Revenue, Net Loss, EBITDA Improve Compared to Third Quarter 2020
MCLEAN, Va.–(BUSINESS WIRE)–KLDiscovery Inc. (“KLDiscovery” or the “Company”), a leading global provider of electronic discovery, information governance and data recovery services, announced today that revenue for the fourth quarter ended December 31, 2020 was $74.6 million versus $72.3 million in the third quarter of 2020, a 3% increase quarter-over-quarter and a decrease of 7% year-over-year compared to the fourth quarter 2019. Net loss for the fourth quarter of 2020 was $9.8 million compared to $12.7 million in the third quarter of 2020, an improvement of 23% quarter-over-quarter and an improvement of 45% compared to the fourth quarter 2019 net loss of $17.8 million.
EBITDA for the fourth quarter of 2020 was $14.3 million versus $12.3 million in the third quarter of 2020, an increase of 16% quarter-over-quarter and was similar to the $14.4 million in the fourth quarter of 2019. Adjusted EBITDA (which excludes management fees and stock-based compensation, acquisition financing and transaction costs and other items as described below) for the fourth quarter of 2020 was $19.4 million compared to $16.7 million in the third quarter of 2020, an increase of 16% quarter-over-quarter and 13% compared to the fourth quarter of 2019. Reconciliations of EBITDA and Adjusted EBITDA to their comparable GAAP measure are shown in detail below, along with definitions for those terms.
“2020 was an extraordinary year of change and challenges but I am very proud of the accomplishments of the team at KLDiscovery as their efforts and dedication resulted in an excellent fourth quarter,” said Christopher Weiler, CEO of KLDiscovery Inc. “We achieved outstanding improvement in our financial results in the fourth quarter of 2020 compared to the second quarter of 2020 when the COVID-19 pandemic severely impacted the economy. We have done an excellent job managing costs while growing revenue. In Q4 2020 compared to Q2 2020, revenue increased 16%, net loss improved 34%, EBITDA was up 37%, and Adjusted EBITDA increased 59%. We achieved our highest Adjusted EBITDA in six quarters. We ended 2020 with $51.2 million in cash and cash equivalents on our balance sheet and a 579% increase in cash flow from operations compared to 2019 due to continued high cash receipts, cost reductions and tax deferral and credits. All of these improvements came as we implemented permanent cost savings with our data recovery integration and real estate footprint reduction while still investing in technology and research & development.”
Mr. Weiler continued, “We are in the process of evolving KLDiscovery into a company that will service industries beyond the confines of traditional eDiscovery and data recovery. In 2021, we are in the process of making significant technology investments that will change the way our customers interact with our products and services. We are investing to further develop our Nebula platform, which we believe is industry-changing and continues to gain customers and terabytes hosted. Our clients are being driven to cloud-only based hosting solutions, while our competitors use third-party applications exclusively for collections, data processing, data hosting, advanced analytics and natural language processing. We believe we will be the company that can deliver outstanding customer service while providing our best of class hosting platform through a number of different delivery vehicles intentionally designed to meet diverse geographic and data control needs. We are on a client-centric mission seamlessly delivering a full suite of proprietary software/hardware products and services in a bespoke manner built for and by our clients, wherever and however the client desires. I believe these changes will give our customers unprecedented levels of optionality in how they manage their data and truly differentiate our company while significantly expanding our total addressable market.”
| Year 2019-2020 Quarterly Results – Unaudited | ||||||||||||||||||
| 2019 (unaudited) | 2020 (unaudited) | |||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | |||||||||||
| Revenue |
75.0 |
78.3 |
78.2 |
80.5 |
78.3 |
64.4 |
72.3 |
74.6 |
||||||||||
| Net loss |
(13.5) |
(11.4) |
(11.3) |
(17.8) |
(12.5) |
(14.9) |
(12.7) |
(9.8) |
||||||||||
| Net loss per share (basic and diluted) |
$ (0.32) |
$ (0.27) |
$ (0.26) |
$ (0.42) |
$ (0.29) |
$ (0.35) |
$ (0.30) |
$ (0.23) |
||||||||||
| Weighted average outstanding shares (basic and diluted) |
42.3 |
42.4 |
42.5 |
42.5 |
42.5 |
42.5 |
42.5 |
42.5 |
||||||||||
| EBITDA |
11.2 |
13.7 |
13.4 |
14.4 |
12.5 |
10.4 |
12.3 |
14.3 |
||||||||||
| Adjusted EBITDA |
15.1 |
19.6 |
16.8 |
17.2 |
15.0 |
12.2 |
16.7 |
19.4 |
||||||||||
| (in millions except per share data) | ||||||||||||||||||
2021 Outlook
As previously announced, KLDiscovery is currently limited in its ability to accurately predict what the financial impact will be from the COVID-19 pandemic. KLDiscovery is not providing full-year 2021 guidance until it gains additional data points about the total operational impact of this global pandemic.
