Total Revenue of $36.3 Million, A Year over
Year Increase of 4%
CS Disco, Inc. (“DISCO”) (NYSE: LAW) today announced financial
results for its third quarter ended September 30, 2024.
“As we continue to focus on the customer experience, operational
effectiveness and revenue acceleration, I am excited about the path
forward for DISCO with continued product innovation,” said CEO Eric
Friedrichsen. “DISCO’s combination of AI-driven products and teams
of legal and professional experts is a clear differentiator in
legal technology, and we continue to demonstrate the power of our
platform and our people for the largest and most important matters
in litigation.”
Third Quarter 2024 Financial Highlights:
- Software revenue was $30.2 million, up 6% compared to the third
quarter of 2023.
- Total revenue was $36.3 million, up 4% compared to the third
quarter of 2023.
- GAAP net loss was $9.2 million, compared to $1.0 million in the
third quarter of 2023.
- Adjusted EBITDA was $(4.5) million in the third quarter of 2024
and 2023.
Recent Business Highlights:
- New Executives: DISCO announced Lauren Caruso as Senior
Vice President, Chief Sales Officer, Susan Garcia as General
Counsel and Chief Compliance Officer and Joe Jacobson as Senior
Vice President of Operations.
- Cecilia: DISCO added Cecilia Auto Review, a generative
AI tool that accelerates first-pass legal document review, to its
suite of generative AI ediscovery products in North America and
officially launched its Cecilia AI Platform in the European Union
and the United Kingdom, including Cecilia Q&A, Cecilia single
doc Q&A and Cecilia doc summaries.
Fourth Quarter and Full Year 2024 Financial Outlook
As of November 6, 2024, DISCO is issuing the following outlook
for the fourth quarter of 2024 and fiscal year 2024:
Fourth quarter of 2024:
- Software revenue in the range of $30.0 million - $31.0
million.
- Total revenue in the range of $35.2 million - $37.2
million.
- Adjusted EBITDA in the range of $(7.6) million - $(5.6)
million.
Fiscal year 2024:
- Software revenue guidance in the range of $119.4 million -
$120.4 million.
- Total revenue guidance in the range of $143.0 million - $145.0
million.
- Adjusted EBITDA in the range of $(22.0) million - $(20.0)
million.
DISCO’s fourth quarter and fiscal year 2024 financial outlook is
based on assumptions that are subject to change, many of which are
outside of its control. If actual results vary from these
assumptions, these expectations may change. There can be no
assurance that DISCO will achieve these results.
Reconciliation of Adjusted EBITDA on a forward-looking basis to
net loss, the most directly comparable GAAP measure, is not
available without unreasonable efforts due to the high variability
and complexity and low visibility with respect to the charges
excluded from this non-GAAP measure; in particular, the effects of
stock-based compensation expense specific to equity compensation
awards that are directly impacted by unpredictable fluctuations in
DISCO’s stock price. DISCO expects the variability of the above
charges to have a significant, and potentially unpredictable,
impact on its future GAAP financial results.
Conference Call Information
DISCO will host a conference call and webcast at 4:00 p.m. CT
(5:00 p.m. ET) today, November 6, 2024, to discuss its third
quarter 2024 financial results and business highlights. The
conference call can be accessed by dialing (888) 300-4030 from the
United States or +1 (646) 970-1443 internationally with conference
ID 8394292. The live webcast of the conference call and other
materials related to DISCO’s financial performance can be accessed
from DISCO’s investor relations website at ir.csdisco.com.
Following the completion of the call until 10:59 p.m. CT (11:59
p.m. ET) on Wednesday, November 27, 2024, a telephone replay will
be available by dialing (800) 770-2030 from the United States or +1
(609) 800-9909 internationally with conference ID 8394292. A
webcast replay will also be available at ir.csdisco.com for 12
months.
About DISCO
DISCO (NYSE: LAW) provides cloud-native, artificial
intelligence-powered legal product offerings that simplify legal
hold, legal request, ediscovery, legal document review and case
management for enterprises, law firms, legal services providers and
governments. Our scalable, integrated product offerings enable
legal departments to easily collect, process and review enterprise
data that is relevant or potentially relevant to legal matters.
