Edited Transcript of KLDI.PK earnings conference call or presentation 26-Mar-20 2:00pm GMT


Jun 30, 2020 (Thomson StreetEvents) — Edited Transcript of KLDiscovery Inc earnings conference call or presentation Thursday, March 26, 2020 at 2:00:00pm GMT * Christopher J. Weiler KLDiscovery Inc. – Co-Founder, CEO & Director * Dawn M. Wilson KLDiscovery Inc. – CFO The Carlyle Group Inc. – Principal Ladies and […]

Jun 30, 2020 (Thomson StreetEvents) — Edited Transcript of KLDiscovery Inc earnings conference call or presentation Thursday, March 26, 2020 at 2:00:00pm GMT

* Christopher J. Weiler

KLDiscovery Inc. – Co-Founder, CEO & Director

* Dawn M. Wilson

KLDiscovery Inc. – CFO

The Carlyle Group Inc. – Principal

Ladies and gentlemen, thank you for standing by, and welcome to the KLDiscovery Q4 2019 Financial Results Conference Call. (Operator Instructions) Also please be advised that today’s conference is being recorded.

I would now like to hand the conference over to your speaker today, Dawn Wilson, Chief Financial Officer. Thank you. Please go ahead.

Dawn M. Wilson, KLDiscovery Inc. – CFO [2]

Thank you, operator. Good morning, and welcome to KLDiscovery’s Q4 and Full Year 2019 Conference Call. Certain portions of our discussion today may contain forward-looking statements, which involve risks and uncertainties that may result in actual results differing materially from such statements.

Important factors that can result — can cause actual results to differ, include, but are not limited to: those stated in KLDiscovery’s March 25, 2020 press release; on our 2019 year-end results; and the company’s filings with the SEC, including our Form 10-K, which we plan to file this week. All forward-looking statements are based on information available to KLDiscovery on the date of this call. KLDiscovery assumes no obligation to update these statements, whether as a result of new information, future events or otherwise.

Reconciliations to the most directly comparable GAAP measure to the non-GAAP financial measures discussed on this call, including EBITDA and adjusted EBITDA, are shown in detail in our press release issued last night, along with definitions for those terms. Please refer to last night’s press release on how to access the replay of this call.

I will now turn the call over to our CEO, Chris Weiler.

Christopher J. Weiler, KLDiscovery Inc. – Co-Founder, CEO & Director [3]

Thank you, Dawn. And thank you very much for joining KLDiscovery’s annual financial results conference call, our very first as a public company. Today, we will be discussing our financial results for 2019, our financial outlook for 2020 and the future strategic direction of KLD. My name is Chris Weiler, and I am the Co-Founder and CEO of KLD.

We started the company in 2005 and have grown from a regional eDiscovery provider to a global company with over 1,200 employees. At KLD, company culture is paramount and is an integral part of our employees’ daily lives. The global KLD family is dedicated to excellence, customer service and innovation, all delivered with teamwork and humility.

In May 2018, I made a commitment to meet with or talk to every global KLD teammate. Throughout the past 1.5 years, I fulfilled that commitment. After speaking with every single employee, I can confidently say we truly possess a deeply loyal, committed and talented global workforce. I am extremely proud of their hard work and accomplishments and the unique culture that we have at KLD. KLD is truly one global fingerprint.

We went public in December of 2019 via merger with a special purpose acquisition company, Pivotal Acquisition Corp. This fact allowed us to refinance a large amount of high-priced debt, lower our interest expense and gave us $38 million of net proceeds after paying down debt, including our revolver and deal transaction costs. We also added 2 members of the Pivotal team to our Board of Directors, Jon Ledecky and Kevin Griffin.

On Monday, March 23, we added 2 other Board members from Carlyle Group, our largest shareholder: Lawrence Prior III and Ian Fujiyama. Mr. Prior was most recently Chief Executive Officer of CSRA, Inc. and brings a wealth of technology solutions experience to the Board. Mr. Fujiyama is a 23-year veteran at Carlyle, focusing on strategic investments in aerospace, defense and government services.

