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]

Core Insights - DISCO has launched an all-inclusive platform for litigation, investigations, and regulatory responses, integrating eDiscovery, Cecilia AI, deposition management, and timelines into a single solution at a transparent price [1] - The new platform aims to address the inadequacies of one-off eDiscovery products by providing a seamless end-to-end solution for modern litigation [1] - A new pricing model has been introduced, featuring a single, transparent per GB price on processed data without ingest fees, facilitating clearer cost comparisons [1] Group 1: Product Features - The DISCO platform includes premier eDiscovery technology for instant access to critical data [1] - Cecilia AI offers advanced AI-powered legal tools to streamline and accelerate litigation processes [1] - Deposition management and timeline capabilities are now integrated into the platform, previously sold separately as Case Builder [1] Group 2: Strategic Direction - The company emphasizes the importance of integrated tools that address the full litigation lifecycle for complex matters [1] - DISCO's CEO highlighted the need for innovation in response to fast-evolving generative AI capabilities [1] - The platform will be showcased at Legalweek, indicating the company's commitment to demonstrating its advancements in legal technology [1]

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]