CS Disco(LAW) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q1 FY2025, total revenue was $36.7 million, up 3% year-over-year, while software revenue was $30.9 million, also up 3% year-over-year [20][21] - Adjusted EBITDA for Q1 was negative $5.1 million, representing an adjusted EBITDA margin of negative 14%, an improvement from negative 15% in the prior year [23] - The company ended Q1 with $118.8 million in cash and short-term investments and no debt [6][23] Business Line Data and Key Metrics Changes - Services revenue, which includes DISCO managed review and professional services, was $5.8 million, up 2% year-over-year [20] - The number of customers contributing over $100,000 in total revenue over the last twelve months increased by 8% year-over-year, representing 76% of total revenue [7] Market Data and Key Metrics Changes - The company noted growth in revenue from large multi-terabyte matters, indicating a positive trend for future revenue [8] - The Cecilia Generative AI suite saw significant growth, with the number of Cecilia Q and A customers increasing fivefold from Q1 FY2024 [12] Company Strategy and Development Direction - The company launched a new customer value proposition, "With You In Every Case," aimed at enhancing customer engagement and showcasing the integration of software and services [9][10] - Strategic initiatives include enhancing talent, targeting accounts, and aligning incentives to drive revenue growth from larger customers and matters [12][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's ability to weather potential economic downturns, citing historical trends where litigation increases during such times [19][42] - The company is focused on executing its strategy and believes it is well-positioned for future growth, with a target of reaching adjusted EBITDA breakeven by Q4 FY2026 [43] Other Important Information - The company is committed to continuous innovation and has released several new capabilities to enhance customer experience and operational efficiency [16][17] - Management emphasized the importance of customer feedback in driving product development and innovation [17] Q&A Session Summary Question: Plans for the next 12-18 months to drive faster growth - Management highlighted the focus on executing the current strategy, enhancing operational effectiveness, and improving customer success teams to drive growth [26][30] Question: Clarification on the new tagline "With You In Every Case" - The tagline reflects the company's commitment to providing both self-service solutions and comprehensive support for larger matters, emphasizing the integration of services and products [33][37] Question: Expense levers to reduce operating losses during an economic downturn - Management indicated that while there are potential headwinds, the strategy focuses on working with clients on critical matters, which are less impacted by economic downturns [41][42] Question: How new customers generally come to DISCO - New customer acquisition involves a mix of account-based marketing, events, and thought leadership, with a strong emphasis on expanding relationships with existing customers [46][50]