Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil Hydroworld Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries DISCO Announces Second Quarter 2024 Financial Results By: DISCO via Business Wire August 08, 2024 at 16:05 PM EDT Total Revenue of $36.0 Million, A Year over Year Increase of 5% CS Disco, Inc. (“DISCO”) (NYSE: LAW) today announced financial results for its second quarter ended June 30, 2024. “I am energized by another quarter with record-breaking revenue and the introduction of several new highly sought after features released within our product,” said Eric Friedrichsen, Chief Executive Officer. “Over my first 100 days at DISCO, I have had the pleasure of speaking directly with many of our top customers and am more convinced than ever that DISCO is a fantastic company with a strong market position. I look forward to continuing to release features that our customers are excited about and working with our employees to drive operational effectiveness that will help us scale to the next level.” Second Quarter 2024 Financial Highlights: Software revenue was $29.3 million, up 8% compared to the second quarter of 2023. Total revenue was $36.0 million, up 5% compared to the second quarter of 2023. GAAP net loss was $10.8 million, compared to $14.9 million in the second quarter of 2023. Adjusted EBITDA was $(4.7) million, compared to $(7.4) million in the second quarter of 2023. Recent Business Highlights: New CPO: DISCO appointed Richard Crum as the new Chief Product Officer of DISCO, beginning July 15, 2024. Customer Count: DISCO grew to 1,449 customers as of June 30, 2024. Mass Redactions: DISCO released in-app mass redactions, a new tool that allows users to redact thousands of gigabytes worth of data all at once. Cecilia Doc Summaries: DISCO unveiled Cecilia Doc Summaries, a generative AI tool that provides detailed and high-level takeaways of individual documents at a user’s request. Third Quarter and Full Year 2024 Financial Outlook As of August 8, 2024, DISCO is issuing the following outlook for the third quarter of 2024 and fiscal year 2024: Third quarter of 2024: Software revenue in the range of $29.5 million - $30.5 million. Total revenue in the range of $35.3 million - $37.3 million. Adjusted EBITDA in the range of $(7.0) million - $(5.0) million. Fiscal year 2024: Software revenue guidance in the range of $118.5 million - $120.5 million. Total revenue guidance in the range of $143.0 million - $147.0 million. Adjusted EBITDA in the range of $(23.0) million - $(19.0) million. DISCO’s third quarter and fiscal year 2024 financial outlook is based on assumptions that are subject to change, many of which are outside of its control. If actual results vary from these assumptions, these expectations may change. There can be no assurance that DISCO will achieve these results. Reconciliation of Adjusted EBITDA on a forward-looking basis to net loss, the most directly comparable GAAP measure, is not available without unreasonable efforts due to the high variability and complexity and low visibility with respect to the charges excluded from this non-GAAP measure; in particular, the effects of stock-based compensation expense specific to equity compensation awards that are directly impacted by unpredictable fluctuations in DISCO’s stock price. DISCO expects the variability of the above charges to have a significant, and potentially unpredictable, impact on its future GAAP financial results. Conference Call Information DISCO will host a conference call and webcast at 4:00 p.m. CT (5:00 p.m. ET) today, August 8, 2024, to discuss its second quarter 2024 financial results and business highlights. The conference call can be accessed by dialing (888) 300-4030 from the United States or +1 (646) 970-1443 internationally with conference ID 8394292. The live webcast of the conference call and other materials related to DISCO’s financial performance can be accessed from DISCO’s investor relations website at ir.csdisco.com. Following the completion of the call until 10:59 p.m. CT (11:59 p.m. ET) on Thursday, August 29, 2024, a telephone replay will be available by dialing (800) 770-2030 from the United States or +1 (609) 800-9909 internationally with conference ID 8394292. A webcast replay will also be available at ir.csdisco.com for 12 months. About DISCO