KLDiscovery Inc. (KLDI)

[HokieHead]

Huge earnings and cash on hand. Nice first report!

KLDiscovery Inc. (“KLDiscovery”), a leading global provider of electronic discovery, information governance and data recovery services, announced today that revenue for the year ended December 31, 2019, was $312.1 million, an increase of 5.3% over revenue of $296.3 million for the full year of 2018. Revenue for the fourth quarter ended December 31, 2019, was $80.5 million, an increase of 4.4% over revenue of $77.1 million for the fourth quarter of 2018.

Adjusted EBITDA (which excludes management fees and stock-based compensation, acquisition financing and transaction costs and other items as described below) for the full year of 2019, was $68.7 million, an increase of 25.9% compared to adjusted EBITDA of $54.6 million for the full year of 2018. Adjusted EBITDA for the fourth quarter of 2019, was $17.2 million, an increase of 27.7% compared to adjusted EBITDA of $13.5 million for the fourth quarter of 2018. Reconciliations of EBITDA and Adjusted EBITDA, to their GAAP basis results are shown in detail below, along with definitions for those terms.

As of December 31, 2019, the Company had approximately $43.4 million in cash and cash equivalents.

“2019 was a very good year for KLDiscovery,” said Christopher Weiler, CEO of KLDiscovery Inc. “Our team continued its dedication to delivering outstanding customer service and we continued to grow with strategic acquisitions and strong sales. In 2019, revenue was up 5.3% and we made significant strides in EBITDA which increased 76.5% year-over-year and Adjusted EBITDA which grew 25.9% year-over-year.”

[LINK Oracle]

And I appreciate all of your DD

[dadeano]

I did all the DD and happily bought warrants at .60 a few months back

[LINK Oracle]

I agree that once we see valuation of the company tonight, we will see the W trade with proper value, relative to the SP. This thing could easily be work $40-$50 a share tomorrow morning with the warrants trading at $30+. That is one hell of a return on a .5o warrant, hence my buying. GLTY

[dadeano]

Hope so. I’m in the hole on Warrants. No worries. This will be trading much higher when a proper valuation is given by the market. Could start as soon as tomorrow when we see the financials tonight. Check their twitter page, company is continually recognized for their technology and growth.

[LINK Oracle]

Fins set to be released AH today with conference call tomorrow. Commons and Warrants on watch . First filing since merger. Could be a boomer tomorrow.

[dadeano]

Revolution Growth owns 10%

Carlyle Group owns 48% ($220 billion dollar firm)

We’re in good hands

[dadeano]

Spoke to IR, they will actually be released in second half of March, no date set.

[dadeano]

Ledecky is still on the board. Looking forward to this achieving a reasonable market valuation shortly.

[LINK Oracle]

agreed

[dadeano]

Got some more warrants today. Locked, ready for the run.

We should see financials next week. Should be the catalyst to start this move up to a fair market valuation.

[HokieHead]

It was amended so it they may have been a holder when this was PVT, I don't see them as a prior owner or reporter for KLDI. Looks like just more paperwork cleanup for move to OTCQB or maybe a big board soon.

[LINK Oracle]

Interesting 13k. What do you think Hokie

[dadeano]

I have bids in every day. Yesterday I had a bid in for warrants at .60. They sold 200k at that price and I somehow didn’t get filled

[dadeano]

Feb 20th

[LINK Oracle]

Arent we due for fins soon?

[HokieHead]

Hmm, look at the SC forms of ownership and the company directors listed at the OTC. Seems to me they are all still here. I'm holding and adding for the long term. Thanks for the concerns and stopping by, KLDI will be fine from here.

[loginusername]

"Included in the shares outstanding and weighted average shares outstanding as presented in the pro forma combined financial statements are 34,800,000 shares of our Common Stock to be issued to LD Topco’s shareholders, 360,435 Pivotal public shares which were not redeemed"

Cash from pivotal was about $4 million. Only 360,000 shares were not redeemed. Spac holders took their cash and ran. They couldn't convince any of them to stay in.
Your article is from august 2019.

[HokieHead]

Nope...

The Pivotal deal also brings significant financial benefits to KLDiscovery. Much of the cash will go to reduce debt, slashing interest expense by $16 million per year. Leverage will drop sharply from 5.8 times to just 2 times in 2020. That will give KLDiscovery plenty of room to pursue accretive acquisitions both large and small.

KLDiscovery: A Unique Bet on Data Getting Bigger and Corporate Litigation Thriving

Anyone who follows daily news knows that civil lawsuits against corporations aren’t going away. And between emails, texts, and messaging across several devices, it’s clear that data is growing while getting harder to harness. The good news: A recent IPO offers investors a way to bet on both of those trends continuing – with a top-notch management team to boot.