We also announced the appointment of Donna Morea as our new Chairman of the Board. Ms. Morea has been on our Board since March 2017. She is an operating adviser of Carlyle, with over 30 years of experience in information technology professional services management. She was President of CGI Technology and Solutions, Inc. We are pleased to have Donna, with her broad knowledge of the information technology industry and management experience, leading our Board of Directors.

With 4 new members on the Board and a new Chairman, we have demonstrated our commitment to the future by strengthening our Board with successful, highly experienced individuals with a strong business and financial experience.

So who are we and where is KLD headed in the future? KLDiscovery provides technology-enabled services and software solutions to help law firms, corporations, government agencies and consumers solve complex data challenges. We are a global market leader in eDiscovery, information governance and data recovery in an industry with a total addressable market of over $22 billion. This market is growing and expanding as companies generate increasing amounts of electronically stored information.

Litigation tends to be acyclical so the recent economic downturn should not adversely affect the long-term demand for our services. In fact, litigation activity could increase as lawsuits emerge from the current socioeconomic environment caused by the novel coronavirus or COVID-19. In the eDiscovery industry, KLD is unique. We are the only technology-enabled service provider who operates its own proprietary end-to-end technology platform. From data collections, processing data, analytics and review, KLD offers a custom solution to both law firms and corporations.

Our competition relies upon third-party technology and only provides the wrappers that daisy chains these disparate tools together. KLD’s white-glove service fabric is deployed through our global network of over 40 offices in 20 countries. KLD performs cross-border complex litigation services, servicing virtually every major geography with the follow-the-sun K support structure. Since the founding of KLD, our team has built an amazing culture of dedicated professionals to deliver 24/7, 365 client service excellence.

I cannot emphasize enough the importance of delivering the best client service wrapped around our leading-edge innovative technology. We design and develop our software and hardware to seamlessly work from the start to the completion of a project. Not only are we the best technology-enabled service provider in the industry, but we also have one of the best legal services software companies. In an industry that is focusing on today, we have always looked to the future, while simultaneously delivering 5-star service to our customers.

Nebula is our end-to-end eDiscovery server and cloud solution that facilitate smarter ways to call, process, review and manage documents in a user-friendly intuitive interface. It is the next evolution in information governance and eDiscovery, designed with the user experience in mind, providing improved flexibility and control. Developed in-house by KLD, the technology offers the latest advancements in eDiscovery to include predictive coding with continuous active learning.

Nebula also delivers solutions for the information governance, compliance and legal hold industries. Nebula Big Data Store, or NBDS, is uniquely equipped to handle extremely large amounts of data from the corporate archive and provide our clients with an array of services, which allows them to make decisions regarding their data intelligently and cost effectively. Nebula has made amazing progress over the last 1.5 years, growing to over 2,300 active users and almost 100 terabytes of data hosted.

We have been recognized by Everlaw, a leading cloud-based review platform, as one of the main competitors. The significance of that recognition cannot be understated. Google’s PE firm, Alphabet, just made a $62 million investment in Everlaw. We will continue investing in Nebula, and have made dozens of new hires to support this product line.

While the focus of our competitors is all about the cloud, Nebula has a solution for every use case that challenges our clients. For corporations and law firms who prefer the security of a technology solution not connected to their internal network or internet, KLD built its own portable solution, Nebula Private Cloud, otherwise is known as NPC. NPC is delivered in a portable mobile device, fitting into the overhead space on an airplane carry-on luggage compartment. It can also be delivered anywhere in the world for ultimate local security.

KLD will also introduce its own rack-mounted server version of NPC in early 2021. The rack-mounted version of Nebula sits behind the client’s firewall and scales to grow with the clients’ data needs. Nebula truly has a solution for every customer and every solution, whether server, cloud, portable, rack-mounted or Nebula Big Data Store.

Coronavirus, or COVID-19, is a global pandemic that may be with us for some time. This is a very challenging time for the world and the KLDiscovery family. We are deeply committed to service excellence and employee well-being. We are confident in our ability to maintain the highest levels of service and productivity our global customers expect as we navigate these uncertain times. Our top priority is the health of our employees and customers, and we have taken careful thought to proactively address these risks and concerns. We are actively monitoring the situations as conditions evolve.