DISCO (NYSE: LAW) provides cloud-native, artificial intelligence-powered legal product offerings that simplify legal hold, legal request, ediscovery, legal document review and case management for enterprises, law firms, legal services providers and governments. Our scalable, integrated product offerings enable legal departments to easily collect, process and review enterprise data that is relevant or potentially relevant to legal matters. References to “DISCO,” the “Company,” “our” or “we” in this press release refer to CS Disco, Inc. and its subsidiaries on a consolidated basis. Use of Non-GAAP Financial Measures DISCO uses the following non-GAAP financial measures: Adjusted EBITDA, Adjusted EBITDA margin; non-GAAP cost of revenue; non-GAAP gross profit; non-GAAP gross margin; non-GAAP research and development expense; non-GAAP research and development expense as a percentage of revenue; non-GAAP sales and marketing expense; non-GAAP sales and marketing expense as a percentage of revenue; non-GAAP general and administrative expense; non-GAAP general and administrative expense as a percentage of revenue; non-GAAP loss from operations; non-GAAP operating margin; non-GAAP net loss attributable to common stockholders, non-GAAP net loss attributable to common stockholders per share (basic and diluted) and non-GAAP net loss attributable to common stockholders as a percentage of revenue. Management believes that these non-GAAP financial measures are useful measures of operating performance because they exclude items that DISCO does not consider indicative of its core performance. In the case of Adjusted EBITDA and Adjusted EBITDA margin, DISCO adjusts net loss for such items as depreciation and amortization expense; income tax provision; interest and other, net; stock-based compensation expense; payroll tax expense on employee stock transactions; restructuring charges; expenses associated with stockholder litigation; and other one-time, non-recurring items, when applicable. In the case of non-GAAP cost of revenue, non-GAAP gross profit and non-GAAP gross margin, DISCO adjusts the respective GAAP balances for stock-based compensation expense. In the case of non-GAAP research and development expense, non-GAAP research and development expense as a percentage of revenue, non-GAAP sales and marketing expense and non-GAAP sales and marketing expense as a percentage of revenue, DISCO adjusts the respective GAAP balances for stock-based compensation expense, restructuring charges, and other one-time, non-recurring items, when applicable. In the case of non-GAAP general and administrative expense, non-GAAP general and administrative expense as a percentage of revenue, non-GAAP loss from operations, non-GAAP operating margin, non-GAAP net loss attributable to common stockholders, non-GAAP net loss attributable to common stockholders per share (basic and diluted) and non-GAAP net loss attributable to common stockholders as a percentage of revenue, DISCO adjusts the respective GAAP balances for stock-based compensation expense, restructuring charges, expenses associated with stockholder litigation, and other one-time, non-recurring items, when applicable. There are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies. Certain items that are excluded from these non-GAAP financial measures can have a material impact on operating loss and net loss. As a result, these non-GAAP financial measures have limitations and should be considered in addition to, not as a substitute for or superior to, the closest GAAP measures, or other financial measures prepared in accordance with GAAP. DISCO's management uses these non-GAAP measures as measures of operating performance; to prepare DISCO's annual operating budget; to allocate resources to enhance the financial performance of DISCO's business; to evaluate the effectiveness of DISCO's business strategies; to provide consistency and comparability with past financial performance; to facilitate a comparison of DISCO's results with those of other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and in communication with DISCO’s board of directors concerning financial performance. Forward-Looking Statements This press release contains forward-looking statements, including, among other things, statements regarding DISCO’s future financial