Core Insights - DISCO's performance in 2025 was driven by increased platform usage, growth in large matters and customers, and rapid adoption of generative AI capabilities [1] - The company reported record highs in total terabytes on its platform and achieved double-digit growth in multi-terabyte matters [1] Financial Performance - For the full year 2025, DISCO's total revenue was $156.8 million, reflecting an 8% year-over-year increase, with software revenue at $134 million, up 12% [2] - In Q4 2025, total revenue reached $41.2 million, an 11% increase year-over-year, while software revenue was $35.1 million, up 14% [3][6] - Full-year adjusted EBITDA was -$10.2 million, improving from a -13% margin in 2024 to a -7% margin in 2025 [2][15] Customer and Market Dynamics - DISCO ended 2025 with 330 customers generating over $100,000 in total revenue, contributing 76% of total revenue, with 20 customers exceeding $1 million in revenue [6] - The adoption of Cecilia AI and Auto Review saw over 600% year-over-year growth in Q4, significantly impacting multi-terabyte usage and revenue growth from large matters [5][7] Product and Strategy Developments - DISCO introduced a new go-to-market strategy that bundles Cecilia AI with every matter and shifts pricing towards customer data size growth to enhance sales efficiency [5][12] - The company emphasized the importance of its AI capabilities in high-stakes litigation workflows, focusing on defensibility and audit trails [8][10] Future Guidance - For FY2026, DISCO guided total revenue between $167 million and $177 million, with expectations of adjusted EBITDA breakeven by Q4 2026 [5][18] - The company anticipates Q1 2026 total revenue of $39.0 million to $41.5 million, with adjusted EBITDA projected between -$6 million and -$4 million [17] Management Insights - CEO Eric Friedrichsen expressed optimism about DISCO's long-term growth potential, targeting a growth rate of over 20% driven by expansion within large customers and increased adoption of generative AI [19]

Financial Data and Key Metrics Changes - In Q4 2025, total revenue grew 11% year-over-year to $41.2 million, while software revenue increased 14% year-over-year to $35.1 million, marking the third consecutive quarter of accelerating growth for both metrics [9][30] - For the full year 2025, total revenue was $156.8 million, up 8% year-over-year, and software revenue was $134 million, up 12% year-over-year [10][30] - Adjusted EBITDA for Q4 was negative $2.2 million, representing an Adjusted EBITDA margin of negative 5%, an improvement from negative 12% in Q4 of the prior year [9][37] - The full year 2025 Adjusted EBITDA was negative $10.2 million, with a margin of negative 7%, compared to negative 13% in 2024 [10][37] Business Line Data and Key Metrics Changes - Services revenue in Q4 was $6 million, down 3% year-over-year, primarily due to a reduction in traditional review services [30] - The decline in services revenue for the full year was $22.8 million, down 8% year-over-year, attributed to the decline in traditional review business [30] Market Data and Key Metrics Changes - The company finished the year with 330 customers generating over $100,000 in total revenue, contributing $119 million, or 76% of total revenue [11] - There was a record high in total terabytes on the platform, with over 30% revenue growth from multi-terabyte matters year-over-year in Q4 [11] Company Strategy and Development Direction - The company aims to disrupt the e-discovery industry by leveraging AI-native technology and enhancing its product offerings, including Cecilia AI and Auto Review [7][12] - A new pricing model was introduced to simplify access to DISCO's tools, combining all capabilities into a single offering to reduce friction for customers [22][23] - The strategy focuses on expanding wallet share with existing customers and increasing adoption of generative AI capabilities [10][75] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving Adjusted EBITDA breakeven by Q4 of 2026, driven by revenue growth and reduced one-time costs [39] - The company anticipates total revenue guidance for Q1 2026 in the range of $39.0 million to $41.5 million, with software revenue guidance of $33.75 million to $35.25 million [38] Other Important Information - The company ended Q4 with $114.6 million in cash equivalents and short-term investments, with no debt [38] - The gross margin for Q4 was 77%, and for the fiscal year 2025, it was 76%, an increase from 75% in fiscal year 2024 [33] Q&A Session Summary Question: Why now for the pricing and packaging changes? - Management indicated that the changes were driven by customer demand and feedback, aiming to reduce friction in selling DISCO's services [41][44] Question: What is the intermediate growth rate outlook? - Management believes the company can achieve 20%+ growth, supported by larger customer engagements and increased adoption of generative AI capabilities [46][48] Question: Are general AI tools impacting the e-discovery process? - Management noted that customers have not reported using general AI for e-discovery, emphasizing the unique requirements of litigation that differ from other legal areas [54][58] Question: What are the potential downsides of the new commercial model? - Management acknowledged that simplifying the pricing model could lead to some initial challenges but emphasized the long-term benefits of improved customer understanding and sales efficiency [67][68] Question: Any changes to the sales organization? - Management confirmed that the sales strategy has been effective, with a focus on outside sales and incentivizing new matters, and they are considering adding talent to capitalize on growth opportunities [70][71]

