UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 8-K
_____________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 16, 2021
_____________________
KLDiscovery Inc.
(Exact name of registrant as specified in its charter)
Delaware |
|
001-38789 |
|
61-1898603 |
(State or other jurisdiction of incorporation) |
|
(Commission File Number) |
|
(I.R.S. Employer Identification No.) |
8201 Greensboro Dr. Suite 300 McLean, VA |
|
22102 |
(Address of principal executive offices) |
|
(Zip Code) |
(703) 288-3380
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
|
☐ |
Written communications pursuant to Rule 425 under the Securities Act |
|
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act |
|
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act |
|
☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
N/A |
|
N/A |
|
N/A |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
|
Item 2.02 |
Results of Operations and Financial Condition |
On March 17, 2021, KLDiscovery Inc. (“KLDiscovery” or the “Company”) issued a press release reporting its financial results for the year ended December 31, 2020. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K. The information furnished with this Item 2.02, including Exhibit 99.1, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), except as expressly set forth by specific reference in such a filing.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On March 16, 2021, William Darman, a Class C director of the Company, with a term ending at the Company’s 2022 annual meeting of stockholders, resigned from the Company’s Board of Directors (the “Board”) with immediate effect. On March 17, 2021, the Company announced that the Board has appointed Arjun Shah as a Class C director of the Company to fill the vacancy on the Board, with a term ending at the Company’s 2022 annual meeting of stockholders. Mr. Shah is a Vice President with The Carlyle Group (“TGC”) focused on investment opportunities in the technology, media and telecom sectors. Prior to joining TGC, Mr. Shah was with Tinicum Incorporated and Blackstone. The Board has determined that Mr. Shah is an independent director under the Company’s corporate governance guidelines. Mr. Shah was designated by funds affiliated with TCG to serve on the Board pursuant to the Stockholders’ Agreement. There are no other transactions involving the Company and Mr. Shah that the Company would be required to report pursuant to Item 404(a) of Regulation S-K.
Mr. Shah will have the same director indemnification arrangement as the Company’s other directors, the form of agreement for which was filed with the SEC on December 26, 2019 as Exhibit 10.13 to the Company’s Current Report on Form 8-K
Item 7.01 Regulation FD Disclosure.
Attached as Exhibit 99.2 to this Current Report on Form 8-K is a press release announcing the appointment of Mr. Shah to the Board.
The information furnished under this Item 7.01, including the exhibit related thereto, is intended to be furnished and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Forward Looking Statements
This Current Report on Form 8-K includes “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934 and the United States Private Securities Litigation Reform Act of 1995. All statements contained in this current report on Form 8-K 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 current report on Form 8-K, 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: KLDiscovery’s potential failure to comply with privacy and information security regulations governing the client datasets it processes and stores; the outbreak of disease or similar public health threat, such as COVID-19; KLDiscovery’s ability to operate in highly competitive markets, and potential adverse effects of this competition; risk of decreased revenues if KLDiscovery does not adapt its pricing models; the ability to deliver products and services following a disaster or business continuity event; potential disruption of KLDiscovery’s products, offerings, website and networks; the ability to attract, motivate and retain qualified employees, including members of KLDiscovery’s senior management team; the ability to maintain a high level of client service and expand operations; potential issues with KLDiscovery’s product offerings that could cause legal exposure, reputational damage and an inability to deliver services; KLDiscovery’s ability to develop new products, improve existing products and adapt its business model to keep pace with industry trends; risk that
KLDiscovery’s products and services fail to interoperate with third-party systems; potential unavailability of third-party technology that KLDiscovery uses in its products and services; difficulties resulting from KLDiscovery’s implementation of new consolidated business systems; the ability to comply with various trade restrictions, such as sanctions and export controls, resulting from KLDiscovery’s international operations; potential intellectual property infringement claims; and KLDiscovery’s substantial indebtedness.
