Wednesday, March 25, 2020

KLDiscovery Inc. Achieves 2019 Revenue of $312 Million, Up 5.3% Year-over-Year

  • Net Loss Improves $13.7 million Year-over-Year
  • CoEBITDA Increases 76.5% Year-over-Year

MCLEAN, Va. -- (BUSINESS WIRE)-- KLDiscovery Inc. (“KLDiscovery”), a leading global provider of electronic discovery, information governance and data recovery services, announced today that revenue for the year ended December 31, 2019, was $312.1 million, an increase of 5.3% over revenue of $296.3 million for the full year of 2018. Revenue for the fourth quarter ended December 31, 2019, was $80.5 million, an increase of 4.4% over revenue of $77.1 million for the fourth quarter of 2018.

Net loss for the year ended December 31, 2019, improved by $13.7 million dollars and was $(54.0) million, compared to net loss of $(67.7) million for the full year of 2018. Net loss for the fourth quarter ended December 31, 2019, was $(17.8) million, compared to net loss of $(17.1) million for the fourth quarter of 2018. EBITDA for the full year of 2019, was $52.7 million, an increase of 76.5% compared to EBITDA of $29.9 million for the full year of 2018. EBITDA for the fourth quarter of 2019, was $14.4 million, an increase of 96.5% compared to EBITDA of $7.4 million for the fourth quarter of 2018.

Adjusted EBITDA (which excludes management fees and stock-based compensation, acquisition financing and transaction costs and other items as described below) for the full year of 2019, was $68.7 million, an increase of 25.9% compared to adjusted EBITDA of $54.6 million for the full year of 2018. Adjusted EBITDA for the fourth quarter of 2019, was $17.2 million, an increase of 27.7% compared to adjusted EBITDA of $13.5 million for the fourth quarter of 2018. Reconciliations of EBITDA and Adjusted EBITDA, to their GAAP basis results are shown in detail below, along with definitions for those terms.

As of December 31, 2019, the Company had approximately $43.4 million in cash and cash equivalents.

“2019 was a very good year for KLDiscovery,” said Christopher Weiler, CEO of KLDiscovery Inc. “Our team continued its dedication to delivering outstanding customer service and we continued to grow with strategic acquisitions and strong sales. In 2019, revenue was up 5.3% and we made significant strides in EBITDA which increased 76.5% year-over-year and Adjusted EBITDA which grew 25.9% year-over-year.”

Weiler continued, “In 2020, we intend to invest in our best-in-breed technology and software with further development of software and hardware solutions. We will be prudent with our cash given the uncertainties of the global economy resulting from the outbreak of COVID-19. While the effects of this outbreak are unknown in the short run, we believe that our business is positioned to capitalize on increased activity as business eventually returns to more normalized levels.”

Year 2018-2019 Quarterly Results - Unaudited

(in millions except per share data)

2018 (unaudited)

2019 (unaudited)

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Revenue

 

70.2

 

 

75.2

 

 

73.8

 

 

77.1

 

 

75.0

 

 

78.3

 

 

78.2

 

 

80.5

 

Net loss

 

(18.0

)

 

(15.1

)

 

(17.5

)

 

(17.1

)

 

(13.5

)

 

(11.4

)

 

(11.3

)

 

(17.8

)

 
Net loss per share (basic and diluted)

$

(0.45

)

$

(0.38

)

$

(0.43

)

$

(0.42

)

$

(0.32

)

$

(0.27

)

$

(0.26

)

$

(0.42

)

Weighted average outstanding shares (basic and diluted)

 

39.4

 

 

40.3

 

 

40.8

 

 

40.8

 

 

42.3

 

 

42.4

 

 

42.5

 

 

42.5

 

 
EBITDA

 

6.3

 

 

9.0

 

 

7.2

 

 

7.4

 

 

11.2

 

 

13.7

 

 

13.4

 

 

14.4

 

Adjusted EBITDA

 

12.3

 

 

15.6

 

 

13.2

 

 

13.5

 

 

15.1

 

 

19.6

 

 

16.8

 

 

17.2

 

2020 Outlook

We are currently limited in our ability to accurately predict what the financial impact will be from the COVID-19 outbreak. In the spirit of being prudent and responsible financial stewards, we are withdrawing our previously disclosed full-year 2020 guidance due to the uncertainty surrounding the impact of this global pandemic.

