Core Insights - CS Disco is currently valued at approximately 1x ARR, a significant decline from its previous valuation of nearly 20x ARR in 2021, reflecting a broader trend in the B2B SaaS market where companies are facing severe valuation compressions due to decelerating growth and leadership instability [2][7][12]. Company Overview - CS Disco is a legal tech company specializing in cloud-native eDiscovery software, operating in a market valued at over $15 billion [4]. - The company went public in July 2021 at $32 per share, initially seeing a market cap of $2.25 billion when it reached $120 million in ARR with a growth rate of 67% [4][6]. Financial Performance - As of Q3 2025, CS Disco has a market cap of around $250 million, with approximately $110 million in cash and no debt, leading to an enterprise value of about $140 million against $155 million in revenue [6][8]. - Revenue growth has sharply declined from 67% in 2021 to 18% in 2022, and is nearly flat in 2023, with projections of only 5% growth in 2024 and a potential re-acceleration to 10% in 2025 [9][14]. Leadership and Governance - The resignation of co-founder and CEO Kiwi Camara in 2023 amid misconduct allegations has contributed to a loss of trust among investors, further impacting the company's valuation [9][12]. Market Dynamics - The current valuation of CS Disco reflects a market sentiment that prioritizes cash on the balance sheet over revenue, indicating a lack of confidence in future growth prospects [8][12]. - The company faces competition from well-funded AI-native startups like Harvey and Legora, which are growing rapidly and commanding high valuations, further pressuring CS Disco's market position [15][42]. Growth and Profitability - Despite challenges, CS Disco has shown signs of improvement under new CEO Eric Friedrichsen, with software revenue growing 17% year-over-year in Q3 2025 [11][14]. - The company has a solid balance sheet with $113.5 million in cash and zero debt, providing a runway of over seven years at current burn rates [14]. Competitive Landscape - CS Disco's current valuation contrasts sharply with competitors like Harvey, which recently raised funds at an $11 billion valuation, and Legora, valued at $1.8 billion, despite CS Disco having higher revenue [37][39]. - The market is increasingly favoring companies with high growth rates, as evidenced by Harvey's rapid ascent from $10 million to over $100 million in ARR within two years, while CS Disco's growth has stagnated [42]. Industry Outlook - The legal AI market is experiencing significant investment and growth, with companies like Filevine demonstrating the potential for rapid revenue increases driven by AI capabilities [29][33]. - The disparity in valuations between established players like CS Disco and emerging startups suggests a potential arbitrage opportunity for investors, as the market reassesses the value of pre-AI SaaS companies [46][47].

Financial Data and Key Metrics Changes - Software revenue in Q3 was $35.2 million, up 17% year-over-year, while total revenue was $40.9 million, up 13% year-over-year [5][26] - Adjusted EBITDA for Q3 was negative $297,000, representing an adjusted EBITDA margin of negative 1%, which is a $4.2 million improvement over Q3 of 2024 [5][29] - The company ended Q3 with $113.5 million in cash and short-term investments and no debt [5][29] Business Line Data and Key Metrics Changes - Revenue growth was driven by both large and small matters, particularly in multi-terabyte matters [26][27] - Services revenues, including Disco Managed Review and Professional Services, were $5.7 million [27] Market Data and Key Metrics Changes - The number of customers contributing over $100,000 in total revenue over the last 12 months reached 326, accounting for 76% of total revenue [6] - The adoption of Cecilia AI more than tripled year-over-year, with consistent growth in auto-review adoption throughout 2025 [7][20] Company Strategy and Development Direction - The company is focusing on large multi-terabyte matters and has refined its approach to target customers that best fit its capabilities [9][10] - Disco has initiated a marketing and sales effort specifically targeting intellectual property litigation, highlighting its strengths in this area [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth acceleration and operational execution, emphasizing the importance of delivering value to customers [5][6] - The company is positioned to be a disruptor in the legal technology industry, leveraging its core platform and AI capabilities [12][25] Other Important Information - The company recognized $1.3 million in revenue from a contingent case, which was a significant contributor to the quarter's results [26][36] - The gross margin in Q3 was 77%, compared to 74% in the prior year [27] Q&A Session Summary Question: About the contingent liability or the contingent case - Management indicated that there are a small number of other contingent cases in the system, but nothing close to the size of the one recognized in Q3 [35][36] Question: Regarding the target for in-quarter EBITDA break-even for Q4 of 2026 - Management confirmed that the target for adjusted EBITDA break-even remains Q4 of 2026, while acknowledging the potential for earlier profitability [38]

INVESTOR PRESENTATION Q3 FY25 Disclaimer Forward-Looking Statements The forward-looking statements contained in this presentation 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 September 30, 2025. Further information on potential risks that could affect actual results will be included in the subsequent periodic and curre ...

Financial Performance (Q2 FY25) - Total revenue reached $38.1 million, reflecting a 6% year-over-year growth[12] - Software revenue grew by 12% year-over-year[12] - Non-GAAP gross margin was 76%[13] - Adjusted EBITDA margin was -7%[13,44] Market Trends and Challenges - Litigation time-to-close has increased by 60% due to growing discovery demands[17] - Litigation spend is increasing by 64% per year, exceeding $360 billion[17] - The volume of productivity data is projected to grow from 22 ZB in 2024 to over 146 ZB in 2029, representing a 46% compounded annual growth rate[17] - Discovery accounts for over 50% of litigation costs[21] DISCO's Solutions and Strategy - DISCO provides litigation solutions for complex legal matters, streamlining processes from fact investigation to document review using an AI-powered platform[27] - DISCO's AI can review millions of documents at speeds up to 32,000 documents per hour[36] - DISCO's growth strategy includes expanding wallet share with existing clients, increasing the number of large matters, and focusing on sales and marketing efficiency[37]