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spk01: Good morning and welcome to the KL Discovery second quarter 2022 financial results conference call. All lines have been placed on mute to prevent any background noise. I will now turn the call over to Dawn Wilson, Chief Financial Officer. Please go ahead.
spk00: Thank you, Operator. Welcome to KL Discovery's Q2 2022 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. KL 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 gap measure to the non-gap 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. Management believes that our presentation of non-gap financial measures provides useful supplemental information to investors regarding our results of operations. Our non-gap financial measure should only be considered in addition to and not as a substitute for or superior to any gap 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 Weiler.
spk02: Thanks, Dawn, and thank you very much for joining KLDiscovery's second quarter 2022 financial results conference call. My name is Chris Weiler, and I am the CEO and co-founder of KLDiscovery. Thank you all for joining. We had an excellent first half of 2022, and I am very proud of the way the KLD team continues to strive for and deliver excellent results. Over the past few years, there have been many external factors that easily could have been major distractions, but this team never stops driving forward and achieving excellence. It is an honor for me, and I am thankful for it every day. Under trying times and with the dark clouds of recession swirling about, our team was able to generate revenue in the first two quarters of 2022 that was equivalent to our revenue in the first six months of last year. We achieved $75.2 million in revenue in the second quarter, and while that is down from the second quarter of last year, this is still impressive. After starting 2022 with an outstanding first quarter, we had to fight for every inch in response to a rapidly declining market in the second quarter. As we discussed in prior calls, we made significant investments in technology and sales and marketing in the first half of 2022. These investments coupled with a revenue decline in Q2 of 2022, resulted in us having less EBITDA and adjusted EBITDA than the second quarter of last year. That said, I remain incredibly proud of how the company manages expenses and finds new ways to innovate and increase efficiency. Despite the investments we made in the first half and lower revenues, adjusted EBITDA was within $700,000 dollars of budget and is a true testament to how nimble and adaptive the company is. While everyone in the market is adjusting to the economy and other geopolitical events, we are also using this time to continue to keep moving ahead. The Nebula platform continues to get stronger as we service more clients and matters. I am proud to report that we delivered the best revenue quarter in our history for Nebula as we increased revenue 27% in Q2-22 compared to Q1-22 of this year. The platform continues to be well received, and we consistently receive very positive feedback. In the second quarter of 2022, we continued the momentum and increased the number of Nebula clients and Nebula matters. Likewise, we continue to increase the amount of active data hosted, active users, and active repositories on the Nebula platform. Overall, our biggest differentiators continue to be simplicity, automation, global reach and service as we continue to achieve major roadmap milestones each quarter. We have been able to do what no other service organization has done by consistently creating new software innovations. One of those is our client portal, which clearly sets us apart from the rest. We launched the client portal in May 2022 and continues to evolve as we develop new features. It is the only real-time client data portal industry-wide and will benefit our clients by giving them quick and reliable access to important case information and metrics. It is helping us attract clients and will be a definite force in retaining them. We believe that once a client has experienced the advantages of our client portal, they will not want to leave KLD and lose this valuable feature. We have very big plans for this product and I am looking forward to sharing more with you throughout the rest of the year as we continue to release even more innovative features. While we are looking ahead to market conditions improving, we will continue to focus on strengthening KLD. I will now turn the call over to our CFO, Dawn Wilson.
spk00: Thank you, Chris. As Chris said, the second quarter of 2022 was a very good quarter. Our first half revenue in 2022 was equivalent to our revenue generated in the first half of 2021. Revenue in the second quarter of 2022 was $75.2 million, down 8% compared to the second quarter of 2021. as we continue to face headwinds from the declining economy, which accelerated in the second quarter. We achieved the highest Nebula ecosystem revenue quarter in company history in the second quarter. Our Nebula revenue grew 27% to $7.8 million in the second quarter of 2022 versus $6.1 million in the first quarter of 2022, as we continue to gain momentum with more customers and more matters. Our Q2 net loss of $11.2 million, EBITDA of $9.7 million, and adjusted EBITDA of $12.4 million include planned investments in research and development to support the revenue growth of our technology, as well as planned increases in sales and marketing. We are responsibly trading some short-term costs for long-term revenue growth and overall strengthening of our product and service offerings. Liquidity continues to be strong as our cash and cash equivalents were $37.5 million on June 30, 2022, and we have nothing drawn on our $40 million revolving credit facility. The first half of 2022 was characterized by economic and geopolitical uncertainty, which slowed revenue growth for the company in the second quarter. Nevertheless, we continue to deliver very good results as the KLD team continues to be committed to delivering outstanding products and services that drive solid results. I would like to turn the call back over to Chris for final comments. Chris?
spk02: Thanks, Dawn. Appreciate everybody joining the call this morning. Everybody have a great rest of the summer. We'll continue to work on strengthening KLD and appreciate your time this morning.
spk01: Thank you all for joining today's conference call. You may now disconnect.
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