8-K: CS Disco Announces First Quarter 2025 Financial Results: Revenue Up 3% Year-Over-Year

CS Disco reports a 3% year-over-year increase in total revenue for Q1 2025, reaching $36.7 million, while also issuing its financial outlook for Q2 and full year 2025.

Summary

• CS Disco, Inc. (DISCO) announced its financial results for the first quarter ended March 31, 2025.
• Total revenue reached $36.7 million, a 3% increase compared to the first quarter of 2024.
• Software revenue also increased by 3% to $30.9 million.
• The company reported a GAAP net loss of $11.4 million, compared to $10.6 million in the first quarter of 2024.
• Adjusted EBITDA was $(5.1) million, slightly better than $(5.2) million in the first quarter of 2024.
• DISCO introduced new product features, including Cecilia Definitions, and welcomed Tom Bogan to its Board of Directors in March 2025.
• For the second quarter of 2025, DISCO expects software revenue between $31.25 million and $32.25 million, and total revenue between $36.5 million and $38.5 million.
• Adjusted EBITDA for Q2 2025 is projected to be between $(5.5) million and $(3.5) million.
• For the full year 2025, DISCO anticipates software revenue between $125.5 million and $131.5 million, and total revenue between $146.0 million and $158.0 million.
• Full year 2025 Adjusted EBITDA is expected to be between $(18.0) million and $(15.0) million.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While revenue growth is positive, the increasing net loss and ongoing adjusted EBITDA loss temper the overall outlook. The company is making progress but still faces challenges in achieving profitability.

Positives

• Total revenue increased by 3% year-over-year to $36.7 million.
• Software revenue also grew by 3% to $30.9 million.
• Adjusted EBITDA improved slightly, from $(5.2) million to $(5.1) million.
• The company introduced new product features like Cecilia Definitions.
• DISCO welcomed Tom Bogan to the Board of Directors, bringing extensive experience.
• The company increased its outlook for fiscal year 2025.

Negatives

• GAAP net loss increased to $11.4 million from $10.6 million in the first quarter of 2024.
• The company is still operating at a loss, with an Adjusted EBITDA of $(5.1) million for the quarter.

Risks

• The company's financial outlook is based on assumptions that are subject to change and outside of its control.
• There is no assurance that DISCO will achieve its projected results.
• The company acknowledges risks related to operating losses, limited operating history, and the ability to maintain innovation and attract new customers.
• Macroeconomic conditions and global events could impact the company's business and financial results.

Future Outlook

DISCO expects Q2 2025 total revenue between $36.5 million and $38.5 million and full year 2025 total revenue between $146.0 million and $158.0 million. Adjusted EBITDA is projected to be between $(5.5) million and $(3.5) million for Q2 2025 and between $(18.0) million and $(15.0) million for the full year 2025.

Management Comments

• Eric Friedrichsen, DISCO Chief Executive Officer, stated that DISCO is shaping the future of litigation and equipping legal teams with tools not previously available.

Industry Context

DISCO operates in the legal technology sector, providing cloud-based solutions for eDiscovery and litigation support. The industry is competitive, with companies like Relativity, Everlaw, and Logikcull also offering similar services. DISCO's focus on AI and innovative features like Cecilia Definitions aims to differentiate it in the market.

Comparison to Industry Standards

• Comparing DISCO's 3% revenue growth to competitors like Relativity (private) and Everlaw (private) is difficult without their specific financial releases, but generally, SaaS companies in the legal tech space aim for higher growth rates, often in the range of 15-30% annually.
• Similar companies such as Nuix (ASX: NXI) have faced challenges in maintaining growth and profitability, highlighting the competitive pressures in the eDiscovery market.
• DISCO's adjusted EBITDA margin of -14% is typical for growth-stage SaaS companies investing in sales and marketing, but the company will need to demonstrate a path to profitability to satisfy investors.

Management Changes

Stakeholder Impact

• Shareholders may be concerned about the increasing net loss, but encouraged by the revenue growth and positive outlook.
• Employees may be motivated by the company's innovation and growth initiatives.
• Customers should benefit from the new product features and continued investment in the platform.

Next Steps

• DISCO will host a conference call and webcast on May 7, 2025, to discuss its first quarter financial results and business highlights.
• The company will continue to focus on product innovation and expanding its customer base.

Key Dates

Keywords

financial results, CS Disco, revenue, EBITDA, software, litigation, legal tech