |
|
|
43.1 |
|
|
43.1 |
|
|
43.1 |
|
|
43.3 |
|
||||||
EBITDA (Non-GAAP) |
|
18.2 |
|
|
18.5 |
|
|
13.9 |
|
|
12.0 |
|
|
7.4 |
|
|
(0.5 |
) |
||||||
Adjusted EBITDA (Non-GAAP) |
|
20.9 |
|
|
20.1 |
|
|
15.9 |
|
|
17.2 |
|
|
10.6 |
|
|
13.3 |
|
1 Non-GAAP measure. See “Non-GAAP Financial Measures” and “Reconciliation of Non-GAAP Financial Measures” below for additional information and a reconciliation to the most directly comparable GAAP measure.
Earnings Conference Call
Management will conduct a conference call at
To join the conference call by telephone, please register via the following link:
Once registered, you will receive an email with Direct Entry and Registrant ID along with dial-in details. An audio recording of the conference call will be available for replay shortly after the call's completion and will remain available for two weeks following the call. To access the recorded conference call, please dial (800) 770-2030 (from the
|
||||||||||||||||
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) | ||||||||||||||||
(in thousands, except share and per share amounts) | ||||||||||||||||
Three Months Ended |
Six Months Ended | |||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Revenues |
$ |
78,969 |
|
$ |
90,007 |
|
$ |
159,141 |
|
$ |
180,666 |
|
||||
Cost of revenues |
|
40,315 |
|
|
44,995 |
|
|
82,383 |
|
|
88,582 |
|
||||
Gross profit |
|
38,654 |
|
|
45,012 |
|
|
76,758 |
|
|
92,084 |
|
||||
Operating expenses | ||||||||||||||||
General and administrative |
|
27,487 |
|
|
14,599 |
|
|
45,650 |
|
|
31,900 |
|
||||
Research and development |
|
3,418 |
|
|
3,257 |
|
|
6,774 |
|
|
6,457 |
|
||||
Sales and marketing |
|
10,354 |
|
|
10,856 |
|
|
21,622 |
|
|
21,247 |
|
||||
Depreciation and amortization |
|
4,412 |
|
|
4,926 |
|
|
8,788 |
|
|
9,739 |
|
||||
Total operating expenses |
|
45,671 |
|
|
33,638 |
|
|
82,834 |
|
|
69,343 |
|
||||
(Loss) Income from operations |
|
(7,017 |
) |
|
11,374 |
|
|
(6,076 |
) |
|
22,741 |
|
||||
Other expenses | ||||||||||||||||
Change in fair value of Private Warrants |
|
(19 |
) |
|
(317 |
) |
|
13 |
|
|
(508 |
) |
||||
Interest expense |
|
17,750 |
|
|
16,192 |
|
|
35,258 |
|
|
31,962 |
|
||||
Loss before income taxes |
|
(24,740 |
) |
|
(4,498 |
) |
|
(41,323 |
) |
|
(8,711 |
) |
||||
Income tax provision |
|
560 |
|
|
182 |
|
|
856 |
|
|
477 |
|
||||
Net loss |
$ |
(25,300 |
) |
$ |
(4,680 |
) |
$ |
(42,179 |
) |
$ |
(9,188 |
) |
||||
Other comprehensive (loss) income, net of tax | ||||||||||||||||
Foreign currency translation |
|
(941 |
) |
|
(177 |
) |
|
(2,853 |
) |
|
648 |
|
||||
Total other comprehensive (loss) income, net of tax |
|
(941 |
) |
|
(177 |
) |
|
(2,853 |
) |
|
648 |
|
||||
Comprehensive loss |
$ |
(26,241 |
) |
$ |
(4,857 |
) |
$ |
(45,032 |
) |
$ |