Initial preparations have been made to protect employees and maintain continuity of business operations by implementing a very aggressive work-from-home policy. KLD operates in 20 countries, all with excellent Internet infrastructure across our entire geographic footprint, with a secure VPN with a mandatory dual-factor authentication. Every country we operate in has strong fiber or Internet bandwidth, so we’re in great shape as far as connectivity.

KLDiscovery is well positioned to expand its work-from-home policies as the coronavirus threat continues. All KLD employees are encouraged to replace nonessential travel and meetings with audio and video conferencing.

Employees are urged to leverage the company’s work-from-home policy with essential lab personnel working on rotation to minimize the risk of exposure. This allows the majority, if not the entirety, of KLD’s workforce to work from home during this difficult time, while continuing to provide outstanding service to our customers.

While the majority of KLD’s full-time employees have historically been able to work remotely, we also employ a large number of temporary contract employees for our document review services. Up to this point, KLD has always conducted document review on-site at one of our global facilities.

In response to the COVID-19 threat, we have successfully executed a plan, which allows our document reviewers to securely connect to our systems and continue working from home. Over the past 2 weeks, we have transitioned all existing projects to this new remote model, allowing the service to operate continuously and seamlessly in a manner that keeps our employees’ best interest front and center. I am very pleased that we are continuing to meet our high security and quality standards while safeguarding the well-being of our global workforce and customers.

Collecting data is a critical service, without which our clients’ other eDiscovery efforts are paralyzed. Given the disruption presented by COVID-19 to travel and human interaction, it is important that we are able to remotely collect as much data as possible. To that end, KLDiscovery offers a self-collection platform called Remote Collection Manager. Remote Collection Manager uses an external hard drive to collect predefined data to include laptop/desktop imaging, server/network shares and MAC, and then encrypted files are shipped back to KLDiscovery. A global task force has been assembled to receive shipments of these hard drives prior to lab work.

Remote Collection Manager reduces unnecessary travel and in-person contact. Additionally, we are able to collect many other data types, even including certain types of mobile devices remotely and securely. This allows us to continue servicing our clients while reducing the amount of travel that is commonly required to collect data.

Furthermore, in a significant moment for the eDiscovery community and in unique elaboration, we have partnered with Consilio, a peer company in this space. With full visibility to our clients, we will be sharing resources for local collections in geographic areas where one of us may not have a physical presence. This will [allow] organizations to deliver on critical client needs across a wide number of geographies, and each organization will be able to leverage local resources to reduce employee travel and prevent service disruption for our clients.

Over the years, KLD has implemented significant safeguards to stay up and running. Security of our systems and preservation of our customers’ valuable data is a top priority of our business. Data in our possession is secured by some of the most advanced data security and disaster recovery technology available. We believe there is no room for missteps when it comes to security.

We have built in redundancy across all critical systems. Our most critical data centers are hosted in 2 sites in the United States. We operate dual sites on the East Coast and in Texas with fiber optic connectivity. In case of disaster in either location, we can move our entire load to the other locations, where our clients can continue their work with little to no interruption. No one else in this industry offers this level of geographic backup.

Malware and ransomware are real threats to everyone. Ransomware recovery has been a growing opportunity for our data recovery business. Our data recovery business has engaged with over 300 clients within the past 12 months to assist with ransomware recovery. We invest a significant amount of time and money to ensure our systems are secure. This became even more obvious when our biggest global competitor had a massive ransomware attack almost a month ago.

We have a proven track record of tuck-in mergers and acquisitions. We are constantly assessing opportunities to identify, integrate and grow revenue with cost synergies by acquiring companies that give us access to quality people, excellent clients, geography and technology. We believe these potential tuck-ins can add to our growth.

I’m going to let Dawn Wilson talk to you in detail about our financial results, but I did want to highlight some numbers for you. 2019 was a very good year for KLD. Revenue was up nicely at 5.3%, and we made tremendous drives with EBITDA, which was up 76.5% over 2018. Adjusted EBITDA grew 25.9% year-over-year to approximately $69 million in 2019. We performed stronger as the year went on, and we now have excellent momentum entering the new year. In January 2020, we have already seen a 17% increase in sales and 39% increase in EBITDA compared to January 2019.