performance. Words such as “may,” “should,” “will,” “believe,” “expect,” “anticipate,” “target,” “project,” and similar phrases that denote future expectation or intent regarding DISCO’s financial results, operations, and other matters are intended to identify forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties, and other factors that may cause DISCO’s actual results, performance, or achievements to differ materially, including (i) our history of operating losses; (ii) our limited operating history; (iii) our ability to maintain and advance our innovation and brand; (iv) our ability to effectively add new customers; (v) our ability to effectively increase usage and penetration with our existing customer base; (vi) our ability to expand our sales coverage and establish a digital sales channel; (vii) our ability to expand internationally; (viii) our ability to extend and strengthen our channel partnerships and integrations; (ix) our ability to expand our offering portfolio to a wider range of legal processes outside of our current core offerings; (x) our dependence on revenue from customer usage, which fluctuates based on the timing of and activity driven by legal matters for which our product offerings are used, and any shortfall of large matters on our platform; (xi) our ability to pursue strategic acquisitions and strategic investments to expand the functionality and value of our product offerings; (xii) our ability to comply or remain in compliance with laws and regulations that currently apply or become applicable to our business in the jurisdictions in which we operate; (xiii) the potential that our computer or electronic systems, applications or services, or those of any third parties on whom we depend, fail or suffer security or data privacy breaches or other unauthorized or improper access to, use of, or destruction of our proprietary or confidential data, employee data, or personal data; (xiv) our ability to compete effectively with existing competitors and new market entrants; (xv) the impact of fluctuations in general macroeconomic conditions, such as the current inflationary environment and fluctuating interest rates; and (xvi) the impact that global events, such as the Russia-Ukraine and Israel-Hamas wars and any related economic downturn could have on our or our customers’ businesses, financial condition and results of operations. The forward-looking statements contained in this press release are also subject to additional risks, uncertainties, and factors, including those more fully described in our filings with the Securities and Exchange Commission (“SEC”), including our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed with the SEC on May 9, 2024. Further information on potential risks that could affect actual results will be included in the subsequent periodic and current reports and other filings that we make with the SEC from time to time, including our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024. Forward-looking statements represent DISCO’s management’s beliefs and assumptions only as of the date such statements are made. We undertake no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law. CS DISCO, INC. Condensed Consolidated Balance Sheets (in thousands, except par value amounts) (unaudited) June 30, 2024 December 31, 2023 Assets Current assets: Cash and cash equivalents $ 130,005 $ 159,551 Accounts receivable, net 25,334 26,993 Prepaid expenses and other current assets 4,812 5,795 Total current assets 160,151 192,339 Property and equipment, net 9,232 9,663 Operating lease right-of-use assets 7,372 8,143 Primary law intangible asset, net 14,000 14,000 Other intangible assets, net 540 681 Goodwill 5,898 5,898 Other assets 808 823 Total assets $ 198,001 $ 231,547 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 4,040 $ 5,234 Accrued expenses 5,457 5,502 Accrued salary and benefits 5,513 6,230 Deferred revenue 3,518 4,285 Operating leases 1,905 1,826 Finance leases 41 41 Total current liabilities 20,474 23,118 Operating leases, non-current 6,262 7,136 Finance leases, non-current 137 158 Other liabilities 238 800 Total liabilities 27,111 31,212 Commitments and contingencies Stockholders’ equity Preferred stock $0.005 par value, 100,000 shares authorized and no shares issued and outstanding as of June 30, 2024 and December 31, 2023 — — Common stock $0.005 par value, 1,000,000 shares authorized as of June 30, 2024 and December 31, 2023; 59,434 and 61,010 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively 298 306 Additional paid-in capital 433,664 440,408 Accumulated deficit (263,072 ) (240,379 ) Total stockholders’ equity 170,890 200,335 Total liabilities and stockholders’ equity $ 198,001 $ 231,547 CS DISCO, INC. Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share amounts) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revenue $ 36,005 $ 34,276 $ 71,576 $ 67,405 Cost of revenue 9,288 9,039 18,140 17,316 Gross profit 26,717 25,237 53,436 50,089 Operating expenses: Research and development 12,888 13,258 24,967 29,030 Sales and marketing 15,498 18,053 31,306 37,113 General and administrative 10,715 10,917 21,879 23,217 Total operating expenses 39,101 42,228 78,152 89,360 Loss from operations (12,384 ) (16,991 ) (24,716 ) (39,271 ) Other income (expense) Interest and other income 1,735 2,129 3,721 4,076 Interest and other expense (80 ) 4 (230 ) 12 Loss from operations before income taxes (10,729 ) (14,858 ) (21,225 ) (35,183 ) Income tax provision (105 ) (57 ) (191 ) (97 ) Net loss attributable to common stockholders $ (10,834 ) $ (14,915 ) $ (21,416 ) $ (35,280 ) Net loss per share attributable to common stockholders, basic and diluted $ (0.18 ) $ (0.25 ) $ (0.35 ) $ (0.59 ) Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted 59,815 59,856 60,508 59,648 CS DISCO, INC. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Six Months Ended June 30, 2024 2023 Cash flow from operating activities: Net loss $ (21,416 ) $ (35,280 ) Adjustments to reconcile net loss to cash used in operations: Depreciation and amortization 2,103 1,957 Stock-based compensation 11,731 14,092 Charge to allowance for credit losses 1,126 1,356 Loss (Gain) on disposal of long-lived assets (2 ) 1 Non-cash operating lease costs 771 699 Changes in operating assets and liabilities: Accounts receivable 533 (3,214 ) Prepaid expenses and other current assets 984 1,819 Other long-term assets 14 (124 ) Accounts payable (816 ) (3,186 ) Accrued expenses and other (1,365 ) 1,616 Deferred revenue (767 ) (790 ) Operating lease liabilities (796 ) (722 ) Other liabilities (80 ) (30 ) Net cash used in operating activities (7,980 ) (21,806 ) Cash flow from investing activities: Purchases of property, equipment and capitalized software development costs (1,346 ) (2,497 ) Proceeds from disposal of equipment 2 1 Cash paid for acquisitions — (1,180 ) Net cash used in investing activities (1,344 ) (3,676 ) Cash flow from financing activities: Proceeds from exercise of stock options 18 283 Net proceeds from issuance of common stock under Employee Stock Purchase Plan 360 932 Repurchase of common stock related to net share settlement (71 ) (38 ) Repurchase of common stock related to share repurchase program (20,052 ) — Cash paid for acquisitions (457 ) — Principal payments on finance lease obligations (20 ) (20 ) Net cash provided by (used in) financing activities (20,222 ) 1,157 Net decrease in cash and cash equivalents: (29,546 ) (24,325 ) Cash and cash equivalents at beginning of period 159,551 203,244 Cash and cash equivalents at end of period $ 130,005 $ 178,919 Supplemental disclosure: Cash paid for taxes $ 464 $ 430 Non-cash investing and financing activities: Property and equipment included in accounts payable and accrued liabilities $ 79 $ 203 Contingent consideration related to acquisition $ 481 $ 753 CS DISCO, INC. Reconciliation from GAAP to Non-GAAP Results (in thousands, except for percentages and per share amounts) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net loss $ (10,834 ) $ (14,915 ) $ (21,416 ) $ (35,280 ) Depreciation and amortization expense 1,028 1,005 2,103 1,957 Income tax provision 105 57 191 97 Interest and other, net (1,655 ) (2,133 ) (3,491 ) (4,088 ) Stock-based compensation expense 6,058 6,868 11,731 14,092 Payroll tax expense on employee stock transactions 178 134 371 244 Restructuring charges — 1,574 — 2,590 Expenses associated with stockholder litigation 384 — 583 — Adjusted EBITDA $ (4,736 ) $ (7,410 ) $ (9,928 ) $ (20,388 ) Adjusted EBITDA margin (13 )% (22 )% (14 )% (30 )% Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Cost of revenue $ 9,288 $ 9,039 $ 