Meet KLDiscovery, an electronic discovery and data recovery provider which is going public through a merger with Pivotal Acquisition Corp. (ticker: PVT), a special purpose acquisition company or SPAC. Pivotal raised money in an IPO to find a target and recently announced a deal with KLDiscovery that will result in a public company with an enterprise value of $800 million. The deal will be put to a shareholder vote later in the third quarter, after which Pivotal will change its name to KLDiscovery.

Here’s how a need for KLDiscovery’s services came about: Record keeping evolved from microfiche and legal copy in the 1990s to scanned digital images stored on computers. By 2000, the Y2K scare prompted serious concern about tracking computer data. Since then, data volume has multiplied, living on physical devices from laptops to thumb drives to iPads with digital trails not only on email but on social platforms from Twitter to Instagram.

All that data can become legally relevant when a court orders discovery of evidence. If a company is compelled to produce large amounts of data that’s dispersed in many places, it usually hires an objective third party to help dig it up. In total, the addressable market is $21.3 billion, according to The Radicati Group.

KLDiscovery has been at the forefront of that business since it was co-founded by CEO Chris Weiler in 2005. Since then, the company has served an impressive client roster, including 65% of the Fortune 500 and 95% of the Am Law 100 firms. Those clients, who range from Apple to Starbucks, have shown a retention rate above 95%.

To foster growth, KLDiscovery has embraced a bold acquisition strategy. The company has executed a string of M&A deals, including bolt-on purchases and transformational acquisitions such as Data recovery and discovery firm Kroll Ontrack.

In late July, KLDiscovery announced two accretive software acquisitions, New York-based Strategic Legal Solutions and Richmond, Virginia-based Compiled. The company has multiple other deals in the pipeline that may close in the near term, including four targets that can generate over $50 million in revenue. Beyond that, there are literally hundreds of possible deals across legal services, software technology, and forensic cyber companies.

One area of potential expansion is data recovery, where KLDiscovery already commands a number one position. The bulk the company’s business is data discovery, but there’s plenty of scope for data recovery to grow from the current level of roughly 15% of revenue.

Importantly, the SPAC sponsor’s CEO is legendary dealmaker Jonathan Ledecky. Mr. Ledecky, who is co-owner of the National Hockey League’s New York Islanders, has had a knack for successful rollups for decades. In the 1990s, the Harvard-educated businessman grew stationery vendor U.S. Office Products through over 200 acquisitions. He will serve an important role in the new company as it hunts for deals.

KLDiscovery will also benefit from the continued ownership of The Carlyle Group and Revolution Growth, who will retain 100% of their existing equity in the transaction. That’s not only a positive because of the private equity firms’ experience managing and growing businesses, but also an indication of their confidence in KLDiscovery.

Such a combination of strong leadership and continued private-equity ownership has proven a hallmark of successful SPACs. A recent example is spa operator OneSpaWorld, (ticker: OSW), which went public through a merger with Haymaker Acquisition and continues to be partially owned by L Catterton. The stock is up over 50% this year.

The Pivotal deal also brings significant financial benefits to KLDiscovery. Much of the cash will go to reduce debt, slashing interest expense by $16 million per year. Leverage will drop sharply from 5.8 times to just 2 times in 2020. That will give KLDiscovery plenty of room to pursue accretive acquisitions both large and small.

The company expects healthy growth in years to come, with Ebitda growing at an annualized 23.8% rate between 2017 and 2020. That forecast could prove conservative if the company lines up major M&A deals.

With the stock trading around $10, investors have a chance to own the business at a reasonable valuation of 10.7 times 2019 adjusted Ebitda. That is significantly below multiples for comparable companies such as 28 times for cloud software firm Blackbaud and 32 times for information management firm Tyler Technologies.

The near-term downside is also very limited. As with any SPAC, investors would get their cash back in the event the deal does not close.

Another plus: the data discovery business should thrive in good economies and bad. For instance, an uptick in Chapter 11 proceedings would trigger strong demand for bankruptcy work.

In these time of turbulent markets and heady valuations, it can be tough to find good bets in growth industries. With a proven track record in a niche industry driven by a structural shift in data, investors have a rare chance to profit from KLDiscovery.

[loginusername]

Does the $400 million in debt concern you?

[dadeano]

I’d settle for $45/share.

[HokieHead]

It's coming. Watching for earnings PR and filing maybe this week or next. Closest competitor, TYL, reports after hours today. To put things in perspective with them.

TYL = 2020 Revenues est $1.2 billion, current price/sales ratio is 11 ($13b MC/$1.2b sales).

KLDI PPS with similar price/sales ratio;

For the full-year 2020, KLD now expects revenue in the range of approximately $335-$355 million and Adjusted EBITDA in a range of approximately $80-$85 million.