With respect to financial guidance for 2020, KLD is like many other public companies who are currently limited in their ability to accurately predict what the financial impact will be from the COVID-19 outbreak. As we stated in our financial press release last night, we are not providing guidance for 2020 at this time, and we are withdrawing our previously disclosed full guidance for 2020. We do not anticipate updating our 2020 guidance until we get more clarity from the existing challenging macro conditions everyone is facing.

In conclusion, I am proud of our team and their incredible focus on delivering outstanding customer service and performance throughout this global pandemic. We are looking forward to a bright future with our software and hardware offerings leading the way, underpinned by the strongest company culture and 5-star customer service. Overall, I am very optimistic about our future as we are positioned exceptionally well for growth and innovation.

I’ll now turn the call over to our CFO, Dawn Wilson.


Dawn M. Wilson, KLDiscovery Inc. – CFO [4]


Thank you, Chris. As Chris mentioned, we achieved excellent financial results in 2019, expanding EBITDA by 76.5% and adjusted EBITDA by 25.9%. Revenue for the full year of 2019 grew 5.3% to $312.1 million compared to $296.3 million in 2018. This increase is mostly due to an increase of $15.3 million or 6.1% in eDiscovery revenue, as eDiscovery revenue increased to $265.9 million in 2019 from $250.5 million in 2018.

Our data recovery revenue is $46.2 million in 2019 versus $45.8 million in prior year, so up slightly for 2019. Data recovery was affected in part by treatment of key ad words by Google, which slowed traffic to our website and resulted in lower lease and revenue. We have since adapted to these Google changes.

Our eDiscovery revenue of $265.9 million is approximately 85% of our total revenue, and our data recovery revenue of $46.2 million is approximately 15% of our total revenue. For the fourth quarter of 2019, we generated a year-over-year revenue growth of $3.4 million, or 4.4%, as we reached $80.5 million in revenue for the quarter compared to $77.1 million in the fourth quarter of 2018. This was our best revenue quarter in our history.

We improved our net loss by $13.7 million, going from a net loss of $67.7 million in 2018, down to a net loss of $54 million in 2019. This was mostly the result of optimizing our revenue on a fairly flat cost of goods sold, minimization of software costs and significantly lower operating expenses related to less costs associated with the investment we made in our sales group in 2018.

As a percentage of revenue, our operating expenses for 2019 decreased to 47.6% as compared to 54.5% in 2018. We achieved significant growth in both EBITDA and adjusted EBITDA in 2019. We generated EBITDA of $52.7 million, which was 76.5% increase compared to 2018. And for 2019 adjusted EBITDA, we came in at $68.7 million versus $54.6 million in 2018, an increase of $14.2 million or 25.9%, which is a huge expansion of adjusted EBITDA year-over-year. And this was due to the increased revenues and management of expenses.

Our gross profit as a percentage of revenue for 2019 increased to 48.4% as compared to 46.1% for 2018, once again due to increased revenues on a relatively flat cost of goods sold. Our positive operating momentum continued into 2020 with strong sales. However, with the challenging macroeconomic conditions that all companies and individuals are facing as a result of the global pandemic from COVID-19, the road map for 2020 from a financial perspective will need more clarity at a future time.

In 2020, we are working closely with our management team to implement contingency plans that will defer and reduce operating costs through this period of economic uncertainty. We are continuing to monitor and assess legislative changes in all countries to ensure we incorporate them into our decision making.

Moving on to liquidity. We had cash and cash equivalents of $43.4 million as of December 31, 2019. As of today, we had $56 million in cash on our balance sheet. Earlier this week, we expanded our cash position by $29 million as we drew down our revolving credit facility. This draw, along with existing cash balances, provides us with the capacity and flexibility to sustain prolonged disruption and create long-term value for our shareholders through sensible and disciplined capital allocation. We believe this is the prudent and conservative thing to do.