(8,540 |
) |
||||
Net loss per share - basic and diluted |
$ |
(0.58 |
) |
$ |
(0.11 |
) |
$ |
(0.98 |
) |
$ |
(0.21 |
) |
||||
Weighted average shares outstanding - basic and diluted |
|
43,266,122 |
|
|
42,959,827 |
|
|
43,176,195 |
|
|
42,931,711 |
|
|
||||||||
Condensed Consolidated Balance Sheets | ||||||||
(in thousands, except share and per share data) | ||||||||
|
|
|||||||
(unaudited) | ||||||||
Current assets | ||||||||
Cash and cash equivalents |
$ |
33,804 |
|
$ |
15,351 |
|
||
Accounts receivable, net of allowance | ||||||||
for credit losses of |
|
92,718 |
|
|
101,257 |
|
||
Prepaid expenses |
|
19,346 |
|
|
15,787 |
|
||
Other current assets |
|
1,478 |
|
|
1,585 |
|
||
Total current assets |
|
147,346 |
|
|
133,980 |
|
||
Property and equipment | ||||||||
Computer software and hardware |
|
62,571 |
|
|
61,731 |
|
||
Leasehold improvements |
|
26,580 |
|
|
26,313 |
|
||
Furniture, fixtures and other equipment |
|
2,151 |
|
|
2,262 |
|
||
Accumulated depreciation |
|
(77,486 |
) |
|
(73,045 |
) |
||
Property and equipment, net |
|
13,816 |
|
|
17,261 |
|
||
Operating lease right of use assets, net |
|
8,398 |
|
|
10,078 |
|
||
Intangible assets, net |
|
38,092 |
|
|
39,729 |
|
||
|
|
393,916 |
|
|
396,283 |
|
||
Other assets |
|
7,213 |
|
|
8,262 |
|
||
Total assets |
$ |
608,781 |
|
$ |
605,593 |
|
||
Current liabilities | ||||||||
Current portion of long-term debt, net |
$ |
592,420 |
|
$ |
546,845 |
|
||
Accounts payable and accrued expense |
|
28,898 |
|
|
25,957 |
|
||
Operating lease liabilities |
|
4,708 |
|
|
5,906 |
|
||
Current portion of contingent consideration |
|
650 |
|
|
650 |
|
||
Deferred revenue |
|
3,905 |
|
|
3,181 |
|
||
Total current liabilities |
|
630,581 |
|
|
582,539 |
|
||
Deferred tax liabilities |
|
9,505 |
|
|
8,941 |
|
||
Long term operating lease liabilities |
|
6,158 |
|
|
7,870 |
|
||
Other liabilities |
|
1,918 |
|
|
2,176 |
|
||
Total liabilities |
|
648,162 |
|
|
601,526 |
|
||
Commitments and contingencies | ||||||||
Stockholders' equity | ||||||||
Common stock | ||||||||
|
|
4 |
|
|
4 |
|
||
Preferred Stock | ||||||||
|
|
— |
|
|
— |
|
||
Additional paid-in capital |
|
397,044 |
|
|
395,461 |
|
||
Accumulated deficit |
|
(436,133 |
) |
|
(393,954 |
) |
||
Accumulated other comprehensive income |
|
(296 |
) |
|
2,556 |
|
||
Total stockholders' equity |
|
(39,381 |
) |
|
4,067 |
|
||
Total liabilities and stockholders' equity |
$ |
608,781 |
|
$ |
605,593 |
|
Set forth below is a reconciliation of EBITDA and Adjusted EBITDA, which are non-GAAP measures, to net (loss), the most directly comparable GAAP measure. See “Non-GAAP Financial Measures” below for additional information on these measures, including why we believe they are useful to investors and certain limitations thereof.