These risks and other factors discussed in the “Risk Factors” section of KLDiscovery’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the Securities Exchange Commission (“SEC”) on March 26, 2020, and any other reports KLDiscovery files with the SEC could cause actual results to differ materially from those expressed or implied by forward-looking statements made by KLDiscovery or on our behalf.
Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. All statements speak only as of the date made, and unless legally required, KLDiscovery undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Item 9.01. |
Financial Statements and Exhibits. |
(d) Exhibits.
Exhibit No. |
Description |
99.1 |
|
99.2 |
KLDiscovery Board of Directors Press Release, dated March 17, 2021. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
KLDiscovery Inc. |
||
|
|
|
|
|||
Date: March 17, 2021 |
|
|
|
By: |
|
/s/ Christopher J. Weiler |
|
|
|
|
Name: |
|
Christopher J. Weiler |
|
|
|
|
Title: |
|
Chief Executive Officer |
Exhibit 99.1
KLDiscovery Inc. Announces Fourth Quarter 2020 Financial Results
Revenue, Net Loss, EBITDA Improve Compared to Third Quarter 2020
McLEAN, Va.—March 17, 2021 — KLDiscovery Inc. (“KLDiscovery” or the “Company”), a leading global provider of electronic discovery, information governance and data recovery services, announced today that revenue for the fourth quarter ended December 31, 2020 was $74.6 million versus $72.3 million in the third quarter of 2020, a 3% increase quarter-over-quarter and a decrease of 7% year-over-year compared to the fourth quarter 2019. Net loss for the fourth quarter of 2020 was $9.8 million compared to $12.7 million in the third quarter of 2020, an improvement of 23% quarter-over-quarter and an improvement of 45% compared to the fourth quarter 2019 net loss of $17.8 million.
EBITDA for the fourth quarter of 2020 was $14.3 million versus $12.3 million in the third quarter of 2020, an increase of 16% quarter-over-quarter and was similar to the $14.4 million in the fourth quarter of 2019. Adjusted EBITDA (which excludes management fees and stock-based compensation, acquisition financing and transaction costs and other items as described below) for the fourth quarter of 2020 was $19.4 million compared to $16.7 million in the third quarter of 2020, an increase of 16% quarter-over-quarter and 13% compared to the fourth quarter of 2019. Reconciliations of EBITDA and Adjusted EBITDA to their comparable GAAP measure are shown in detail below, along with definitions for those terms.
“2020 was an extraordinary year of change and challenges but I am very proud of the accomplishments of the team at KLDiscovery as their efforts and dedication resulted in an excellent fourth quarter,” said Christopher Weiler, CEO of KLDiscovery Inc. “We achieved outstanding improvement in our financial results in the fourth quarter of 2020 compared to the second quarter of 2020 when the COVID-19 pandemic severely impacted the economy. We have done an excellent job managing costs while growing revenue. In Q4 2020 compared to Q2 2020, revenue increased 16%, net loss improved 34%, EBITDA was up 37%, and Adjusted EBITDA increased 59%. We achieved our highest Adjusted EBITDA in six quarters. We ended 2020 with $51.2 million in cash and cash equivalents on our balance sheet and a 579% increase in cash flow from operations compared to 2019 due to continued high cash receipts, cost reductions and tax deferral and credits. All of these improvements came as we implemented permanent cost savings with our data recovery integration and real estate footprint reduction while still investing in technology and research & development.”