In December 2019, we issued $200 million in new debentures associated with the closing of the merger with Pivotal. We paid down our second lien facility, which was at LIBOR plus 10%. As a result, we wrote off deferred financing costs and debt discounts totaling $7.2 million. This resulted in approximately $16 million in annual cash interest savings, which was partially offset by interest of $8 million for the new debentures. The net cash interest savings are $8 million annually.

Because of these debt restructurings on the balance sheet, KLDiscovery received positive rating actions from both S&P and Moody’s. S&P upgraded our rating from CCC+ to B-, and the first lien debt rating from B- to B. Moody’s maintained a Caa1 issuer rating and upgraded the first lien debt rating from B3 to B2. At the end of 2019, we had $306 million outstanding on our first lien loans and $200 million outstanding on the debentures.

As Chris discussed, and as we stated in our financial results press release last night, we are not providing guidance for 2020 at this time due to the uncertainties surrounding the effects of the global pandemic from COVID-19. We are withdrawing our previously disclosed full year 2020 guidance due to the uncertainties surrounding the impact. We do not anticipate updating our 2020 guidance until we get more clarity from the existing challenging macro conditions everyone is facing.

From an operating perspective, we are well positioned for 2020. We believe that we can still have a good financial year in spite of the current market conditions, but we will have to wait and see how the situation evolves.

We will now open the call to questions.


Questions and Answers


Operator [1]


(Operator Instructions) The first question is from Greg Gibas with Northland Securities.


Gregory Thomas Gibas, Northland Capital Markets, Research Division – VP & Senior Research Analyst [2]


Congrats on the solid Q4 results. First of all, just from a high level, roughly what percentage of revenues do you say are exposed or potentially impacted by the virus? I guess, in another way, are there any revenue streams that you think will be minimally impacted? And how much of the business is really continuing to function from a remote level?


Christopher J. Weiler, KLDiscovery Inc. – Co-Founder, CEO & Director [3]


So we have virtually 100% of our employees working remote, with the exception of a skeleton crew that’s been coming into each of our key offices that receives media. So we receive inbound shipments of media, and then once we’re done, we ship the media back to our customers. We also have people coming in to a few of our offices globally to receive checks and handle some of the mail.

So outside a few operations that we have in Richmond and in Northern Virginia, where we scan documents, it’s a handful of people, staggered over 3 shifts, separated by the mandatory 6 feet. Virtually everybody works from home as opposed to the majority of bigger companies in the eDiscovery space that have very huge operations in a country like India, where that country has literally shut down at this time, and their ability to work from home is limited because of the weak infrastructure they have for fiber.

When you take a look at the company, 54% of our revenue is reoccurring, and that is — a majority of that is data hosting. So we have 54% we roll in every month that is reoccurring. The other work is à la carte or projects that we win on a daily basis. We are monitoring the number of incoming projects that we receive and the number of requests that we have for project managers for those projects globally on the legal technology side as well as on the data storage technology side, how many leads do we get from our Google pay-per-click and how many jobs come into our global offices?

So virtually, every one of our office is up and running, with the exception of our office in China, which we believe will be open, I think, in the second week of April, at least that’s what we’re hearing right now. Up until — really, up until today, the amount of — not only jobs closed that we’ve had, both in the U.S., EMEA and APAC, have gone up over historical 2019 or 3-year average. The number of PM requests have gone up as well. And I’m not really sure what that’s attributable to. Some of it could certainly be from receiving some customer work from our largest competitor that got hit by a ransomware attack.

On the data storage technology side, we’ve definitely seen a dip in leads and jobs in. We believe that their budget outlook on the data storage technology side is very strong for Q1. I think the question is, what is this impact going to be going into Q2? And again, they are probably about a $46 million piece of the business, but we’ll just have to kind of wait and see how that works. But we’re monitoring it very closely. And again, up until today, we want to give you guys the most recent information. We’re looking strong in this first quarter.