References to “DISCO,” the “Company,” “our” or “we” in this
press release refer to CS Disco, Inc. and its subsidiaries on a
consolidated basis.
Use of Non-GAAP Financial Measures
DISCO uses the following non-GAAP financial measures: Adjusted
EBITDA, Adjusted EBITDA margin; non-GAAP cost of revenue; non-GAAP
gross profit; non-GAAP gross margin; non-GAAP research and
development expense; non-GAAP research and development expense as a
percentage of revenue; non-GAAP sales and marketing expense;
non-GAAP sales and marketing expense as a percentage of revenue;
non-GAAP general and administrative expense; non-GAAP general and
administrative expense as a percentage of revenue; non-GAAP loss
from operations; non-GAAP operating margin; non-GAAP net loss
attributable to common stockholders, non-GAAP net loss attributable
to common stockholders per share (basic and diluted) and non-GAAP
net loss attributable to common stockholders as a percentage of
revenue. Management believes that these non-GAAP financial measures
are useful measures of operating performance because they exclude
items that DISCO does not consider indicative of its core
performance.
In the case of Adjusted EBITDA and Adjusted EBITDA margin, DISCO
adjusts net loss for such items as depreciation and amortization
expense; income tax provision; interest and other, net; stock-based
compensation expense; payroll tax expense on employee stock
transactions; restructuring charges; expenses associated with
stockholder litigation; and other one-time, non-recurring items,
when applicable. In the case of non-GAAP cost of revenue, non-GAAP
gross profit and non-GAAP gross margin, DISCO adjusts the
respective GAAP balances for stock-based compensation expense. In
the case of non-GAAP research and development expense, non-GAAP
research and development expense as a percentage of revenue,
non-GAAP sales and marketing expense and non-GAAP sales and
marketing expense as a percentage of revenue, DISCO adjusts the
respective GAAP balances for stock-based compensation expense,
restructuring charges, and other one-time, non-recurring items,
when applicable. In the case of non-GAAP general and administrative
expense, non-GAAP general and administrative expense as a
percentage of revenue, non-GAAP loss from operations, non-GAAP
operating margin, non-GAAP net loss attributable to common
stockholders, non-GAAP net loss attributable to common stockholders
per share (basic and diluted) and non-GAAP net loss attributable to
common stockholders as a percentage of revenue, DISCO adjusts the
respective GAAP balances for stock-based compensation expense,
restructuring charges, expenses associated with stockholder
litigation, and other one-time, non-recurring items, when
applicable.
There are limitations associated with the use of these non-GAAP
financial measures. These non-GAAP financial measures are not
prepared in accordance with GAAP, do not reflect a comprehensive
system of accounting and may not be completely comparable to
similarly titled measures of other companies due to potential
differences in the exact method of calculation between companies.
Certain items that are excluded from these non-GAAP financial
measures can have a material impact on operating loss and net loss.
As a result, these non-GAAP financial measures have limitations and
should be considered in addition to, not as a substitute for or
superior to, the closest GAAP measures, or other financial measures
prepared in accordance with GAAP.
DISCO's management uses these non-GAAP measures as measures of
operating performance; to prepare DISCO's annual operating budget;
to allocate resources to enhance the financial performance of
DISCO's business; to evaluate the effectiveness of DISCO's business
strategies; to provide consistency and comparability with past
financial performance; to facilitate a comparison of DISCO's
results with those of other companies, many of which use similar
non-GAAP financial measures to supplement their GAAP results; and
in communication with DISCO’s board of directors concerning
financial performance.
Forward-Looking Statements
This press release contains forward-looking statements,
including, among other things, statements regarding DISCO’s future
financial performance. Words such as “may,” “should,” “will,”
“believe,” “expect,” “anticipate,” “target,” “project,” and similar
phrases that denote future expectation or intent regarding DISCO’s
financial results, operations, and other matters are intended to
identify forward-looking statements. You should not rely upon
forward-looking statements as predictions of future events.
