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spk01: Thank you for standing by. My name is Pam, and I will be your conference operator today. At this time, I would like to welcome everyone to the CAEL Discovery Q1 2024 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. I would now like to turn the conference over to Dawn Wilson, Chief Financial Officer. You may begin.
spk02: Thank you, Operator. Welcome to KL Discovery's Q1 2024 conference call. Today's call contains forward-looking statements within the meaning of the federal securities laws. 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 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 of the non-GAAP financial measures to the most directly comparable GAAP 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 in isolation from or 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.
spk00: Thank you, Don, and good morning. And thank you all for joining us today for KL Discovery's first quarter 2024 Financial Results Conference call. My name is Chris Weiler and I am the CEO and co-founder of KL Discovery. I would like to begin today's call by expressing my gratitude to the KLD team whose unmatched world-class customer service, coupled with our innovative technology platform, creates an unbeatable value proposition. This incredible group is the heart of KLD's success and is instrumental in delivering industry-leading results to our value clients all around the globe. Coming off the heels of a record-breaking 2023, for the first quarter of 2024, we reported total revenue of $80.2 million, with legal technology revenue of $73 million, and data recovery revenue of 7.2 million. As of March 31st, 2024, we had 8,283 legal technology matters, which includes those using Nebula, our flagship e-discovery platform, and our expansive technology solutions, up from 8,078 matters in the same period in the prior year. Additionally, our legal technology net revenue retention continues to improve, For the 12 months ended March 31st, our legal technology net revenue retention was 98%, up 300 basis points compared to the same period in the prior year. We plan to continue improving our net revenue retention rate by increasing the number of solutions that we sell on a subscription basis as well as broadening the scope of our Nebula offerings to promote strong product adoption. Nebula continues to shine and is transforming our business. Nebula is a premier e-discovery platform that combines ease of use with powerful functionality to create an unmatched user experience. The platform brings full EDRM coverage to customers that demand high performance solutions at every phase of the discovery process. Nebula has proven to be an increasingly steady driver of our revenue. In fact, for the first quarter of 2024, we reported Nebula revenue of $14.9 million, up 82% year over year. Overall, Nebula contributed 19% of our total revenue in the first quarter of 2024, a healthy increase as compared to 9% in the same period in the prior year. We continue to invest heavily in Nebula, which, when coupled with our one-of-a-kind client portal and extensive use of artificial intelligence, strengthens the user experience and creates new opportunities for KLD to complete the value chain for our clients. As a result, Nebula is becoming the preferred solution for many of our existing customers and continues to attract new customers. In fact, the number of matters utilizing Nebula has grown to 1,320 as of March 31, 2024. At this point, virtually all legal technology engagements leverage Nebula in one way or another. Active data hosted in Nebula is up 24% over last year, and active users are up 11% compared to last year. The bottom line is this, our clients have responded incredibly well to Nebula, and we expect its adoption and impact in the industry to continue its upward trajectory. We are also pleased to share that last week, we entered into an agreement in principle that with our principal, the venture holders, and principal term loan lender that will strengthen our balance sheet and reinforce our financial foundation. Our key capital partners are aligned with our strategy and vision to continue to make KLD the best e-discovery provider in the world. The agreement in principle contemplates that KL Discovery's outstanding convertible notes will be converted into approximately 96% of our pro forma outstanding equity resulting in meaningful reduction in overall debt. Additionally, under the agreement in principle, with our principal term loan lender, the maturity on our term loan will be extended to August 2027. The agreement in principle remains subject to finalizing legal, definitive documentation and satisfying conditions to closing, but we expect to implement the transaction as quickly as practical. Following finalization of this expected transaction, KLD will have a bolstered financial position and deleveraged balance sheet via a significant reduction in long-term debt and costly interest rate payments. When you combine this solid financial foundation with our record-breaking 2023 financial results, we believe we have an outstanding future ahead of us. We remain laser-focused on our clients and pushing forward with the exceptionally high levels of innovation and service quality that they have come to expect from KLD. The global e-discovery industry remains fragmented, and we believe there are large opportunities for KLD to continue gaining market share. Our integrated and comprehensive proprietary technology, complying with our world-class 24-7, 365 client service and technical support, offer distinct competitive advantages over other providers. With a strengthened capital position and continued investment in our world-class technologies, we see a clear path toward profitability moving forward. KLD has a clear vision for the future, and I am energized by where we are headed and the positive responses we are seeing from our clients. Our global team is battle-tested, experienced, and more motivated than ever. And with a further reinforced financial foundation, I am confident we have the right strategy in place to execute on our vision and succeed. I will now turn the call over to our CFO, Dawn Wilson.
spk02: Thank you, Chris. After a record-breaking 2023, for the first quarter of 2024, we had total revenue of $80.2 million, legal technology revenue of $73 million, and data recovery revenue of $7.2 million. Nebula continues to drive legal technology revenue growth, delivering revenue of $14.8 million which includes $5.7 million for Nebula processing services for non-Nebula hosted engagements. Nebula revenue growth was 82% over Q1 2023. Nebula revenues are now 19% of our total revenues. This is up from 9% in Q1 2023. Active data hosted in Nebula is up 24%, and active users are up 11% compared to the same quarter last year. Net loss was $16.9 million for the first quarter of 2024. Q1 2024 EBITDA was $7.4 million, while Q1 2024 adjusted EBITDA was $10.6 million. Our gross margin was 48%. Our liquidity includes our cash and cash equivalents, which were $18.4 million on March 31, 2024. As of the end of the quarter, we were $15 million drawn on the revolving credit facility. As Chris mentioned, we entered into an agreement in principle with our principal debenture holders and principal term loan lender that will provide a significant reduction in our long-term debt and costly interest rate payments as we strengthen our balance sheet and reinforce our financial foundation with a bolstered financial position and deleveraged balance sheet. In closing, we believe we have an outstanding future ahead of us. And as always, we will continue to be diligent, agile, and build upon our strong foundation and momentum. I will now turn the call over to Chris for final comments. Chris?
spk00: Thanks, Dawn. Just wanted to thank everyone for joining the call this morning. And I just wanted to thank The KLD Global family for being the most awesome team ever. Go KLD. One unique fingerprint.
spk01: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
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