Mr. Weiler continued, “We are in the process of evolving KLDiscovery into a company that will service industries beyond the confines of traditional eDiscovery and data recovery. In 2021, we are in the process of making significant technology investments that will change the way our customers interact with our products and services. We are investing to further develop our Nebula platform, which we believe is industry-changing and continues to gain customers and terabytes hosted. Our clients are being driven to cloud-only based hosting solutions, while our competitors use third-party applications exclusively for collections, data processing, data hosting, advanced analytics and natural language processing. We believe we will be the company that can deliver outstanding customer service while providing our best of class hosting platform through a number of different delivery vehicles intentionally designed to meet diverse geographic and data control needs. We are on a client-centric mission seamlessly delivering a full suite of proprietary software/hardware products and services in a bespoke manner built for and by our clients, wherever and however the client desires. I believe these changes will give our customers unprecedented levels of optionality in how they manage their data and truly differentiate our company while significantly expanding our total addressable market.”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year 2019-2020 Quarterly Results - Unaudited |
|
|||||||||||||||||||||||||
|
|
2019 (unaudited) |
|
|
2020 (unaudited) |
|
||||||||||||||||||||
|
|
Q1 |
|
Q2 |
|
Q3 |
|
Q4 |
|
|
Q1 |
|
Q2 |
|
Q3 |
|
Q4 |
|
||||||||
Revenue |
|
|
75.0 |
|
|
78.3 |
|
|
78.2 |
|
|
80.5 |
|
|
|
78.3 |
|
|
64.4 |
|
|
72.3 |
|
|
74.6 |
|
Net loss |
|
|
(13.5 |
) |
|
(11.4 |
) |
|
(11.3 |
) |
|
(17.8 |
) |
|
|
(12.5 |
) |
|
(14.9 |
) |
|
(12.7 |
) |
|
(9.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share (basic and diluted) |
|
$ |
(0.32 |
) |
$ |
(0.27 |
) |
$ |
(0.26 |
) |
$ |
(0.42 |
) |
|
$ |
(0.29 |
) |
$ |
(0.35 |
) |
$ |
(0.30 |
) |
$ |
(0.23 |
) |
Weighted average outstanding shares (basic and diluted) |
|
|
42.3 |
|
|
42.4 |
|
|
42.5 |
|
|
42.5 |
|
|
|
42.5 |
|
|
42.5 |
|
|
42.5 |
|
|
42.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
|
11.2 |
|
|
13.7 |
|
|
13.4 |
|
|
14.4 |
|
|
|
12.5 |
|
|
10.4 |
|
|
12.3 |
|
|
14.3 |
|
Adjusted EBITDA |
|
|
15.1 |
|
|
19.6 |
|
|
16.8 |
|
|
17.2 |
|
|
|
15.0 |
|
|
12.2 |
|
|
16.7 |
|
|
19.4 |
|
(in millions except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 Outlook
As previously announced, KLDiscovery is currently limited in its ability to accurately predict what the financial impact will be from the COVID-19 pandemic. KLDiscovery is not providing full-year 2021 guidance until it gains additional data points about the total operational impact of this global pandemic.
Earnings Conference Call
Management will conduct a conference call at 8:30 AM ET on Thursday, March 18, 2021 to discuss results for the fourth quarter of 2020. 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 register via the following link:
http://www.directeventreg.com/registration/event/3093296
Once registered, you will receive an email with Direct Entry and Registrant ID along with dial-in details. An audio recording of the conference call will be available for replay shortly after the call's completion and will remain available for two weeks 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 3093296 or visit the Investors section of the KLDiscovery website at 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, |
|
||||||||||
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
|
(unaudited) |
|
|