While we cannot predict how long the outbreak will last, we have taken action to add to our cash position. Earlier this week, we drew down $29 million from our revolving credit facility, a step that many other public companies are taking at this time. While we do not have immediate plans for this cash, it provides us with the capacity and flexibility to sustain prolonged disruption and create long-term value for our shareholders through sensible and disciplined capital allocation. In addition, we are working closely with our management team to implement contingency plans that will defer and reduce operating costs through this period of uncertainty.

Non-GAAP Financial Measures

For information regarding the purpose for which management uses the non-GAAP financial measures disclosed in this release and why management believes they provide useful information to investors regarding the Company’s financial condition and results of operations, please refer to the Company’s latest periodic report.

EBITDA is a non-GAAP financial measure that represents GAAP net income attributable to the Company before interest and other income (expense), loss on debt extinguishment, income taxes, depreciation and amortization.

Adjusted EBITDA is a non-GAAP financial measure that represents EBITDA before stock-based compensation expense, acquisition- and integration-related costs, restructuring costs and settlements and impairments incurred outside the Company’s normal course of business.

Earnings Conference Call

Management will conduct a conference call at 10:00 AM EDT on Thursday March 26, 2020 to discuss earnings results for the fourth quarter and full-year of 2019 and the Company’s outlook. 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 dial (866) 497-6138 from the United States and Canada) or (825) 312-2333 from all other countries) and refer to conference code 3440629. An audio recording of the conference call will be available for replay shortly after the call's completion and will remain available for a period of time 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 3440629. The webcast replay will also be available in the Investors section of KLDiscovery’s website for a period of time following the call. 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,

2019

2018

2019

2018

(unaudited)
 
Revenues

$

80,527

 

$

77,109

 

$

312,054

 

$

296,282

 

Cost of revenues

 

41,908

 

 

40,177

 

 

160,845

 

 

159,617

 

Gross profit

 

38,619

 

 

36,932

 

 

151,209

 

 

136,665

 

 
 
Operating expenses
General and administrative

 

13,126

 

 

13,724

 

 

55,005

 

 

54,633

 

Research and development

 

1,490

 

 

2,211

 

 

5,945

 

 

7,100

 

Change in fair value of contingent consideration

 

-

 

 

-

 

Depreciation and amortization

 

9,906

 

 

10,115

 

 

39,149

 

 

41,519

 

Total operating expenses

 

36,827

 

 

42,412

 

 

148,616

 

 

161,525

 

 
Income (Loss) from operations

 

1,792

 

 

(5,480

)

 

2,593

 

 

(24,860

)

 
Other (income) expenses
Other (income) expense

 

186

 

 

(21

)

 

308

 

 

29

 

Loss on extinguishmnet of debt

 

7,203

 

 

-

 

 

7,203

 

 

-

 

Interest expense

 

11,890

 

 

12,111

 

 

48,377

 

 

46,591

 

Loss before income taxes

 

(17,487

)

 

(17,570

)

 

(53,295

)

 

(71,480

)

Income tax (benefit) provision

 

328

 

 

(438

)

 

719

 

 

(3,741

)

 
Net loss

$

(17,815

)

$

(17,132

)

$

(54,014

)

$

(67,739

)

 
Other comprehensive income (loss), net of tax
Foreign currency translation

 

2,604

 

 

391

 

 

311

 

 

(870

)

Total other comprehensive income (loss), net of tax

 

2,604

 

 

391

 

 

311

 

 

(870

)

Comprehensive loss

$

(15,211

)

$

(16,741

)

$

(53,703

)

$

(68,609

)

 
Net loss per share - basic and diluted

$

(0.42

)

$

(0.42

)

$

(1.27

)

$

(1.68

)

 

Weighted average shares outstanding - basic and diluted

 

42,529,017

 

 

40,835,186

 

 

42,425,295

 

 

40,382,578

 

KLDiscovery Inc.
Reconciliation of Non-GAAP Financial Matters
(In thousands)
(Unaudited)
 

Three Months Ended December 31,

For The Year Ended December 31,

2019

2018

2019

2018

Net loss

$

(17,815

)

