Q2 2023 KLDiscovery Inc Earnings Call

Participants

Christopher J. Weiler; Co-Founder, CEO & Director; KLDiscovery Inc.

Dawn M. Wilson; CFO; KLDiscovery Inc.

Presentation

Operator

Thank you for standing by. My name is Enrique, and I'll be your conference operator today. At this time, I would like to welcome everybody to the KLDiscovery Q2 2023 Financial Results Conference Call. (Operator Instructions).
I would like now to turn the call over to Dawn Wilson, CFO. Please go ahead.

Dawn M. Wilson

Thank you, operator. Welcome to KLDiscovery's Q2 2023 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. KLDiscovery 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 measure 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 a replay of this call.
I will now turn the call over to our CEO, Chris Weiler.

Christopher J. Weiler

Thanks, Dawn. Thanks for joining us today for KLDiscovery's Second Quarter 2023 Financial Results Conference Call. My name is Chris Weiler, and I'm the CEO and Co-Founder of KLDiscovery.
Our strong momentum continues as we had yet another outstanding quarter of financial results in Q2 2023, as the KLD team delivered amazing results. I am incredibly proud to lead and be surrounded by an incredible team of professionals from around the globe that have an amazing commitment to delivering excellent products and services to our global client base.
Our 24/7/365 client service when combined with innovative tools such as Client Portal and our Nebula ecosystem are changing the way our clients can manage their data for legal matters, resulting in increased revenue and improved -- improving profitability, the combination is creating a clear, unmatched competitive advantage for KLD.
In the first half of 2023, we generated a record $181 million of revenue. In the second quarter, we delivered $90 million of revenue, which is 20% increase compared to the second quarter of 2022. Our strong revenue momentum is also reflected in our bottom line. We reduced our net loss by 58% in the second quarter of 2023 compared to the second quarter of 2022. EBITDA for the same period increased 91%, while adjusted EBITDA increased 63%.
As we move into the second half of 2023, it's hard for me to contain my excitement about the business. Our momentum, which began in our fourth quarter of 2022, has carried through the first half of this year and is a reflection of our successful execution of our strategic initiatives.
I believe our strong performance is proof positive that KLD is evolving the client experience and creating practical real-world solutions that not only create incredible value for our clients but help them gain greater levels of control, efficiency and quality. Our team's commitment to KLD strategic vision is further evidence with the increasing numbers of high-value engagements such as regulatory investigations and cyber incident response.
The Nebula ecosystem is solidifying itself as a platform of choice for our clients. Client adoption is growing at a tremendous rate. And we currently use Nebula processing for virtually every legal technology engagement worldwide. The Nebula ecosystem's already expansive library of technology-enabled solutions will continue to grow as we pave the way for additional cutting-edge AI that will put even more automation and efficiency in our clients' hands.
Client Portal is another solution we developed to disrupt the status quo of client engagement. We have spent years creating a highly integrated back office, including our one-of-a-kind business process automation platform that was custom built for e-discovery, and our clients are now reaping the rewards. We believe Client Portal is the only offering available that gives users the level of real -- instant real-time visibility into their portfolio matters and it will only get better over time.
As you may recall, we also launched our first-of-a-kind franchise program in Q2. We are quickly working to complete the registration process in all key states and expect to ramp up marketing efforts in Q3. This program is an exciting and innovative opportunity for revenue and EBITDA growth. It is garnering significant industry interest from qualified entrepreneurs and existing business owners.
Across the board, we remain incredibly bullish on where KLD is heading with all of our proprietary technology and are excited to execute our strategic and engineering road maps to bring more innovation and a differentiated client experience into market.
We are in prime position to capitalize on the favorable industry tailwinds created by expanding data volumes and increased regulatory scrutiny and believe we are well equipped to continue forging our own path forward backed by the strength of our fully integrated back office, one-of-a-kind technology and 24/7/365 customer service.
I will now turn the call over to our CFO, Dawn Wilson.

Dawn M. Wilson

Thank you, Chris. Q2 2023 was another outstanding quarter as we continue to deliver strong financial results. We have $90-plus million in revenue each of the last 2 quarters and $20-plus million in adjusted EBITDA in the last 3 quarters. Our second quarter 2023 revenue of $90 million was the second highest revenue quarter in our history with Q1 of 2023 being the highest. Revenue was up 20% compared to the $75.2 million of revenue in the second quarter of 2022.
Nebula generated $10.9 million of revenue in the second quarter of 2023, up 40% compared to the second quarter of 2022. Our continued efforts to increase our bottom line are reflected in our improved net loss, EBITDA and adjusted EBITDA results. Our Q2 2023 net loss of $4.7 million was a 58% improvement from the Q2 2022 net loss of $11.2 million.
Q2 2023 EBITDA was $18.5 million compared to Q2 2022 EBITDA of $9.7 million, a 91% increase. As I mentioned earlier, we posted our third consecutive quarter of adjusted EBITDA over $20 million, with Q2 2023 adjusted EBITDA of $20.1 million compared to Q2 2022 adjusted EBITDA of $12.4 million, an increase of 63% year-over-year.
Our liquidity remains strong as our cash and cash equivalents were $21 million on June 30, 2023. And we have nothing drawn on our $40 million revolving credit facility.
In closing, we were very happy with our strong financial results and the great job our colleagues at KLD do every day. 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?

Christopher J. Weiler

Thank you, Dawn, and thanks, everyone, for joining our call this morning, and have a great rest of the summer.

Operator

This concludes our conference call. You may now disconnect.