CS Disco(US:LAW)2025-11-05 23:00Financial 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]