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spk00: Good morning, and welcome to the KL Discovery fourth quarter and full year 2022 financial results conference call. All lines have been placed on mute to prevent any background noise. Thank you. Dawn Wilson, Chief Financial Officer of KL Discovery, you may begin your conference.
spk01: Thank you, Operator. Welcome to KL Discovery's Q4 and full year 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 filing through 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 to 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: Thanks, Dawn, and good morning, everyone. Thanks for joining us today for KL Discovery's fourth quarter and full year 2022 financial results conference call. My name is Chris Weiler, and I am the CEO and co-founder of KL Discovery. I want to start off today's call by saying how proud I am of our global team. We had an outstanding Q4 and are starting off 2023 with tremendous momentum. Our strategic plans, corporate culture, and world-class technology have positioned us well in a challenging macroeconomic environment. However, it is our global team's execution that helped us achieve these results. Our team members have remained steadfast worked hard and have risen to every challenge presented to them. The KLD Global family continues to inspire me and is a true test of our company's character and perseverance that is making KLD a stronger company every day. I am proud to be leading this team and I am truly grateful for their commitment, teamwork and loyalty. I am pleased to report that the fourth quarter was a record for KLD. We delivered the highest revenue quarter in company history. with 85.8 million, which is a 15% increase over our revenue from the third quarter of 2022. Our net loss came in at 5 million, setting another record as the lowest in company history. We have been chipping away at this number each quarter, and this 32% improvement compared to Q4 last year shows our financials continue to strengthen. Our record high revenue and dedication to strive for efficiencies across the business and us achieving the highest EBITDA and adjusted EBITDA quarter in company history, both growing 33% year-over-year to $18.3 million and $20.4 million, respectively. Our adjusted EBITDA margin moved to 24%, another all-time high, and we managed to continue our investment in technology and sales and marketing while still delivering these impressive financial results. Our managed review offering continues to deliver solid results driven by the positive reputation in our antitrust and cyber incident response practices. As I mentioned on prior calls, we conduct our managed review work remotely, which has allowed us to not only reduce our real estate expense, but also maximize our global talent pool to ensure our resources are used to their fullest capacity so that every engagement creates a stellar client experience. Nebula, our end-to-end e-discovery and review platform, continues to grow, and is gaining significant traction with our customers. Q4 was our highest revenue quarter for Nebula, with revenue up 23% compared to Q4 of 2021. Our investment in R&D is paying off as we are seeing larger and more complex engagements sold in Nebula, as well as many of our top clients choosing Nebula for their e-discovery needs for the first time. Our client portal continues to impress our clients, and I'm thrilled with the impact it is making for our business. In 2022, we launched Client Portal, the first real-time reporting dashboard for our clients to access critical case and financial metrics, including up-to-date reporting on current period work-in-progress spending. In 2023, we have already released the first of several plan features to aid users in tracking real-time budget performance. We are underway on work to give on-demand access to complex matter and portfolio reports, as well as access to our alerting system. This alerting capability allows users to create bespoke notifications to let them know immediately when certain conditions have been met during the course of their case, such as illegal matters spent nearing their budget or a certain amount of data process produced or hosted. I'm also excited to announce that we will be bringing this innovative technology to Europe by releasing Client Portal in EMEA in the first half of this year. With APAC and the U.S. already using Client Portal, once EMEA is up in the spring, KLD will showcase this real-time reporting dashboard across the globe. Across all our platforms, we are seeing outstanding growth in the volumes of data in KLD's technology. Year over year, inbound data received and processed grew by 10%, with explosive growth in the second half of last year, which saw record high months and quarters resulting in 18% growth in Q422 over Q322 and 45% growth in Q422 over Q421. This is further proof that our technology, services, global footprint, and 24 by 7 client support models have all converged to make KLD a compelling choice for any law firm, corporation, or government agency. During 2022, We were focused and vigilant on executing our strategic initiatives by investing in them while simultaneously lowering our costs such as real estate occupancy and optimizing our digital marketing initiatives. We are enjoying the benefits of a more efficient cost structure due to all our systems and process improvements over the past several years. We have built up significant top line momentum as we continue to execute our strategic plan to strengthen the company. We are also growing revenue in EBITDA under difficult market conditions. I believe that as the economy recovers, we will be in excellent position to continue to grow profitably, invest further in the business, and stay committed to customer excellence. I will now turn the call over to Dawn Wilson, our CFO.
spk01: Thank you, Chris. As Chris mentioned, Q4 2022 was an excellent quarter as we achieved strong top line and profit margin results. Our fourth quarter 2022 revenue was $85.8 million, which was up 4% compared to the fourth quarter of 2021. For the full year of 2022, our revenue was $317.4 million, which was slightly less than the $320.5 million in 2021. However, when you consider the macroeconomic headwinds we experienced throughout 2022, our revenue results in 2022 were an accomplishment punctuated by a record-setting Q4. Nebula revenue for fourth quarter was the highest in our history and up 23% compared to the fourth quarter of 2021. Consistent with prior quarters, we continue to gain momentum with more Nebula customers and matters. Likewise, our Nebula utilization metrics for active users, data hosted, and active repositories are up significantly in the fourth quarter of 22 versus the fourth quarter of 21. We continue to be diligent about seeking operating efficiencies to reduce costs and improve our profitability. Our Q4 2022 net loss of 5 million was a 32% improvement from the Q4 21 net loss of 7.3 million. Q4 2022 EBITDA was $18.3 million compared to Q4 2021 EBITDA of $13.8 million, while Q4 2022 adjusted EBITDA was $20.4 million compared to Q4 2021 adjusted EBITDA of $15.3 million. Both EBITDA and adjusted EBITDA are up 33% compared to prior year, and Q4 2022 adjusted EBITDA was the highest adjusted EBITDA in company history. We continue to invest in research and development and sales and marketing year over year. We believe that these investments, along with our Nebula platform, will contribute to higher revenues in future years. Liquidity is strong as our cash and cash equivalents were 32.6 million on December 31st, 2022. And we have nothing drawn on our 40 million revolving credit facility. In 2022, we experienced an uncertain and challenging macro environment, yet our cost-cutting efforts and strategic investments over recent years have led to strong financial results in the fourth quarter of 2022, while building a solid foundation for the future. Given that there is a fair amount of macroeconomic uncertainty for 2023, we are continuing not to provide guidance for 2023 at this time. As for KLD, we continue to be agile, and move forward with a strong foundation. The team is energized as we enter 2023 with a momentum and a very satisfied customer base. I would like to turn the call over to Chris for final comments. Chris?
spk02: Thank you, Dawn. And I just want to thank everybody for joining us this morning. Have a great rest of the quarter. And, yeah, thanks for joining us. Appreciate it.
spk00: this concludes today's conference call thank you for your participation you may now disconnect
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