(unaudited) |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues....................................................................................... |
$ |
74,592 |
|
|
$ |
80,527 |
|
|
$ |
289,545 |
|
|
$ |
312,054 |
|
Cost of revenues........................................................................ |
|
36,260 |
|
|
|
41,908 |
|
|
|
147,732 |
|
|
|
160,845 |
|
Gross profit.............................................................................. |
|
38,332 |
|
|
|
38,619 |
|
|
|
141,813 |
|
|
|
151,209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative..................................................... |
|
15,975 |
|
|
|
13,126 |
|
|
|
58,509 |
|
|
|
55,005 |
|
Research and development.................................................... |
|
2,033 |
|
|
|
1,490 |
|
|
|
7,167 |
|
|
|
5,945 |
|
Sales and marketing................................................................. |
|
8,935 |
|
|
|
12,305 |
|
|
|
38,395 |
|
|
|
48,517 |
|
Depreciation and amortization................................................ |
|
8,820 |
|
|
|
9,906 |
|
|
|
35,955 |
|
|
|
39,149 |
|
Total operating expenses..................................................... |
|
35,763 |
|
|
|
36,827 |
|
|
|
140,026 |
|
|
|
148,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations........................................................ |
|
2,569 |
|
|
|
1,792 |
|
|
|
1,787 |
|
|
|
2,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense............................................................................ |
|
16 |
|
|
|
7,389 |
|
|
|
118 |
|
|
|
7,511 |
|
Interest expense........................................................................ |
|
12,356 |
|
|
|
11,890 |
|
|
|
50,659 |
|
|
|
48,377 |
|
Loss before income taxes.................................................... |
|
(9,803 |
) |
|
|
(17,487 |
) |
|
|
(48,990 |
) |
|
|
(53,295 |
) |
Income tax benefit (provision)..................................................... |
|
(28 |
) |
|
|
328 |
|
|
|
936 |
|
|
|
719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss.................................................................................... |
$ |
(9,775 |
) |
|
$ |
(17,815 |
) |
|
$ |
(49,926 |
) |
|
$ |
(54,014 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation................................................. |
|
4,400 |
|
|
|
2,604 |
|
|
|
4,947 |
|
|
|
311 |
|
Total other comprehensive income, net of tax......................... |
|
4,400 |
|
|
|
2,604 |
|
|
|
4,947 |
|
|
|
311 |
|
Comprehensive loss.................................................................... |
$ |
(5,375 |
) |
|
$ |
(15,211 |
) |
|
$ |
(44,979 |
) |
|
$ |
(53,703 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and diluted..................................... |
$ |
(0.23 |
) |
|
$ |
(0.42 |
) |
|
$ |
(1.17 |
) |
|
$ |
(1.27 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic and diluted.. |
|
42,529,017 |
|
|
|
40,835,186 |
|
|
|
42,529,017 |
|
|
|
42,425,295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Non-GAAP Financial Matters |
|||||||||||||||||
(In thousands) |
|||||||||||||||||
(Unaudited) |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
|
For The Year Ended December 31, |
|
|
||||||||||
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
||||
Net loss |
|
$ |
(9,774 |
) |
|
$ |
(17,815 |
) |
|
$ |
(49,926 |
) |
|
$ |
(54,014 |
) |
|
Interest expense |
|
|
12,356 |
|
|
|
11,890 |
|
|
|
50,659 |
|
|
|
48,377 |
|
|
Income tax (benefit) expense |
|
|
(28 |
) |
|
|
328 |
|
|
|
936 |
|
|
|
719 |
|
|
Depreciation and amortization expense |
|
|
11,698 |
|
|
|
12,793 |
|
|
|
47,761 |
|
|
|
50,407 |
|
|
Loss on debt extinguishment |
|
|
— |
|
|
|
7,203 |
|
|
|
— |
|
|
|
7,203 |
|
|
EBITDA |
|
$ |
14,252 |
|
|
$ |
14,399 |
|
|
$ |
49,430 |
|
|
$ |