Earnings Conference Call
Management will conduct a conference call at 8:30 AM ET on Thursday, March 18, 2021 to discuss results for the fourth quarter of 2020. The audio portion of the conference call will be broadcast live over the Internet in the Investors section of KLDiscovery’s website https://investors.kldiscovery.com.
To join the conference call by telephone, please register via the following link:
http://www.directeventreg.com/registration/event/3093296
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) 585-8367 (from the U.S. and Canada) or (416) 621-4642 (from all other countries) using access code 3093296 or visit the Investors section of the KLDiscovery website at https://investors.kldiscovery.com.
| KLDiscovery Inc. | |||||||||
| Consolidated Statements of Comprehensive Loss | |||||||||
| (in thousands, except share and per share amounts) | |||||||||
| Three Months Ended December 31, | Year Ended December 31, | ||||||||
|
2020 |
2019 |
2020 |
2019 |
||||||
| (unaudited) | (unaudited) | ||||||||
| Revenues |
$ 74,592 |
$ 80,527 |
$ 289,545 |
$ 312,054 |
|||||
| Cost of revenues |
36,260 |
41,908 |
147,732 |
160,845 |
|||||
| Gross profit |
38,332 |
38,619 |
141,813 |
151,209 |
|||||
| Operating expenses | |||||||||
| General and administrative |
15,975 |
13,126 |
58,509 |
55,005 |
|||||
| Research and development |
2,033 |
1,490 |
7,167 |
5,945 |
|||||
| Sales and marketing |
8,935 |
12,305 |
38,395 |
48,517 |
|||||
| Depreciation and amortization |
8,820 |
9,906 |
35,955 |
39,149 |
|||||
| Total operating expenses |
35,763 |
36,827 |
140,026 |
148,616 |
|||||
| Income from operations |
2,569 |
1,792 |
1,787 |
2,593 |
|||||
| Other expenses | |||||||||
| Other expense |
16 |
7,389 |
118 |
7,511 |
|||||
| Interest expense |
12,356 |
11,890 |
50,659 |
48,377 |
|||||
| Loss before income taxes |
(9,803) |
(17,487) |
(48,990) |
(53,295) |
|||||
| Income tax benefit (provision) |
(28) |
328 |
936 |
719 |
|||||
| Net loss |
$ (9,775) |
$ (17,815) |
$ (49,926) |
$ (54,014) |
|||||
| Other comprehensive income, net of tax | |||||||||
| Foreign currency translation |
4,400 |
2,604 |
4,947 |
311 |
|||||
| Total other comprehensive income, net of tax |
4,400 |
2,604 |
4,947 |
311 |
|||||
| Comprehensive loss |
$ (5,375) |
$ (15,211) |
$ (44,979) |
$ (53,703) |
|||||
| Net loss per share – basic and diluted |
$ (0.23) |
$ (0.42) |
$ (1.17) |
$ (1.27) |
|||||
| Weighted average shares outstanding – basic and diluted |
42,529,017 |
40,835,186 |
42,529,017 |
42,425,295 |
|||||
| Reconciliation of Non-GAAP Financial Matters | |||||||||
| (In thousands) | |||||||||
| (Unaudited) | |||||||||
| Three Months Ended December 31, | For The Year Ended December 31, | ||||||||
|
2020 |
2019 |
2020 |
2019 |
||||||
| Net loss |
$ (9,774) |
$ (17,815) |
$ (49,926) |
$ (54,014) |
|||||
| Interest expense |
12,356 |
11,890 |
50,659 |
48,377 |
|||||
| Income tax (benefit) expense |
(28) |
328 |
936 |
719 |
|||||
| Depreciation and amortization expense |
11,698 |
12,793 |
47,761 |
50,407 |
|||||
| Loss on debt extinguishment |
— |
7,203 |
— |
7,203 |
|||||
| EBITDA |
$ 14,252 |
$ 14,399 |
$ 49,430 |
$ 52,692 |
|||||
| Acquisition, financing and transaction costs |
3,629 |
121 |
5,210 |
3,626 |
|||||
| Strategic Initiatives: | |||||||||
| Sign-on bonus amortization |
— |
113 |
188 |
413 |
|||||
| Non-recoverable draw |
— |
840 |
304 |
3,714 |
|||||
| Total strategic initiatives |
— |
953 |
492 |
4,127 |
|||||
| Management fees, stock compensation and other |
933 |
671 |
3,658 |
3,515 |
|||||
| Restructuring costs |
231 |
573 |
2,530 |
2,209 |
|||||
| Systems establishment |
403 |
443 |
1,969 |
2,554 |
|||||
| Adjusted EBITDA |
$ 19,448 |
$ 17,160 |
$ 63,289 |
$ 68,723 |
|||||
Note:
- Acquisition, financing and transaction costs include earnout payments, rating agency, letter of credit and revolving facility fees, and transaction costs relating to the business combination with Pivotal Acquisition Corp in December 2019
- Strategic initiatives include the amortization of one-time expenses related to the hiring of a team of sales personnel.