The outcome of the events described in these forward-looking
statements is subject to known and unknown risks, uncertainties,
and other factors that may cause DISCO’s actual results,
performance, or achievements to differ materially, including (i)
our history of operating losses; (ii) our limited operating
history; (iii) our ability to maintain and advance our innovation
and brand; (iv) our ability to effectively add new customers; (v)
our ability to effectively increase usage and penetration with our
existing customer base; (vi) our ability to expand our sales
coverage and establish a digital sales channel; (vii) our ability
to expand internationally; (viii) our ability to extend and
strengthen our channel partnerships and integrations; (ix) our
ability to expand our offering portfolio to a wider range of legal
processes outside of our current core offerings; (x) our dependence
on revenue from customer usage, which fluctuates based on the
timing of and activity driven by legal matters for which our
product offerings are used, and any shortfall of large matters on
our platform; (xi) our ability to pursue strategic acquisitions and
strategic investments to expand the functionality and value of our
product offerings; (xii) our ability to comply or remain in
compliance with laws and regulations that currently apply or become
applicable to our business in the jurisdictions in which we
operate; (xiii) the potential that our computer or electronic
systems, applications or services, or those of any third parties on
whom we depend, fail or suffer security or data privacy breaches or
other unauthorized or improper access to, use of, or destruction of
our proprietary or confidential data, employee data, or personal
data; (xiv) our ability to compete effectively with existing
competitors and new market entrants; (xv) the impact of
fluctuations in general macroeconomic conditions, such as the
current inflationary environment and fluctuating interest rates;
and (xvi) the impact that global events, such as the Russia-Ukraine
and Israel-Hamas wars and any related economic downturn could have
on our or our customers’ businesses, financial condition and
results of operations.
The forward-looking statements contained in this press release
are also subject to additional risks, uncertainties, and factors,
including those more fully described in our filings with the
Securities and Exchange Commission (“SEC”), including our Quarterly
Report on Form 10-Q for the quarter ended June 30, 2024, filed with
the SEC on August 8, 2024. Further information on potential risks
that could affect actual results will be included in the subsequent
periodic and current reports and other filings that we make with
the SEC from time to time, including our Quarterly Report on Form
10-Q for the quarter ended September 30, 2024.
Forward-looking statements represent DISCO’s management’s
beliefs and assumptions only as of the date such statements are
made. We undertake no obligation to update any forward-looking
statements made in this press release to reflect events or
circumstances after the date of this press release or to reflect
new information or the occurrence of unanticipated events, except
as required by law.
CS DISCO, INC.
Condensed Consolidated Balance
Sheets
(in thousands, except par
value amounts)
(unaudited)
September 30,
2024
December 31,
2023
Assets
Current assets:
Cash and cash equivalents
$
76,549
$
159,551
Short-term investments
50,245
—
Accounts receivable, net
23,988
26,993
Prepaid expenses and other current
assets
6,318
5,795
Total current assets
157,100
192,339
Property and equipment, net
9,239
9,663
Operating lease right-of-use assets
6,859
8,143
Primary law intangible asset, net
14,000
14,000
Other intangible assets, net
470
681
Goodwill
5,898
5,898
Other assets
816
823
Total assets
$
194,382
$
231,547
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
3,410
$
5,234
Accrued expenses
5,847
5,502
Accrued salary and benefits
6,816
6,230
Deferred revenue
3,042
4,285
Operating leases
1,823
1,826
Finance leases
42
41
Total current liabilities
20,980
23,118
Operating leases, non-current
5,817
7,136
Finance leases, non-current
127
158
Other liabilities
199
800
Total liabilities
27,123
31,212
Commitments and contingencies
Stockholders’ equity
Preferred stock $0.005 par value, 100,000
shares authorized and no shares issued and outstanding as of
September 30, 2024 and December 31, 2023
—
—
Common stock $0.005 par value, 1,000,000
shares authorized as of September 30, 2024 and December 31, 2023;
59,910 and 61,010 shares issued and outstanding as of September 30,
2024 and December 31, 2023, respectively
300
306
Additional paid-in capital
439,128
440,408
Accumulated other comprehensive income
(loss)
61
—
Accumulated deficit
(272,230
)
(240,379
)
Total stockholders’ equity
167,259
200,335
Total liabilities and stockholders’
equity
$
194,382
$
231,547
CS DISCO, INC.