42m OS x $8 PPS = $336m MC / $335m 2020 sales = PS 1
Similar PS of only 10 would be a $80 PPS

After S1 with full shares OS:

72m OS x $8 PPS = $576m MC / $335m 2020 sales = PS ~2
Similar PS of only 10 would be a $45-$50 PPS

This will go, be patient

[dadeano]

Yeah, I was the only one who bought some warrants today. I have bids in every day if someone wants to sell cheap, I’ll add.

Crazy undervalued here. I’m watching DraftKings SPAC play DEAC run and shake my head. KLDiscovery has more revenue than DraftKings and doesn’t incur huge losses/high customer acquisition costs.

Really a no brainer at this market cap. Pivotal merger brings more capital for acquisitions and paying off debts

[HokieHead]

S1 effective, filing. Things should start to get interesting this month

[HokieHead]

It will come bud, just add and accumulate when you can. I have no worries at all. Not a flip or week hold, long term play here for me.

[dadeano]

Guess it is only us 3 on this board who’s “radar is up.”

Hope we don’t have to wait until an uplist to one of the main exchanges to get the proper attention/valuation here.

[LINK Oracle]

Should be getting fins this week. Radars up

[dadeano]

Just a matter of time... not sure what it will take to get attention, but it’s got to come

[LINK Oracle]

This is Linden Advisors

As a team, we have invested more than $2 billion in healthcare companies, helping to build strong platforms and thriving businesses. Today, we manage nearly $3 billion of commitments augmented by capital provided by our Limited Partners for larger transactions.

https://www.lindenllc.com/about/our-firm/

[HokieHead]

Linden Capital and Linden Advisors, 5% stake filings..

https://www.otcmarkets.com/filing/html?id=13899824&guid=P42CUKE1xYNch3h

https://www.lindenllc.com/

Backers that are holding this are big time private equity firms.

[HokieHead]

Float is only like 360,000 so they walked it down on 100 share trades with 1 MM to try and get sellers. Didn't happen. End of day had 6-7 MM's on the bid and only 2 on the ask, same as last week when it ran in to the $20's. I am looking for it to turn back higher tomorrow in a big way.

TYL - $13 BILLION Market cap and 100 PE

KLDI has a long way to go higher to catch up.

[dadeano]

Why is this happening?

[HokieHead]

Look at this walkdown on 100 share trades. Last week there were 1,000 share buys in the $20's. LOL.

[HokieHead]

Couldn't have said it any better. $$

[dadeano]

Company can execute warrants if stock trades over $18 for 20 consecutive trading days. I’m assuming they will at that point.

Let’s say stock is worth $20/share when company executes warrants. Warrants will be worth:

$20-$11.50= $8.50

Current price for a warrant is $0.70. That’s a 1100% gain.

Probably capped there and then we can just hold the commons that the warrants get us and ride it up from there.

Anyone doubt this is going to $20?

[HokieHead]

You’re not missing anything d! They walked the commons down on low volume, only ask end of day was $16.85. A week ago there were thousands of shares bought in the $20s. I compare it to TYL, it will get there from a valuation standpoint soon enough imo.

[dadeano]

At a pps of $9.15, the market cap is $389 million. The company is forecasting $335-$355 million in revenue this year.

What am I missing here?

I know it’s a different sector, but look at DraftKings SPAC into DEAC. Crazy valuation already and DraftKings is forecasting $225 million in revenue with huge losses.

Again, what am I and the market missing here? Honest question. If all the 29 million in warrants are executed, the market cap grows to $650 million, still a bargain.

[HokieHead]

No doubt. Adding more commons the week.

[dadeano]

Maybe this week it wakes up?

[dadeano]

The S1 just provided the financials so people need to open their eyes

[LINK Oracle]

I believe as soon as fins are posted (in the next week or two) we see the commons start to make their move north, with the Ws to follow with a multiple.

[HokieHead]

They are playing with the commons and the low SS. $0.75 warrants easily telling you commons will be north of $12.25. These both will fly in due time. It will pay off bigly imo.

[dadeano]

People buying warrants at .70+ and this going down to $9. Ok....

[LINK Oracle]

That’s why I made sure I had my position now. Fins will tell us a lot but I am also looking for supplemental information contained in the fins about the January merger.

[dadeano]

I don’t doubt the DD. Just curious why no interest here....

Guess us 3 are just ahead of the curve. Looks like financials are due out on February 20th- maybe that will wake up the masses

[LINK Oracle]

Anybody willing to drop $650,000 on the warrants at 75 and $.80 has my vote

[LINK Oracle]

Just wait for the filings by the 15th

[HokieHead]

It will come, not worried at all. Big names behind it.

[dadeano]

No volume today. Wonder if anyone but us know this undervalued, $350 million/year company exists?

[dadeano]

I’m speaking to Superior Document Services which KLD acquired on Jan 8th.

The core business is producing ~$350 million a year as you stated.