- Management fees, stock compensation & other includes consulting fees, expenses related to the Company’s stock compensation plan, business insurance and other expenses.
- Restructuring costs include severance payments, recruiting fees and retention charges
Systems establishment costs include expenses related to IT infrastructure build-out, system automation and ERP implementation
| KLDiscovery Inc. | ||||
| Consolidated Balance Sheets | ||||
| (in thousands, except share and per share data) | ||||
| December 31, 2020 | December 31, 2019 | |||
| Current assets | ||||
| Cash and cash equivalents |
$ 51,201 |
$ 43,407 |
||
| Accounts receivable, net of allowance | ||||
| for doubtful accounts of $8,449 and $7,486, respectively |
83,985 |
96,994 |
||
| Prepaid expenses |
7,175 |
7,296 |
||
| Other current assets |
709 |
556 |
||
| Total current assets |
143,070 |
148,253 |
||
| Property and equipment | ||||
| Computer software and hardware |
72,211 |
72,228 |
||
| Leasehold improvements |
27,271 |
26,963 |
||
| Furniture, fixtures and other equipment |
3,365 |
3,794 |
||
| Accumulated depreciation |
(77,697) |
(64,682) |
||
| Property and equipment, net |
25,150 |
38,303 |
||
| Intangible assets, net |
109,733 |
130,568 |
||
| Goodwill |
399,085 |
395,171 |
||
| Other assets |
2,708 |
2,617 |
||
| Total assets |
$ 679,746 |
$ 714,912 |
||
| Current liabilities | ||||
| Current portion of long-term debt, net |
$ 10,948 |
$ 11,689 |
||
| Accounts payable and accrued expense |
33,504 |
31,270 |
||
| Current portion of contingent consideration |
695 |
340 |
||
| Deferred revenue |
3,955 |
4,851 |
||
| Total current liabilities |
49,102 |
48,150 |
||
| Long-term debt, net |
472,600 |
468,932 |
||
| Deferred tax liabilities |
7,335 |
6,294 |
||
| Other liabilities |
8,488 |
7,771 |
||
| Total liabilities |
537,525 |
531,147 |
||
| Commitments and contingencies | ||||
| Stockholders’ equity | ||||
| Common stock | ||||
| $0.0001 par value, shares authorized – 200,000,000 shares authorized as of December 31, 2020 and December 31, 2019; shares issued and outstanding – 42,529,017 as of December 31, 2020 and December 31, 2019, respectively |
4 |
4 |
||
| Preferred Stock | ||||
| $0.0001 par value, 1,000,000 shares authorized, zero issued and outstanding as of December 31, 2020 and December 31, 2019, respectively |
— |
— |
||
| Additional paid-in capital |
385,387 |
381,952 |
||
| Accumulated deficit |
(255,424) |
(205,498) |
||
| Accumulated other comprehensive income |
12,254 |
7,307 |
||
| Total stockholders’ equity |
142,221 |
183,765 |
||
| Total liabilities and stockholders’ equity |
$ 679,746 |
$ 714,912 |
||
| KLDiscovery Inc. | ||||
| Consolidated Statements of Cash Flows | ||||
| (in thousands) | ||||
| (unaudited) | ||||
| For The Year Ended December 31 | ||||
|
2020 |
2019 |
|||
| Operating activities | ||||
| Net loss |
$ (49,926) |
$ (54,014) |
||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||
| Depreciation and amortization |
47,762 |
50,407 |
||
| Non-cash interest |
19,450 |
5,320 |
||
| Stock-based compensation |
3,435 |
2,265 |
||
| Provision for losses on accounts receivable |
4,088 |
3,104 |
||
| Deferred income taxes |
1,041 |
219 |
||
| Loss on extinguishment of debt |
— |
7,203 |
||
| Change in fair value of contingent consideration |
98 |
48 |
||
| Changes in operating assets and liabilities: | ||||
| Accounts receivable |
10,050 |
(16,712) |
||
| Prepaid expenses and other assets |
87 |
2,404 |
||
| Accounts payable and accrued expenses |
4,675 |
(8,937) |
||
| Deferred revenue |
(984) |
396 |
||
| Net cash provided by (used) in operating activities |
39,776 |
(8,297) |
||
| Investing activities | ||||
| Acquisitions, net of cash |
(3,124) |
(1,950) |
||
| Purchases of property and equipment |
(10,935) |
(13,268) |
||
| Net cash used in investing activities |
(14,059) |
(15,218) |
||
| Financing activities | ||||
| Recapitalization transaction |
— |
186,503 |
||
| Revolving credit facility – draws |
29,000 |
54,500 |
||
| Revolving credit facility – repayments |
(29,000) |
(54,500) |
||
| Payments for capital lease obligations |
(1,595) |
(1,427) |
||
| Issuance of common stock |
— |
414 |
||
| Payments on long-term debt |
(17,000) |
(142,000) |
||
| Net cash (used in) provided by financing activities |
(18,595) |
43,490 |
||
| Effect of foreign exchange rates |
672 |
(7) |
||
| Net increase in cash |
7,794 |
19,968 |
||
| Cash at beginning of period |
43,407 |
23,439 |
||
| Cash at end of period |
$ 51,201 |
$ 43,407 |
||
| Supplemental disclosure: | ||||
| Cash paid for interest |
$ 32,196 |
$ 42,693 |
||
| Income taxes paid, net of refunds |
$ (195) |
$ 470 |
||