|
||||||||||||||||
Reconciliation of Non-GAAP Financial Matters | ||||||||||||||||
(In thousands) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Net loss |
$ |
(25,300 |
) |
$ |
(4,680 |
) |
$ |
(42,179 |
) |
$ |
(9,188 |
) |
||||
Interest expense |
|
17,750 |
|
|
16,192 |
|
|
35,258 |
|
|
31,962 |
|
||||
Income tax provision |
|
560 |
|
|
182 |
|
|
856 |
|
|
477 |
|
||||
Depreciation and amortization expense |
|
6,525 |
|
|
6,766 |
|
|
12,979 |
|
|
13,375 |
|
||||
EBITDA |
$ |
(465 |
) |
$ |
18,460 |
|
$ |
6,914 |
|
$ |
36,626 |
|
||||
Acquisition, financing and transaction costs |
|
13,000 |
|
|
353 |
|
|
15,480 |
|
|
2,115 |
|
||||
Stock compensation and other |
|
767 |
|
|
877 |
|
|
1,514 |
|
|
1,710 |
|
||||
Change in fair value of Private Warrants |
|
(19 |
) |
|
(317 |
) |
|
13 |
|
|
(508 |
) |
||||
Restructuring costs |
|
13 |
|
|
556 |
|
|
(85 |
) |
|
719 |
|
||||
Systems establishment costs |
|
— |
|
|
158 |
|
|
— |
|
|
338 |
|
||||
Adjusted EBITDA |
$ |
13,296 |
|
$ |
20,087 |
|
$ |
23,836 |
|
$ |
41,000 |
|
Note:
- Acquisition, financing and transaction costs generally represent earn-out payments, rating agency fees and letter of credit and revolving facility fees, as well as professional service fees and direct expenses related to acquisitions and public offerings and cost associated with reviewing potential alternative sources for cash or financing related to our debt maturities.
- Stock compensation and other primarily represents portions of compensation paid to our employees and executives through stock-based instruments.
-
Change in fair value of Private Warrants relates to changes in the fair market value of the Private Warrants issued in conjunction with the
December 2019 business combination. - Restructuring costs generally represent non-ordinary course costs incurred in connection with a change in a contract or a change in the makeup of our personnel often related to an acquisition, such as severance payments, recruiting fees and retention charges.
- Systems establishment costs relate to non-ordinary course expenses incurred to develop our IT infrastructure, including system automation and enterprise resource planning system implementation.
|
||||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) | ||||||||
(in thousands) | ||||||||
Six Months Ended |
Six Months Ended |
|||||||
Operating activities | ||||||||
Net loss |
$ |
(42,179 |
) |
$ |
(9,188 |
) |
||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization |
|
12,979 |
|
|
13,374 |
|
||
Paid in kind interest |
|
12,297 |
|
|
10,416 |
|
||
Stock-based compensation |
|
1,515 |
|
|
1,709 |
|
||
Provision for losses on accounts receivable |
|
1,887 |
|
|
1,571 |
|
||
Deferred income taxes |
|
568 |
|
|
98 |
|
||
Change in fair value of Private Warrants |
|
13 |
|
|
(508 |
) |
||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable |
|
6,403 |
|
|
(13,374 |
) |
||
Prepaid expenses and other assets |
|
(1,985 |
) |
|
(6,189 |
) |
||
Accounts payable and accrued expenses |
|
(3,204 |
) |
|
593 |
|
||
Deferred revenue |
|
747 |
|
|
(1,528 |
) |
||
Net cash used in operating activities |
|
(10,959 |
) |
|
(3,026 |
) |
||
Investing activities | ||||||||
Purchases of property and equipment |
|
(6,651 |
) |
|
(6,106 |
) |
||
Net cash used in investing activities |
|
(6,651 |
) |
|
(6,106 |
) |
||
Financing activities | ||||||||
Revolving credit facility draws |
|
38,000 |
|
|
— |
|
||
Payments for capital lease obligations |
|
— |
|
|
(1,272 |
) |
||
Payments on long-term debt |
|
(1,500 |
) |
|
(1,500 |
) |
||
Net cash provided by (used in) financing activities |
|
36,500 |
|
|
(2,772 |
) |
||
Effect of foreign exchange rates |
|
(437 |
) |
|
170 |
|
||
Net increase (decrease) in cash |
|
18,453 |
|
|
(11,734 |
) |
||
Cash at beginning of period |
|
15,351 |
|
|
32,629 |
|
||
Cash at end of period |
$ |
33,804 |
|
$ |
20,895 |
|
||
Supplemental disclosure: | ||||||||
Cash paid for interest |
$ |
23,285 |
|
$ |
21,912 |
|
||
Net income taxes paid |
$ |
866 |
|
$ |
536 |
|
||
Significant noncash investing and financing activities | ||||||||
Purchases of property and equipment in accounts payable and accrued expenses on the condensed consolidated balance sheets |
$ |
158 |
|
$ |
212 |
|
About
This press release includes “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934 and the United States Private Securities Litigation Reform Act of 1995. All statements contained in this press release other than statements of historical facts, including, without limitation, statements regarding the benefits of KLDiscovery’s products and Client Portal for its clients and the benefits of the Company’s agreement in principle with its principal debenture holders and principal term loan lender are forward-looking statements. When used in this press release, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements.