52,692 |
|
|
Acquisition, financing and transaction costs |
|
|
3,629 |
|
|
|
121 |
|
|
|
5,210 |
|
|
|
3,626 |
|
|
Strategic Initiatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sign-on bonus amortization |
|
|
— |
|
|
|
113 |
|
|
|
188 |
|
|
|
413 |
|
|
Non-recoverable draw |
|
|
— |
|
|
|
840 |
|
|
|
304 |
|
|
|
3,714 |
|
|
Total strategic initiatives |
|
|
— |
|
|
|
953 |
|
|
|
492 |
|
|
|
4,127 |
|
|
Management fees, stock compensation and other |
|
|
933 |
|
|
|
671 |
|
|
|
3,658 |
|
|
|
3,515 |
|
|
Restructuring costs |
|
|
231 |
|
|
|
573 |
|
|
|
2,530 |
|
|
|
2,209 |
|
|
Systems establishment |
|
|
403 |
|
|
|
443 |
|
|
|
1,969 |
|
|
|
2,554 |
|
|
Adjusted EBITDA |
|
$ |
19,448 |
|
|
$ |
17,160 |
|
|
$ |
63,289 |
|
|
$ |
68,723 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
• |
Acquisition, financing and transaction costs include earnout payments, rating agency, letter of credit and revolving facility fees, and transaction costs relating to the business combination with Pivotal Acquisition Corp in December 2019 |
|
• |
Strategic initiatives include the amortization of one-time expenses related to the hiring of a team of 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 and retention charges |
|
• |
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) |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020 |
|
|
December 31, 2019 |
|
||
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
51,201 |
|
|
$ |
43,407 |
|
Accounts receivable, net of allowance |
|
|
|
|
|
|
|
|
for doubtful accounts of $8,449 and $7,486, respectively |
|
|
83,985 |
|
|
|
96,994 |
|
Prepaid expenses |
|
|
7,175 |
|
|
|
7,296 |
|
Other current assets |
|
|
709 |
|
|
|
556 |
|
Total current assets |
|
|
143,070 |
|
|
|
148,253 |
|
Property and equipment |
|
|
|
|
|
|
|
|
Computer software and hardware |
|
|
72,211 |
|
|
|
72,228 |
|
Leasehold improvements |
|
|
27,271 |
|
|
|
26,963 |
|
Furniture, fixtures and other equipment |
|
|
3,365 |
|
|
|
3,794 |
|
Accumulated depreciation |
|
|
(77,697 |
) |
|
|
(64,682 |
) |
Property and equipment, net |
|
|
25,150 |
|
|
|
38,303 |
|
Intangible assets, net |
|
|
109,733 |
|
|
|
130,568 |
|
Goodwill |
|
|
399,085 |
|
|
|
395,171 |
|
Other assets |
|
|
2,708 |
|
|
|
2,617 |
|
Total assets |
|
$ |
679,746 |
|
|
$ |
714,912 |
|
Current liabilities |
|
|
|
|
|
|
|
|
Current portion of long-term debt, net |
|
$ |
10,948 |
|
|
$ |
11,689 |
|
Accounts payable and accrued expense |
|
|
33,504 |
|
|
|
31,270 |
|
Current portion of contingent consideration |
|
|
695 |
|
|
|
340 |
|
Deferred revenue |
|
|
3,955 |
|
|
|
4,851 |
|
Total current liabilities |
|
|
49,102 |
|
|
|
48,150 |
|
Long-term debt, net |
|
|
472,600 |
|
|
|
468,932 |
|
Deferred tax liabilities |
|
|
7,335 |
|
|
|
6,294 |
|
Other liabilities |
|
|
8,488 |
|
|
|
7,771 |
|
Total liabilities |
|
|
537,525 |
|
|
|
531,147 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Stockholders' equity |
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
|
|
$0.0001 par value, shares authorized - 200,000,000 shares authorized as of December 31, 2020 and December 31, 2019; shares issued and outstanding - 42,529,017 as of December 31, 2020 and December 31, 2019, respectively |
|
|
4 |
|
|
|
4 |
|
Preferred Stock |
|
|
|
|
|
|
|
|
$0.0001 par value, 1,000,000 shares authorized, zero issued and outstanding as of December 31, 2020 and December 31, 2019, respectively |
|
|
— |
|
|
|
— |
|
Additional paid-in capital |
|
|
385,387 |
|
|
|
381,952 |
|
Accumulated deficit |
|
|
(255,424 |
) |
|
|
(205,498 |
) |
Accumulated other comprehensive income |
|
|
12,254 |
|
|
|
7,307 |
|
Total stockholders' equity |
|
|
142,221 |
|
|
|
183,765 |
|
Total liabilities and stockholders' equity |
|
$ |
679,746 |