Condensed Consolidated
Statements of Operations and Comprehensive Loss
(in thousands, except per
share amounts)
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Revenue
$
36,266
$
34,943
$
107,842
$
102,348
Cost of revenue
9,740
8,939
27,880
26,255
Gross profit
26,526
26,004
79,962
76,093
Operating expenses:
Research and development
12,757
12,065
37,724
41,095
Sales and marketing
14,988
16,708
46,294
53,821
General and administrative
9,658
128
31,537
23,345
Total operating expenses
37,403
28,901
115,555
118,261
Loss from operations
(10,877
)
(2,897
)
(35,593
)
(42,168
)
Other income (expense)
Interest and other income
1,652
2,191
5,373
6,267
Interest and other expense
185
(260
)
(45
)
(248
)
Loss from operations before income
taxes
(9,040
)
(966
)
(30,265
)
(36,149
)
Income tax provision
(118
)
(64
)
(309
)
(161
)
Net loss attributable to common
stockholders
$
(9,158
)
$
(1,030
)
$
(30,574
)
$
(36,310
)
Unrealized gain on investments
61
—
61
—
Comprehensive loss
$
(9,097
)
$
(1,030
)
$
(30,513
)
$
(36,310
)
Net loss per share attributable to common
stockholders, basic and diluted
$
(0.15
)
$
(0.02
)
$
(0.51
)
$
(0.61
)
Weighted-average shares used in computing
net loss per share attributable to common stockholders, basic and
diluted
59,675
60,350
60,236
59,896
CS DISCO, INC.
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended
September 30,
2024
2023
Cash flow from operating activities:
Net loss
$
(30,574
)
$
(36,310
)
Adjustments to reconcile net loss to cash
used in operations:
Depreciation and amortization
3,092
3,011
Stock-based compensation
16,878
11,211
Charge to allowance for credit losses
2,059
1,801
Loss (Gain) on disposal of long-lived
assets
(3
)
1
Non-cash operating lease costs
1,284
1,187
Amortization of premium on short-term
investments
(256
)
—
Other
9
—
Changes in operating assets and
liabilities:
Accounts receivable
946
(6,184
)
Prepaid expenses and other current
assets
(523
)
(775
)
Other long-term assets
14
(124
)
Accounts payable
(1,432
)
(1,928
)
Accrued expenses and other
355
1,791
Deferred revenue
(1,243
)
(1,134
)
Operating lease liabilities
(1,323
)
(1,207
)
Other liabilities
(120
)
(46
)
Net cash used in operating activities
(10,837
)
(28,706
)
Cash flow from investing activities:
Purchases of property, equipment and
capitalized software development costs
(2,223
)
(3,587
)
Purchases of short-term investments
(49,937
)
—
Purchase of primary law intangible
asset
—
(14,000
)
Proceeds from disposal of equipment
3
1
Cash paid for acquisitions
—
(1,180
)
Net cash used in investing activities
(52,157
)
(18,766
)
Cash flow from financing activities:
Proceeds from exercise of stock
options
30
514
Net proceeds from issuance of common stock
under Employee Stock Purchase Plan
601
1,459
Repurchase of common stock related to net
share settlement
(100
)
(64
)
Repurchase of common stock related to
share repurchase program
(20,052
)
—
Cash paid for acquisitions
(457
)
—
Principal payments on finance lease
obligations
(30
)
(29
)
Net cash provided by (used in) financing
activities
(20,008
)
1,880
Net decrease in cash and cash
equivalents:
(83,002
)
(45,592
)
Cash and cash equivalents at beginning of
period
159,551
203,244
Cash and cash equivalents at end of
period
$
76,549
$
157,652
Supplemental disclosure:
Cash paid for taxes
$
572
$
500
Non-cash investing and financing
activities:
Property and equipment included in
accounts payable and accrued liabilities
$
66
$
307
Contingent consideration related to
acquisition
$
481
$
753
CS DISCO, INC.
