CS Disco(LAW) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Software revenue for fiscal year 2024 was $120.1 million, up 7$24.7 million, down 4% year-over-year, leading to total revenue of $144.8 million, up 5$18.7 million, an improvement of $7.2 million from the prior year, with a net loss of$17.2 million, or negative 12% of revenue, compared to a net loss of $22.8 million, or negative 17$129.1 million in cash and short-term investments, with no debt [8][52] Business Line Data and Key Metrics Changes - Revenue from customers contributing more than $100,000 grew at more than double the rate of those contributing less than$100,000, with 19 customers contributing more than $1 million in revenue [9] - The dollar-based net retention (DNR) improved year-over-year from 92$100,000 in total revenue, a 9% increase year-over-year [8][9] - The multi-product attach rate was 17% at year-end, indicating growth in customer engagement with multiple products [9][106] Company Strategy and Development Direction - The company is focused on becoming a more customer-centric organization, enhancing internal operations, and fostering cultural improvement [11][12] - The strategy includes targeting larger customers, reallocating investments to drive revenue growth, and enhancing the sales and marketing approach [21][84] - Product development is centered on core ediscovery and Cecilia AI capabilities, with a focus on delivering meaningful enhancements [30][86] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving breakeven adjusted EBITDA by Q4 2026, emphasizing a commitment to sustainable profitability and growth [42][43][68] - The company is optimistic about the early signs of success from its strategic shifts and is focused on driving innovation and improving execution [114] Other Important Information - The company recorded a full non-cash impairment charge of $15.2 million on its primary law asset and related capitalized development, which does not impact adjusted EBITDA [53] - For Q1 2025, total revenue guidance is in the range of$35 million to $37 million, with software revenue guidance between$30.1 million and 31.1 million [54] Q&A Session Summary Question: Selling environment in legal tech and AI tools - Management noted that the selling opportunity within the legal industry has become easier recently, with significant adoption of their Cecilia products [59][60] Question: Target for breakeven adjusted EBITDA - Management confirmed confidence in achieving breakeven adjusted EBITDA by Q4 2026, emphasizing a focus on larger customers to drive efficient growth [64][68] Question: Improvement in dollar net retention - Management reported that software retention improved to 100% from 97%, driven by larger customers, and expressed confidence in further improving DNR over time [72][74] Question: Investment priorities for the coming year - The company is investing in growth by targeting ideal customer profiles, enhancing sales leadership, and focusing on core ediscovery and Cecilia AI products [81][86] Question: Changes in sales force and maturity - Management indicated early positive results from the sales force changes, with a focus on larger customers leading to a 9% increase in customers spending over 100,000 [92][93]