|
|
$ |
714,912 |
|
|
|
|
|
|
|
|
|
|
KLDiscovery Inc. |
||||||||
Consolidated Statements of Cash Flows |
||||||||
(in thousands) |
||||||||
(unaudited) |
||||||||
|
|
|
|
|
|
|
|
|
|
For The Year Ended December 31 |
|
|
|||||
|
2020 |
|
|
2019 |
|
|
||
Operating activities |
|
|
|
|
|
|
|
|
Net loss |
$ |
(49,926 |
) |
|
$ |
(54,014 |
) |
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
47,762 |
|
|
|
50,407 |
|
|
Non-cash interest |
|
19,450 |
|
|
|
5,320 |
|
|
Stock-based compensation |
|
3,435 |
|
|
|
2,265 |
|
|
Provision for losses on accounts receivable |
|
4,088 |
|
|
|
3,104 |
|
|
Deferred income taxes |
|
1,041 |
|
|
|
219 |
|
|
Loss on extinguishment of debt |
|
— |
|
|
|
7,203 |
|
|
Change in fair value of contingent consideration |
|
98 |
|
|
|
48 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
10,050 |
|
|
|
(16,712 |
) |
|
Prepaid expenses and other assets |
|
87 |
|
|
|
2,404 |
|
|
Accounts payable and accrued expenses |
|
4,675 |
|
|
|
(8,937 |
) |
|
Deferred revenue |
|
(984 |
) |
|
|
396 |
|
|
Net cash provided by (used) in operating activities |
|
39,776 |
|
|
|
(8,297 |
) |
|
Investing activities |
|
|
|
|
|
|
|
|
Acquisitions, net of cash |
|
(3,124 |
) |
|
|
(1,950 |
) |
|
Purchases of property and equipment |
|
(10,935 |
) |
|
|
(13,268 |
) |
|
Net cash used in investing activities |
|
(14,059 |
) |
|
|
(15,218 |
) |
|
Financing activities |
|
|
|
|
|
|
|
|
Recapitalization transaction |
|
— |
|
|
|
186,503 |
|
|
Revolving credit facility - draws |
|
29,000 |
|
|
|
54,500 |
|
|
Revolving credit facility - repayments |
|
(29,000 |
) |
|
|
(54,500 |
) |
|
Payments for capital lease obligations |
|
(1,595 |
) |
|
|
(1,427 |
) |
|
Issuance of common stock |
|
— |
|
|
|
414 |
|
|
Payments on long-term debt |
|
(17,000 |
) |
|
|
(142,000 |
) |
|
Net cash (used in) provided by financing activities |
|
(18,595 |
) |
|
|
43,490 |
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rates |
|
672 |
|
|
|
(7 |
) |
|
Net increase in cash |
|
7,794 |
|
|
|
19,968 |
|
|
Cash at beginning of period |
|
43,407 |
|
|
|
23,439 |
|
|
Cash at end of period |
$ |
51,201 |
|
|
$ |
43,407 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure: |
|
|
|
|
|
|
|
|
Cash paid for interest |
$ |
32,196 |
|
|
$ |
42,693 |
|
|
Income taxes paid, net of refunds |
$ |
(195 |
) |
|
$ |
470 |
|
|
|
|
|
|
|
|
|
|
|
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 |
$ |
394 |
|
|
$ |
129 |
|
|
Investor Contacts:
Dawn Wilson
(703) 520-1498
dawn.wilson@kldiscovery.com
Richard Simonelli
(202) 450-9516
richard.simonelli@kldiscovery.com
Media Contact:
Krystina Jones
(888) 811-3789
krystina.jones@kldiscovery.com
About KLDiscovery
KLDiscovery provides technology-enabled services and software to help law firms, corporations, government agencies and consumers solve complex data challenges. The company has 32 locations, nine data centers and 18 data recovery labs across 18 countries and is a global leader in delivering best-in-class eDiscovery, information governance and data recovery solutions to support the litigation, regulatory compliance, internal investigation and data recovery and management needs of our clients. Serving clients for over 30 years, KLDiscovery offers data collection and forensic investigation, early case assessment, electronic discovery and data processing, application software and data hosting for web-based document reviews, and managed document review services. In addition, through its global Ontrack Data Recovery business, KLDiscovery delivers world-class data 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 recognized as 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. For more information, please email info@kldiscovery.com or visit www.kldiscovery.com.