$

(17,132

)

$

(54,014

)

$

(67,739

)

Interest expense

 

11,890

 

 

12,120

 

 

48,377

 

 

46,591

 

Income tax (benefit) expense

 

328

 

 

(438

)

 

719

 

 

(3,741

)

Depreciation and amortization expense

 

12,793

 

 

12,776

 

 

50,407

 

 

54,749

 

Loss on debt extinguishment

 

7,203

 

 

7,203

 

EBITDA

$

14,399

 

$

7,326

 

$

52,692

 

$

29,860

 

Acquisition, financing and transaction costs

 

121

 

 

216

 

 

3,626

 

 

998

 

Strategic Initiatives:
Sign-on bonus amortization

 

113

 

 

1,643

 

 

413

 

 

6,199

 

Non-recoverable draw

 

840

 

 

1,235

 

 

3,714

 

 

5,696

 

Recruiting and signing bonuses

 

56

 

 

1,000

 

Legal fees

 

(7

)

 

2,296

 

Total strategic initiatives

 

953

 

 

2,927

 

 

4,127

 

 

15,191

 

Management fees, stock compensation and other

 

671

 

 

673

 

 

3,515

 

 

3,316

 

Restructuring costs

 

573

 

 

1,046

 

 

2,209

 

 

3,200

 

Systems establishment

 

443

 

 

1,249

 

 

2,554

 

 

2,000

 

Adjusted EBITDA

$

17,160

 

$

13,437

 

$

68,723

 

$

54,565

 

Note:

  • Acquisition, financing and transaction costs includes earnout payments, rating agency, letter of credit and revolving facility fees, and Pivotal transaction costs.
  • Strategic initiatives includes the amortization of one-time expenses related to the hiring of a team of industry leading 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, retention charges and signing bonuses.
  • 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)
 

For The Year Ended December 31,

2019

2018

Current assets
Cash and cash equivalents

$

43,407

 

$

23,439

 

Accounts receivable, net of allowance
for doubtful accounts of $7,486 and $5,564, respectively

 

96,994

 

 

80,641

 

Prepaid expenses

 

7,296

 

 

9,825

 

Other current assets

 

556

 

 

310

 

Total current assets

 

148,253

 

 

114,215

 

Property and equipment
Computer software and hardware

 

72,228

 

 

68,474

 

Leasehold improvements

 

26,963

 

 

25,389

 

Furniture, fixtures and other equipment

 

3,794

 

 

4,239

 

Accumulated depreciation

 

(64,682

)

 

(49,761

)

Property and equipment, net

 

38,303

 

 

48,341

 

Intangible assets, net

 

130,568

 

 

151,918

 

Goodwill

 

395,171

 

 

394,167

 

Other assets

 

2,617

 

 

1,739

 

Total assets

$

714,912

 

$

710,380

 

Current liabilities
Current portion of long-term debt, net

$

11,689

 

$

12,355

 

Accounts payable and accrued expense

 

31,270

 

 

41,135

 

Current portion of contingent consideration

 

340

 

Deferred revenue

 

4,851

 

 

4,160

 

Total current liabilities

 

48,150

 

 

57,650

 

Long-term debt, net

 

468,932

 

 

413,064

 

Contingent consideration

 

482

 

Deferred tax liabilities

 

6,294

 

 

6,075

 

Other liabilities

 

7,289

 

 

4,635

 

Total liabilities

 

531,147

 

 

481,424

 

Commitments and contingencies
Stockholders' equity
Common stock
$0.0001 par value, shares authorized - 200,000,000 shares authorized as of December 31, 2019 and December 31, 2018; shares issued and outstanding - 42,529,017 and 42,288,870 as of December 31, 2019 and December 31, 2018, respectively

 

4

 

 

4

 

Preferred Stock
$0.0001 par value, 1,000,000 shares authorized, zero issued and outstanding as of December 31, 2019 and December 31, 2018, respectively

Additional paid-in capital

 

381,952

 

 

372,316

 

Treasury stock

 

(2,406

)

Accumulated deficit

 

(205,498

)

 

(147,954

)

Accumulated other comprehensive income

 

7,307

 

 

6,996

 

Total stockholders' equity

 

183,765

 

 

228,956

 