Financial Data and Key Metrics Changes - In Q4 2025, total revenue grew 11% year-over-year to $41.2 million, while software revenue increased 14% year-over-year to $35.1 million, marking the third consecutive quarter of accelerating growth for both metrics [9][30] - For the full year 2025, total revenue was $156.8 million, up 8% year-over-year, and software revenue was $134 million, up 12% year-over-year [10][30] - Adjusted EBITDA for Q4 was negative $2.2 million, representing an adjusted EBITDA margin of negative 5%, an improvement from negative 12% in Q4 of the prior year [9][36] - The full year adjusted EBITDA was negative $10.2 million, with a margin of -7%, compared to -13% in 2024 [10][37] Business Line Data and Key Metrics Changes - Services revenue in Q4 was $6 million, down 3% year-over-year, primarily due to a reduction in traditional review services [30] - The decline in services revenue for the full year was $22.8 million, down 8% year-over-year, attributed to the decline in traditional review business [30] Market Data and Key Metrics Changes - The company finished the year with 330 customers generating over $100,000 in total revenue, contributing $119 million, or 76% of total revenue [11] - There was a record high in total terabytes on the platform, with over 30% revenue growth from multi-terabyte matters year-over-year in Q4 [11] Company Strategy and Development Direction - The company aims to disrupt the e-discovery industry by leveraging AI-native technology and enhancing its product offerings, including Cecilia AI and Auto Review [7][12] - The new pricing model combines all DISCO capabilities into a single offering, aiming to simplify customer access and increase adoption of AI features [22][23] - The strategy focuses on expanding wallet share with existing customers and targeting larger matters, with a goal of achieving 20%+ growth in the future [46][47] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's role as a disruptor in the legal tech industry, emphasizing the importance of AI in enhancing litigation outcomes [6][18] - The outlook for Q1 2026 includes total revenue guidance of $39.0 million to $41.5 million and software revenue guidance of $33.75 million to $35.25 million, with expectations of adjusted EBITDA improving towards breakeven by Q4 2026 [38][39] Other Important Information - The company ended Q4 with $114.6 million in cash equivalents and short-term investments, with no debt [38] - The gross margin for Q4 was 77%, and for the fiscal year 2025, it was 76%, an increase from 75% in 2024 [33] Q&A Session Summary Question: Why implement pricing and packaging changes now? - Management noted that the changes were driven by customer demand and feedback, aiming to reduce friction in the sales process and improve win rates for larger matters [41][43] Question: What is the expected intermediate growth rate for the company? - Management expressed optimism about achieving 20%+ growth, driven by larger customer engagements and increased adoption of generative AI capabilities [46][47] Question: Are general AI tools impacting the e-discovery process? - Management indicated that customers have not reported using general AI for e-discovery, emphasizing the unique requirements of litigation that differ from other legal areas [56][58] Question: How does the usage-based model inform guidance philosophy? - The CFO highlighted that as the business scales, predictability in the usage model improves, allowing for more precise guidance [61][63] Question: What potential downsides or trade-offs are anticipated with the new commercial model? - Management acknowledged that simplifying the pricing model could reduce the need for discounts and improve customer understanding, which is expected to enhance sales efficiency [65][66]

Financial Data and Key Metrics Changes - In Q4 2025, total revenue grew 11% year-over-year to $41.2 million, while software revenue increased 14% year-over-year to $35.1 million, marking the third consecutive quarter of accelerating growth in both categories [8][31] - For the full year 2025, total revenue reached $156.8 million, up 8% year-over-year, and software revenue was $134 million, up 12% year-over-year [9][31] - Adjusted EBITDA for Q4 was negative $2.2 million, improving from negative $4.3 million in Q4 of the prior year, while full year Adjusted EBITDA was negative $10.2 million, compared to negative $17.2 million in 2024 [9][38] Business Line Data and Key Metrics Changes - Services revenue in Q4 was $6 million, down 3% year-over-year, primarily due to a reduction in traditional review services [31] - The decline in services revenue for the full year was $22.8 million, down 8% year-over-year, attributed to the decline in traditional review business [31] - Auto Review showed strong growth, partially offsetting the decline in traditional review services [31] Market Data and Key Metrics Changes - The company finished the year with 330 customers generating over $100,000 in total revenue, contributing $119 million, or 76% of total revenue [10] - There was a record high in total terabytes on the platform, with over 30% revenue growth from multi-terabyte matters year-over-year in Q4 [10] Company Strategy and Development Direction - The company aims to disrupt the e-discovery industry by leveraging AI-native technology and enhancing its product offerings, including Cecilia AI and Auto Review [6][11] - The new pricing model combines all DISCO capabilities into a single offering, aiming to reduce friction for customers and improve sales efficiency [24][27] - The strategy focuses on expanding wallet share with existing customers and targeting larger matters, with a goal of achieving over 20% growth [48][70] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's role as a disruptor in the legal technology space, emphasizing the importance of AI in enhancing litigation outcomes [5][6] - The outlook for Q1 2026 includes total revenue guidance of $39.0 million to $41.5 million, with expectations for Adjusted EBITDA to improve towards breakeven by Q4 2026 [39][40] Other Important Information - The company ended Q4 with $114.6 million in cash equivalents and short-term investments, with no debt [39] - The gross margin for Q4 was 77%, and for the full year, it was 76%, an increase from 75% in 2024 [34] Q&A Session Summary Question: Why implement pricing and packaging changes now? - Management noted that the changes were driven by customer demand and feedback, aiming to simplify the pricing model to reduce friction in sales [42][44] Question: What is the expected intermediate growth rate for the company? - Management is optimistic about achieving over 20% growth, driven by larger customer engagements and increased adoption of generative AI capabilities [46][48] Question: How is DISCO addressing competition from foundational model companies? - Management indicated that customers have not reported using general AI for e-discovery, emphasizing DISCO's unique position in handling sensitive data and complex litigation workflows [55][60] Question: What are the implications of the usage-based model for guidance? - The CFO highlighted that as the business scales, predictability in the usage model improves, allowing for more precise guidance [63][65] Question: What potential downsides or trade-offs are anticipated with the new commercial model? - Management acknowledged that simplifying the pricing model could lead to reduced discounts and improved understanding among customers, enhancing sales opportunities [67][68]