This press release includes “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934 and 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: KLDiscovery’s potential failure to comply with privacy and information security regulations governing the client datasets it processes and stores; the outbreak of disease or similar public health threat, such as COVID-19; KLDiscovery’s ability to operate in highly competitive markets, and potential adverse effects of this competition; risk of decreased revenues if KLDiscovery does not adapt its pricing models; the ability to deliver products and services following a disaster or business continuity event; potential disruption of KLDiscovery’s products, offerings, website and networks; the ability to attract, motivate and retain qualified employees, including members of KLDiscovery’s senior management team; the ability to maintain a high level of client service and expand operations;
potential issues with KLDiscovery’s product offerings that could cause legal exposure, reputational damage and an inability to deliver services; KLDiscovery’s ability to develop new products, improve existing products and adapt its business model to keep pace with industry trends; risk that KLDiscovery’s products and services fail to interoperate with third-party systems; potential unavailability of third-party technology that KLDiscovery uses in its products and services; difficulties resulting from KLDiscovery’s implementation of new consolidated business systems; the ability to comply with various trade restrictions, such as sanctions and export controls, resulting from KLDiscovery’s international operations; potential intellectual property infringement claims; and KLDiscovery’s substantial indebtedness. These risks and other factors discussed in the “Risk Factors” section of KLDiscovery’s Annual Report on Form 10-K filed with the Securities Exchange Commission (“SEC”) and any other reports KLDiscovery files with the SEC could cause actual results to differ materially from those expressed or implied by forward-looking statements made by KLDiscovery or on our behalf.
Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. All statements speak only as of the date made, and unless legally required, KLDiscovery undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Non-GAAP Financial Measures
In addition to providing financial measurements based on accounting principles generally accepted in the United States of America (“GAAP”), this earnings press release includes additional financial measures that are not prepared in accordance with GAAP (“non-GAAP”), including EBTIDA and Adjusted EBITDA. We believe that these measures are relevant and provide useful supplemental information to investors by providing a baseline for evaluation and comparing our operating performance against that of other companies in our industry.
The non- GAAP financial measures that we use may not be comparable to similarly titled measures reported by other companies and in the future, we may disclose different non- GAAP financial measures in order to help our investors meaningfully evaluate and compare our results of operations to our previously reported results of operations or to those of other companies in our industry. We believe these non- GAAP financial measures reflect our ongoing operating performance because the isolation of non-cash charges, such as amortization and depreciation, and other items, such as interest, income taxes, management fees and equity compensation, acquisition and transaction costs, restructuring costs, systems establishment and costs associated with strategic initiatives which are incurred outside the ordinary course of our business, provides information about our cost structure and helps us to track our operating progress. We encourage investors and potential investors to carefully review the GAAP financial information and compare them with our EBITDA and adjusted EBITDA.