Total liabilities and stockholders' equity

$

714,912

 

$

710,380

 

KLDiscovery Inc.
Consolidated Statements of Cash Flows
(in thousands)
 

For The Year Ended December 31,

2019

2018

Operating activities
Net loss

$

(54,014

)

$

(67,739

)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization

 

50,407

 

 

54,749

 

Non-cash interest

 

5,320

 

 

4,564

 

Loss on extinguishment of debt

 

7,203

 

Stock-based compensation

 

2,265

 

 

2,125

 

Provision for losses on accounts receivable

 

3,104

 

 

2,226

 

Deferred income taxes

 

219

 

 

(6,686

)

Change in fair value of contingent consideration

 

48

 

Changes in operating assets and liabilities:
Accounts receivable

 

(16,712

)

 

(12,126

)

Prepaid expenses and other assets

 

2,404

 

 

9,864

 

Accounts payable and accrued expenses

 

(8,937

)

 

1,540

 

Deferred revenue

 

396

 

 

(459

)

Net cash used in operating activities

 

(8,297

)

 

(11,942

)

Investing activities
Acquisitions, net of cash

 

(1,950

)

Purchases of property and equipment

 

(13,268

)

 

(12,387

)

Net cash used in investing activities

 

(15,218

)

 

(12,387

)

Financing activities
Recapitalization transaction

 

186,503

 

Revolving credit facility - draws

 

54,500

 

 

21,000

 

Revolving credit facility - repayments

 

(54,500

)

 

(21,000

)

Payments for capital lease obligations

 

(1,427

)

 

(544

)

Payments on long-term debt

 

(142,000

)

 

(8,500

)

Issuance of common stock

 

414

 

 

40,541

 

Treasury share repurchases

 

(87

)

Payments of contingent consideration

 

(2,380

)

Net cash provided by financing activities

 

43,490

 

 

29,030

 

Effect of foreign exchange rates

 

(7

)

 

(158

)

Net increase in cash

 

19,968

 

 

4,543

 

Cash at beginning of period

 

23,439

 

 

18,896

 

Cash at end of period

$

43,407

 

$

23,439

 

 
Supplemental disclosure:
Cash paid for interest

$

42,693

 

$

41,596

 

Income taxes paid, net of refunds

$

470

 

$

1,229

 

 
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

$

129

 

$

489

 

Foreward Looking Statements

This press release includes “forward looking statements” within the meaning of the “safe harbor” provisions of 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: the inability to recognize the anticipated benefits of the business combination with Pivotal Acquisition Corp. (“Pivotal”) which occurred in December 2019 (the “business combination”), which may be affected by, among other things, costs related to the business combination; KLDiscovery’s ability to execute on its plans to develop and market new products and the timing of these development programs; KLDiscovery’s estimates of the size of the markets for its solutions; the rate and degree of market acceptance of KLDiscovery’s solutions; the success of other competing technologies that may become available; KLDiscovery’s ability to identify and integrate acquisitions; the performance and security of KLDiscovery’s services; potential litigation involving Pivotal or KLDiscovery; and general economic and market conditions impacting demand for KLDiscovery’s services, including as a result of the impact of COVID-19. Other factors include risks and uncertainties set forth in the “Risk Factors” section of KLDiscovery’s registration statement on Form S-1 filed with the SEC on February 4, 2020 and any subsequent reports that KLDiscovery files with the SEC. KLDiscovery does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.


About KLDiscovery

KLDiscovery provides technology-enabled services and software to help law firms, corporations, and government agencies solve complex data challenges. With offices in 26 locations across 17 countries, KLDiscovery is a global leader in delivering best-in-class data management, information governance, and eDiscovery solutions to support the litigation, regulatory compliance, and internal investigation needs of clients. Serving organizations for over 30 years, KLDiscovery offers data collection and forensic investigation, early case assessment, data processing, application software and data hosting for web-based document reviews, and managed document review services. In addition, through its global Ontrack data management business, KLDiscovery delivers world-class data recovery, disaster 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 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. Visit www.kldiscovery.com to learn more.

Investor Contact

Dawn Wilson
571.424.0818
dawn.wilson@kldiscovery.com

Media Contact

Danny Zambito
888.811.3789
danny.zambito@kldiscovery.com