CS Disco(US:LAW)2024-05-11 20:25Financial Data and Key Metrics Changes - Total revenue for Q1 2024 was $35.6 million, up 7% year-over-year, while software revenue grew 9% to $29.9 million [85][118] - Adjusted EBITDA was negative $5.2 million, improving from negative $12.1 million in Q1 of the prior year, representing an adjusted EBITDA margin of negative 15% compared to negative 39% [19][97] - The net loss in Q1 was $4.7 million, or $0.08 per share, compared to a net loss of $12.1 million, or $0.20 per share, in the prior year [19][97] Business Line Data and Key Metrics Changes - Services revenue, including DISCO manager review and professional services, was $5.7 million, up 2% year-over-year [118] - Research and development expense for Q1 was $10 million, or 28% of revenue, down from 39% in the prior year [119] - Sales and marketing expense for Q1 was $14.7 million, or 41% of revenue, compared to 53% in Q1 of the prior year, primarily due to headcount changes [48] Market Data and Key Metrics Changes - The company ended Q1 with approximately 1,442 customers, a 4% increase from the previous year [90] - The company reported that nearly 300 customers spent over $100,000, contributing to 75% of total revenue [56][102] Company Strategy and Development Direction - The company is focused on enhancing its generative AI offerings and has launched a new feature called doc summaries to improve efficiency in legal workflows [14][44] - A stock buyback program was initiated in March, reflecting confidence in the company's ability to generate more value than its current share price [17] - The company aims to re-energize top-line growth by focusing on customer segmentation and aligning resources to maximize revenue opportunities [26][102] Management's Comments on Operating Environment and Future Outlook - Management acknowledged some softness in the start of Q2, which is expected to impact full-year numbers, but remains confident in the ability to accelerate growth in the medium to long term [20][91] - The new CEO, Eric Friedrichsen, expressed optimism about the company's potential for significant growth and the transformative impact of AI on the legal industry [12][59] - Management emphasized the importance of understanding customer needs and reallocating resources to drive revenue growth [27][102] Other Important Information - The company has a strong cash position with $148.7 million in cash and cash equivalents and no debt [49] - The gross margin in Q1 was reported at 76%, with fluctuations based on customer usage [48] Q&A Session Summary Question: What are the first priorities for the new CEO? - The new CEO plans to focus on understanding the company, its people, customers, and products over the next 90 days [22][50] Question: Can you elaborate on the softness in Q2? - Management indicated that the softness is a minor impact from the reorganization on the sales side, with a focus on customer segmentation [51][100] Question: How does the company define top customers and their growth? - The company defines top customers as those spending over $100,000, with a noted growth of over 30% in this cohort over the past two years [29][56] Question: What is the outlook for revenue growth and profitability? - Management believes that investments in understanding customer needs and enhancing product offerings will lead to reaccelerated revenue growth and improved profitability [113][103]