Adjusted EBITDA
We define EBITDA as net income (loss) plus interest (income) expense, income tax expense (benefit), depreciation and amortization. We view adjusted EBITDA as our operating performance measure and as such, we believe that the most directly comparable GAAP financial measure is net loss. In calculating adjusted EBITDA, we exclude from net loss certain items that we believe are not reflective of our ongoing business and exclusion of these items allows us to provide additional analysis of the financial components of the day-to-day operation of our business. We have outlined below the type and scope of these exclusions:
|
• |
Acquisition, financing and transaction costs generally represented by non-ordinary course earn-out valuation changes, rating agency fees, letter of credit and revolving facility fees, as well as professional service fees and direct expenses related to acquisitions. Because we do not acquire businesses on a predictable cycle, we do not consider the amount of acquisition- and integration-related costs to be a representative component of the day-to-day operating performance of our business. |
|
• |
Strategic initiatives expenses relate to costs resulting from pursuing strategic business opportunities. We do not consider the amounts to be representative of the day-to-day operating performance of our business. |
|
• |
Management fees, stock compensation and other primarily represents consulting fees and portion of compensation paid to our employees and executives through stock-based instruments. Determining the fair value of the stock-based instruments involves a high degree of judgment and estimation and the expenses recorded may not align with the actual value realized upon the future exercise or termination of the related stock-based awards. Therefore, we believe it is useful to exclude stock-based compensation to better understand the long-term performance of our core business. |
|
• |
Restructuring costs generally represent non-ordinary course costs incurred in connection with a change in a contract or a change in the makeup of our personnel often related to an acquisition. We do not consider the amount of restructuring costs to be a representative component of the day-to-day operating performance of our business. |
|
• |
Systems establishment costs relate to non-ordinary course expenses incurred to develop our IT infrastructure, including system automation and enterprise resource planning system implementation. We do not consider the amount to be representative of a component of the day-to-day operating performance of our business. |
Exhibit 99.2
KLDiscovery Inc. Adds Arjun Shah to the Board of Directors
McLEAN, Va.— March 17, 2021 — KLDiscovery Inc. (“KLDiscovery”), a leading global provider of electronic discovery, information governance and data recovery services, today announced that it is adding Arjun Shah to its Board of Directors, effective March 16, 2021.
Mr. Shah is a Vice President at The Carlyle Group Inc. (“Carlyle”). He is focused on investment opportunities in the technology, media and telecom sectors.
Prior to joining Carlyle in 2017, Mr. Shah worked at Tinicum Incorporated and Blackstone.
Mr. Shah received his MBA from Harvard Business School where he was a Baker Scholar. He graduated summa cum laude from University of Pennsylvania where he received a BS in economics from the Wharton School and a BS in engineering.
“We are pleased to welcome Arjun to our Board of Directors,” said Christopher Weiler, Chief Executive Officer of KLDiscovery. “He brings a wealth of financial and technology experience to our Board.”
KLDiscovery’s Board members are: Chair of the Board - Donna Morea; Chris Weiler, CEO KLDiscovery; Ian Fujiyama; Kevin Griffin; Jonathan Ledecky; Evan Morgan; Lawrence Prior III; Arjun Shah, Lauren Tanenbaum; and Richard Williams.
About KLDiscovery
KLDiscovery provides technology-enabled services and software to help law firms, corporations, government agencies and consumers solve complex data challenges. The company has 32 locations, nine data centers and 18 data recovery labs across 18 countries and is a global leader in delivering best-in-class eDiscovery, information governance and data recovery solutions to support the litigation, regulatory compliance, internal investigation and data recovery and management needs of our clients. Serving clients for over 30 years, KLDiscovery offers data collection and forensic investigation, early case assessment, electronic discovery and data processing, application software and data hosting for web-based document reviews, and managed document review services. In addition, through its global Ontrack Data Recovery business, KLDiscovery delivers world-class data 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 recognized as 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. For more information, please email info@kldiscovery.com or visit www.kldiscovery.com.
Media Contact:
Krystina Jones
888-811-3789
Exhibit 99.2
krystina.jones@kldiscovery.com
Investor Contact:
Richard Simonelli
202-450-9516
richard.simonelli@kldiscovery.com