Gregory Thomas Gibas, Northland Capital Markets, Research Division – VP & Senior Research Analyst [4]


Yes, that’s really good to hear, Chris. Appreciate all that color. And then I was just wondering if you could touch a little bit on the recent acquisition of Superior Document Services. Could you maybe discuss how this maybe was a strategically attractive addition to KLDiscovery? And maybe how we should think about the financial contribution from this acquisition?


Christopher J. Weiler, KLDiscovery Inc. – Co-Founder, CEO & Director [5]


Sure. So Superior was a small eDiscovery scanning company out of Richmond, Virginia. And the beautiful thing about these acquisitions is, typically, they have fantastic relationships. They’ve got a really good solid core of employees on the customer-facing side. They have some really good prospective huge clients, but they’re not able to do all the work that they could do for those clients because they lack the geographic footprint or they lack the array of services that a company like ours can offer.

So one of the wonderful things about buying companies like that is that you come in and you provide their business development people right away after the deal closes, with basically just an incredible global network with 3 different hosting platforms, data storage technology, all of these different services.

And so what we like about these is that in — after year 1 and year 2, those bigger potential clients that may have only been giving them some small scanning work in the past will now give them significant projects. And I think that’s why we like these tuck-ins. They’re smaller but, however, they pack a big punch as far as accretiveness, and they’re really adding a really nice value proposition to the company.


Gregory Thomas Gibas, Northland Capital Markets, Research Division – VP & Senior Research Analyst [6]


Okay. Great. And then you previously did talk about, and I guess, kind of continue that today, is just the eDiscovery landscape being pretty fragmented. And I remember last year, you were saying you saw a number of pretty attractive opportunities out there for M&A. Obviously, near term, that would probably be put on hold. But just wondering if you could maybe remind us of what you’re looking for in potential acquisition targets, and if you’re still seeing a number of attractive opportunities out there.


Christopher J. Weiler, KLDiscovery Inc. – Co-Founder, CEO & Director [7]


Yes. Great question. So we hired a gentleman. His name is Greg Mazares. He lives out in the Southern California area. Greg was the CEO of a company in this space and has been in very big, higher-level jobs, not only running companies but also running sales forces. And Greg has joined our team, I think it was last August, and he is our EVP of really Corporate Business Development. We have a tremendously full pipeline of potential M&A targets, ranging from small technology companies to small- to medium-sized tuck-in acquisitions on the eDiscovery side.

So we’re not seeing any — there’s plenty of targets out there to act upon. It’s just the question is, what is the right timing and what are the ones that you pursue first? So at this point in time, obviously, taking a more conservative approach with COVID-19, we’ve kind of put that on the back burner. We’ve gone out to all these folks saying, “Look, we’re going to delay this 30 to 60 days.”

But I am very pleased with the work that Greg has done. And there’s a couple of other folks in the company that help him, both on the scanning — legal scanning side and the technology side. They’ve done a heck of a job, and we really have a full pipeline.


Gregory Thomas Gibas, Northland Capital Markets, Research Division – VP & Senior Research Analyst [8]


Okay. Great. Yes, that makes sense. Then just last quick one for me. It was really nice to see the significant debt refinancing that you did. Can you maybe discuss plans to reduce leverage? And maybe where do you envision ending the year from a debt balance standpoint?


Christopher J. Weiler, KLDiscovery Inc. – Co-Founder, CEO & Director [9]


Yes. That’s, I mean, excellent question again. So as you’ve read or as you heard today, we have restructured our Board, adding some incredibly strong folks from The Carlyle Group to our Board, and elevating Donna from a Board member status to the Chairman of the Board. These are all things that we continue to look at and pursue across the board.

Obviously, our key goal is shareholder value. And having all these fantastic people on the Board and this kind of new leadership structure will allow us to look at all of those different questions and challenges on debt, warrant, public versus private, all of those things. Obviously, our focus is on the day-to-day business. And certainly, through this pandemic crisis, it’s just making sure that we achieve the best possible results.

But the Board is extremely experienced. We have the best and the brightest people from The Carlyle Group on our Board. And those are things that we look at every day.

So it’s probably premature to talk about that today. Our goal is to maximize revenue and profitability and build our incredible Nebula platform. And as the days and the weeks and the months go on, the Board will certainly address all of those things.