These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside KLDiscovery’s management’s control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Important factors, among others, that may affect actual results or outcomes include: consequences of KLDiscovery’s substantial levels of indebtedness, including the pending maturity and potential acceleration thereof in
These risks and other factors discussed in the “Risk Factors” section of KLDiscovery’s Annual Report on Form 10-K and Quarterly Report on Form 10-Q filed with the
Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. All statements speak only as of the date made, and unless legally required,
Non-GAAP Financial Measures
We prepare financial statements in accordance with
Our management believes EBITDA and Adjusted EBITDA reflect our ongoing operating performance because the isolation of non-cash charges, such as amortization and depreciation, and other items, such as interest, income taxes, equity compensation, acquisition and transaction costs, restructuring costs, systems establishment and costs associated with strategic initiatives which are incurred outside the ordinary course of our business, provides information about our cost structure and helps us to track our operating progress. We encourage investors and potential investors to carefully review our
EBITDA and Adjusted EBITDA
We define EBITDA as net income (loss) plus interest (income) expense, income tax expense (benefit), extinguishment of debt, impairment losses, and depreciation and amortization. We view adjusted EBITDA as an operating performance measure and as such, we believe that the most directly comparable
- Acquisition, financing and transaction costs generally represent earn-out payments, rating agency fees and letter of credit and revolving facility fees, as well as professional service fees and direct expenses related to acquisitions and public offerings and cost associated with reviewing potential alternative sources for cash or financing related to our debt maturities.
- Because we do not acquire businesses or effect financings on a regular or predictable cycle, we do not consider the amount of these costs to be a representative component of the day-to-day operating performance of our business.
- Stock compensation and other primarily represent portions of compensation paid to our employees and executives through stock-based instruments. Determining the fair value of the stock-based instruments involves a high degree of judgment and estimation and the expenses recorded may not align with the actual value realized upon the future exercise or termination of the related stock-based awards. Additionally, stock compensation is a non-cash expense. Therefore, we believe it is useful to exclude stock-based compensation to better understand the long-term performance of our core business.
- Change in fair value of Private Warrants relates to changes in the fair market value of the Private Warrants issued in conjunction with the Business Combination. We do not consider the amount to be representative of a component of the day-to-day operating performance of our business.
- Restructuring costs generally represent non-ordinary course costs incurred in connection with a change in a contract or a change in the makeup of our personnel often related to an acquisition, such as severance payments, recruiting fees and retention charges. We do not consider the amount of restructuring costs to be a representative component of the day-to-day operating performance of our business.
- Systems establishment costs relate to non-ordinary course expenses incurred to develop our IT infrastructure, including system automation and enterprise resource planning system implementation. We do not consider the amount to be representative of a component of the day-to-day operating performance of our business.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240807045874/en/
Investor Contact:
(703) 520-1498
dawn.wilson@kldiscovery.com
Media Contact:
(888) 811-3789
danny.zambito@kldiscovery.com
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