| Significant noncash investing and financing activities | ||||
| Assumption of Pivotal Debentures |
$ – |
$ 200,000 |
||
| Equity issued for acquisitions |
$ – |
$ 1,241 |
||
| Purchases of property and equipment in accounts payable and accrued expenses on the consolidated balance sheets |
$ 394 |
$ 129 |
||
About KLDiscovery
KLDiscovery provides technology-enabled services and software to help law firms, corporations, government agencies and consumers solve complex data challenges. The company has 32 locations, nine data centers and 18 data recovery labs across 18 countries and is a global leader in delivering best-in-class eDiscovery, information governance and data recovery solutions to support the litigation, regulatory compliance, internal investigation and data recovery and management needs of our clients. Serving clients for over 30 years, KLDiscovery offers data collection and forensic investigation, early case assessment, electronic discovery and data processing, application software and data hosting for web-based document reviews, and managed document review services. In addition, through its global Ontrack Data Recovery business, KLDiscovery delivers world-class data recovery, email extraction and restoration, data destruction and tape management. KLDiscovery has been recognized as one of the fastest growing companies in North America by both Inc. Magazine (Inc. 5000) and Deloitte (Deloitte’s Technology Fast 500) and CEO Chris Weiler was recognized as a 2014 Ernst & Young Entrepreneur of the Year™. Additionally, KLDiscovery is a Relativity Certified Partner and maintains ISO/IEC 27001 Certified data centers around the world. For more information, please email info@kldiscovery.com or visit www.kldiscovery.com.
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 KLDiscovery’s future financial and business performance, attractiveness of KLDiscovery’s product offerings and platform and the value proposition of KLDiscovery’s products, 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: KLDiscovery’s potential failure to comply with privacy and information security regulations governing the client datasets it processes and stores; the outbreak of disease or similar public health threat, such as COVID-19; KLDiscovery’s ability to operate in highly competitive markets, and potential adverse effects of this competition; risk of decreased revenues if KLDiscovery does not adapt its pricing models; the ability to deliver products and services following a disaster or business continuity event; potential disruption of KLDiscovery’s products, offerings, website and networks; the ability to attract, motivate and retain qualified employees, including members of KLDiscovery’s senior management team; the ability to maintain a high level of client service and expand operations; potential issues with KLDiscovery’s product offerings that could cause legal exposure, reputational damage and an inability to deliver services; KLDiscovery’s ability to develop new products, improve existing products and adapt its business model to keep pace with industry trends; risk that KLDiscovery’s products and services fail to interoperate with third-party systems; potential unavailability of third-party technology that KLDiscovery uses in its products and services; difficulties resulting from KLDiscovery’s implementation of new consolidated business systems; the ability to comply with various trade restrictions, such as sanctions and export controls, resulting from KLDiscovery’s international operations; potential intellectual property infringement claims; and KLDiscovery’s substantial indebtedness. These risks and other factors discussed in the “Risk Factors” section of KLDiscovery’s Annual Report on Form 10-K filed with the Securities Exchange Commission (“SEC”) and any other reports KLDiscovery files with the SEC could cause actual results to differ materially from those expressed or implied by forward-looking statements made by KLDiscovery or on our behalf.
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, KLDiscovery undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Non-GAAP Financial Measures
In addition to providing financial measurements based on accounting principles generally accepted in the United States of America (“GAAP”), this earnings press release includes additional financial measures that are not prepared in accordance with GAAP (“non-GAAP”), including EBTIDA and Adjusted EBITDA.
Contacts
Investor Contacts:
Dawn Wilson
(703) 520-1498
dawn.wilson@kldiscovery.com
Richard Simonelli
(202) 450-9516
richard.simonelli@kldiscovery.com
Media Contact:
Krystina Jones
(888) 811-3789
krystina.jones@kldiscovery.com