Reconciliation from GAAP to
Non-GAAP Results
(in thousands, except for
percentages and per share amounts)
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Net loss
$
(9,158
)
$
(1,030
)
$
(30,574
)
$
(36,310
)
Depreciation and amortization expense
989
1,054
3,092
3,011
Income tax provision
118
64
309
161
Interest and other, net
(1,837
)
(1,931
)
(5,328
)
(6,019
)
Stock-based compensation expense
5,147
(2,881
)
16,878
11,211
Payroll tax expense on employee stock
transactions
95
175
466
419
Restructuring charges
—
—
—
2,590
Expenses associated with stockholder
litigation
143
—
726
—
Adjusted EBITDA
$
(4,503
)
$
(4,549
)
$
(14,431
)
$
(24,937
)
Adjusted EBITDA margin
(12
)%
(13
)%
(13
)%
(24
)%
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Cost of revenue
$
9,740
$
8,939
$
27,880
$
26,255
Non-GAAP adjustments:
Stock-based compensation expense
(456
)
(270
)
(1,273
)
(772
)
Non-GAAP cost of revenue
$
9,284
$
8,669
$
26,607
$
25,483
Non-GAAP gross profit
$
26,982
$
26,274
$
81,235
$
76,865
Non-GAAP gross margin
74
%
75
%
75
%
75
%
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Research and development
$
12,757
$
12,065
$
37,724
$
41,095
Non-GAAP adjustments:
Stock-based compensation expense
(1,680
)
(2,001
)
(5,856
)
(5,920
)
Restructuring charges
—
—
—
(1,510
)
Non-GAAP research and development
$
11,077
$
10,064
$
31,868
$
33,665
Non-GAAP research and development as a %
of revenue
31
%
29
%
30
%
33
%
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Sales and marketing
$
14,988
$
16,708
$
46,294
$
53,821
Non-GAAP adjustments:
Stock-based compensation expense
(1,213
)
(1,277
)
(3,464
)
(4,028
)
Restructuring charges
—
—
—
(648
)
Non-GAAP sales and marketing
$
13,775
$
15,431
$
42,830
$
49,145
Non-GAAP sales and marketing as a % of
revenue
38
%
44
%
40
%
48
%
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
General and administrative
$
9,658
$
128
$
31,537
$
23,345
Non-GAAP adjustments:
Stock-based compensation expense
(1,798
)
6,429
(6,285
)
(491
)
Restructuring charges
—
—
—
(432
)
Expenses associated with stockholder
litigation
(143
)
—
(726
)
—
Non-GAAP general and administrative
$
7,717
$
6,557
$
24,526
$
22,422
Non-GAAP general and administrative as a %
of revenue
21
%
19
%
23
%
22
%
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Loss from operations
$
(10,877
)
$
(2,897
)
$
(35,593
)
$
(42,168
)
Operating margin
(30
)%
(8
)%
(33
)%
(41
)%
Non-GAAP adjustments:
Stock-based compensation expense
5,147
(2,881
)
16,878
11,211
Restructuring charges
—
—
—
2,590
Expenses associated with stockholder
litigation
143
—
726
—
Non-GAAP loss from operations
$
(5,587
)
$
(5,778
)
$
(17,989
)
$
(28,367
)
Non-GAAP operating margin
(15
)%
(17
)%
(17
)%
(28
)%
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Net loss attributable to common
stockholders
$
(9,158
)
$
(1,030
)
$
(30,574
)
$
(36,310
)
Non-GAAP adjustments:
Stock-based compensation expense
5,147
(2,881
)
16,878
11,211
Restructuring charges
—
—
—
2,590
Expenses associated with stockholder
litigation
143
—
726
—
Non-GAAP net loss attributable to common
stockholders
$
(3,868
)
$
(3,911
)
$
(12,970
)
$
(22,509
)
Non-GAAP net loss per share, basic and
diluted
$
(0.06
)
$
(0.06
)
$
(0.22
)
$
(0.38
)
Weighted average shares used to compute
basic and diluted net loss per share
59,675
60,350
60,236
59,896
Non-GAAP net loss attributable to common
stockholders as a % of revenue
(11
)%
(11
)%
(12
)%
(22
)%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241105719127/en/
Investor Relations Contact IR@csdisco.com
Grafico Azioni CS Disco (NYSE:LAW)
Storico
Da Dic 2024 a Gen 2025
Grafico Azioni CS Disco (NYSE:LAW)
Storico
Da Gen 2024 a Gen 2025