Operator [10]


The next question is from Jerry Wang with South Carlyle.


Jerry Wang, The Carlyle Group Inc. – Principal [11]


Just had a quick one for you as it relates to maybe some impact from COVID. I understand that many of the courts are starting to close or has closed on a state or federal basis. I was wondering, maybe, a, if you could talk a little bit about your pipeline; and then, b, what your view is on servicing that pipeline as some of the courts have kind of — at least for now, has delayed processing or prosecuting on some of those volumes?


Christopher J. Weiler, KLDiscovery Inc. – Co-Founder, CEO & Director [12]


Yes, good question. The only thing that we can go on, and this is what I’ve told our global family, I do a video every day at COB, Eastern standard time, to the global family. I’ve been doing this now for the past couple of weeks, just updating them on personnel issues, office closures, shelter in place and also the major key indicators and metrics from a dashboard perspective on how the company is doing.

Up until today, the company — I mean, through today, the company has only experienced an uptick in closed opportunities and an uptick in PM request, both in EMEA and in the U.S. APAC is a very small portion of our LT revenue. But they have some very significant jobs that we believe will start in April to kind of hold them over for at least that month.

So I think where we’re really seeing it is more on the data — the document storage technology side, where that’s very much more of a B2C business. You have folks that will — they have to get to a shipping company to ship their hard drives. They have to be able to walk in and hand the drive over and say, “Hey, I lost this data, can you recover it for me?” We have seen the leads and the jobs in decrease about 40% to last week.

However, the amount of work that we had and the pipeline that we had in that business globally, right, which is a fantastic aspect of KLD because we have a global footprint, has really given us a great deal of confidence that we’re going to hit our budget number in that group for Q1. So right now, we’re just trying to assess this hour-by-hour and day-by-day to see exactly what we’ll need to do to kind of rejigger the workforce globally on the document storage technology side. There’s a lot of governments in EMEA that are presenting some pretty healthy packages for employees that get furloughed.

So I think that the answer to that question is one day at a time. Yes, I mean, I’ve seen all the reports on the courts closing. A lot of these folks are doing video conferencing and things like that. I think this is a little bit different than, let’s say, a government closure that we had back in January 2019, where, literally, everything was shut down and there wasn’t any appropriations for those folks. People are trying to kick the ball down the road as much as possible.

And again, I think, just by default with some of our — some of the global law firms and corporations that have lost confidence in our largest competitor, we may see sort of a counterbalance to COVID with some of the work that will be moved over to us, right? Even if it’s not a, “Okay, we have to go to court tomorrow” case. A lot of people will probably be in the situation where they may want to move data over to our network because they’ve lost confidence.

So it’s too early to tell at this point in time. Obviously, we all watch the news. We’re completely connected globally with all the municipalities and the governments and the countries that we operate in. But all I can tell you is, as of today and this quarter, company is looking strong. Now that may change tomorrow, but I don’t have that information yet.


Operator [13]


There are no further questions at this time. I’ll turn the call back to Mr. Weiler for any closing remarks.


Christopher J. Weiler, KLDiscovery Inc. – Co-Founder, CEO & Director [14]


I appreciate everybody jumping on the call. I know this is a very, very, very challenging time for everybody, both personally and professionally. The only thing I can say is best to you and your families. Everyone, stay healthy. And as far as KLD and the global family that we have, I am doing everything possible to keep folks updated. I think that we’ve been ahead of the crisis by weeks. And certainly, through a lot of communication, especially we have Microsoft Teams and different ways to communicate globally, it’s given us a great kind of sense of unity and community, where folks are getting together on virtual meetings and virtual happy hours at the end of the workday just to kind of share experiences and their family and all that kind of stuff.

And like I said before, I do a video every day, updating the company on every aspect that impacts their lives. And I think that in times of crisis, great companies thrive through them, and that’s what we’re trying to be as a great company.

So thank you for your time and your confidence in KLD. I wish all the best to you and your family as we go through COVID-19.


Operator [15]


Ladies and gentlemen, this concludes today’s conference call. Thank you for participating, and you may now disconnect.

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