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spk01: ladies and gentlemen thank you for standing by my name is brent and i will be your conference operator today at this time i would like to welcome everyone to the kl discovery third quarter 2022 financial results conference call all lines have been placed on mute to prevent any background noise should you need operator assistance please press star 0 on your telephone keypad and an operator will come online to assist you thank you it is now my pleasure to turn today's call over to don wilson Chief Financial Officer of KL Discovery. Please go ahead.
spk00: Thank you, operator. Welcome to KL Discovery's Q3 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, risk, and uncertainties that are described in more detail in our earnings press release issued yesterday and filings with the SEC. CAEL 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 is the most directly comparable GAAP measures to the non-GAAP financial measures are shown in detail in our press release issued last night, along with definitions for those terms and 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. Our 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 Weiler.
spk02: Thank you, Don. Welcome to KL Discovery's third quarter 2022 financial results conference call. My name is Chris Weiler, and I am the CEO and co-founder of KL Discovery. Thank you all for joining. In the face of stiff winds coming from severe macroeconomic conditions, geopolitical uncertainty, and a Fed aggressively fighting inflation with rising interest rates, the KLV team is hard at work implementing operating efficiencies in our business while still investing in the future. We are consistently creating new features on our offerings and identifying ways to improve our world-class client experience, which differentiates us from other service organizations in the industry. We continue to execute our strategic plan and strengthen the company and believe we will be well-positioned to capitalize on our investments in our growth when the external factors of the world has been battling ease. We achieved $74.5 million of revenue in the third quarter, which is down from the third quarter of 2021, but in line with our second quarter of this year. Consistent with our strategy to drive future growth, we continue to invest in the business. Given the stable nature of our business and despite our current net loss, we are very comfortable continuing to balance responsible investment while still delivering positive EBITDA and adjusted EBITDA. Our existing customers and potential new clients I speak with are impressed with Nebula. All of the key Nebula utilization metrics we monitor are up year over year. We are also getting very positive feedback for our client portal. Our client portal continues to evolve as we develop new features that we believe will drive adoption and increase the value it brings to all of our legal technology clients. For example, in October, we released functionality that gave our users access in real time to critical financial metrics on demand. Advanced visualization tools allow clients to group these data points by service type and soon by entity and time period, providing an unmatched level of control and flexibility. We will continue to focus on strengthening KLD and being the best that we can be under difficult economic times. I'm very proud. to be leading this great team that delivers excellence every day by keeping their heads down and working hard. I will now turn the call over to our CFO, Dawn Wilson.
spk00: Thank you, Chris. As Chris said, despite the macroeconomic headwinds, which continue to adversely impact our revenue levels, we continue to make tremendous progress in implementing strategic initiatives that we believe are making KLD even stronger. Revenue in the third quarter of 2022 was $74.5 million, down 8.1% compared to the third quarter of 2021. Our Nebula revenue decreased 8% to $6.5 million in the third quarter of 2022 versus $7.1 million in the third quarter of 2021, but increased 5% for the year-to-date period as compared to 2021. We continue to gain momentum with more Nebula customers and matters, while our Nebula utilization metrics such as active users, data hosted, and repositories, are up significantly in the third quarter of 2022 versus the third quarter of 2021. As always, we are actively looking for operating efficiencies to reduce costs. We consolidated office space, capitalizing on our success in operating remotely. We have been streamlining operations throughout the organization, which has allowed us to eliminate some redundant roles For data recovery, we optimized our personnel and expanded our sales strategy to target global companies and technology partners as we seek larger contracts with stronger margins in that business. We continue to make investments to strengthen our products and service offerings as we responsibly trade some short-term costs for what we expect will be long-term revenue growth. Our Q3 2022 net loss of $17.4 million improved from our Q3 net loss of $29.5 million in 2021, which included an impairment charge that did not recur in 2022. Q3 2022 EBITDA was $5.1 million compared to Q3 2021 EBITDA of $14.7 million, while Q3 2022 adjusted EBITDA was $11.3 million compared to Q3 2021 adjusted EBITDA of $16.8 million. Our net loss EBITDA and adjusted EBITDA reflect the lower revenues resulting from the challenging environment, but also the investment in research and development and sales and marketing year over year that should contribute to higher revenues in future years. Likewise, our net loss and EBITDA include lease vacating and severance costs to implement efficiencies that will contribute positively to future results. We are excited about the investments we've made to contribute positively to our future. Liquidity is strong as our cash and cash equivalents. We're 32.9 million on September 30, 2022, and we have nothing drawn on our 40 million revolving credit facility. 2022 has proven to be a year that will be defined by a challenging macro environment. There remains a fair amount of uncertainty for the rest of 22 and into 23. Therefore, we are continuing not to provide guidance for the rest of 22 or 23. We remain agile and continue to invest in the future and strengthen the company while being fully committed to delivering outstanding products and services that drive solid results. I would like to turn the call over to Chris for final comments.
spk02: Thank you, Dawn, and thank you for joining our call today. We'll continue to work hard and focused on balancing expense management and all of our very awesome Blue Ocean strategic plans as we go in the future. So thank you for your time today.
spk01: Ladies and gentlemen, thank you for participating. This concludes today's conference call. You may now disconnect.
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