18,140 $ 17,316 Non-GAAP adjustments: Stock-based compensation expense (432 ) (271 ) (817 ) (502 ) Non-GAAP cost of revenue $ 8,856 $ 8,768 $ 17,323 $ 16,814 Non-GAAP gross profit $ 27,149 $ 25,508 $ 54,253 $ 50,591 Non-GAAP gross margin 75 % 74 % 76 % 75 % Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Research and development $ 12,888 $ 13,258 $ 24,967 $ 29,030 Non-GAAP adjustments: Stock-based compensation expense (2,084 ) (1,729 ) (4,176 ) (3,919 ) Restructuring charges — (1,001 ) — (1,510 ) Non-GAAP research and development $ 10,804 $ 10,528 $ 20,791 $ 23,601 Non-GAAP research and development as a % of revenue 30 % 31 % 29 % 35 % Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Sales and marketing $ 15,498 $ 18,053 $ 31,306 $ 37,113 Non-GAAP adjustments: Stock-based compensation expense (1,171 ) (1,360 ) (2,251 ) (2,751 ) Restructuring charges — (471 ) — (648 ) Non-GAAP sales and marketing $ 14,327 $ 16,222 $ 29,055 $ 33,714 Non-GAAP sales and marketing as a % of revenue 40 % 47 % 41 % 50 % Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 General and administrative $ 10,715 $ 10,917 $ 21,879 $ 23,217 Non-GAAP adjustments: Stock-based compensation expense (2,371 ) (3,508 ) (4,487 ) (6,920 ) Restructuring charges — (102 ) — (432 ) Expenses associated with stockholder litigation (384 ) — (583 ) — Non-GAAP general and administrative $ 7,960 $ 7,307 $ 16,809 $ 15,865 Non-GAAP general and administrative as a % of revenue 22 % 21 % 23 % 24 % Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Loss from operations $ (12,384 ) $ (16,991 ) $ (24,716 ) $ (39,271 ) Operating margin (34 )% (50 )% (35 )% (58 )% Non-GAAP adjustments: Stock-based compensation expense 6,058 6,868 11,731 14,092 Restructuring charges — 1,574 — 2,590 Expenses associated with stockholder litigation 384 — 583 — Non-GAAP loss from operations $ (5,942 ) $ (8,549 ) $ (12,402 ) $ (22,589 ) Non-GAAP operating margin (17 )% (25 )% (17 )% (34 )% Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net loss attributable to common stockholders $ (10,834 ) $ (14,915 ) $ (21,416 ) $ (35,280 ) Non-GAAP adjustments: Stock-based compensation expense 6,058 6,868 11,731 14,092 Restructuring charges — 1,574 — 2,590 Expenses associated with stockholder litigation 384 — 583 — Non-GAAP net loss attributable to common stockholders $ (4,392 ) $ (6,473 ) $ (9,102 ) $ (18,598 ) Non-GAAP net loss per share, basic and diluted $ (0.07 ) $ (0.11 ) $ (0.15 ) $ (0.31 ) Weighted average shares used to compute basic and diluted net loss per share 59,815 59,856 60,508 59,648 Non-GAAP net loss attributable to common stockholders as a % of revenue (12 )% (19 )% (13 )% (28 )% View source version on businesswire.com: https://www.businesswire.com/news/home/20240807296588/en/Contacts Investor Relations Contact IR@csdisco.com Stock Quote API & Stock News API supplied by www.cloudquote.io Quotes delayed at least 20 minutes. 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DISCO Announces Second Quarter 2024 Financial Results By: DISCO via Business Wire August 08, 2024 at 16:05 PM EDT Total Revenue of $36.0 Million, A Year over Year Increase of 5% CS Disco, Inc. (“DISCO”) (NYSE: LAW) today announced financial results for its second quarter ended June 30, 2024. “I am energized by another quarter with record-breaking revenue and the introduction of several new highly sought after features released within our product,” said Eric Friedrichsen, Chief Executive Officer. “Over my first 100 days at DISCO, I have had the pleasure of speaking directly with many of our top customers and am more convinced than ever that DISCO is a fantastic company with a strong market position. I look forward to continuing to release features that our customers are excited about and working with our employees to drive operational effectiveness that will help us scale to the next level.” Second Quarter 2024 Financial Highlights: Software revenue was $29.3 million, up 8% compared to the second quarter of 2023. Total revenue was $36.0 million, up 5% compared to the second quarter of 2023. GAAP net loss was $10.8 million, compared to $14.9 million in the second quarter of 2023. Adjusted EBITDA was $(4.7) million, compared to $(7.4) million in the second quarter of 2023. Recent Business Highlights: New CPO: DISCO appointed Richard Crum as the new Chief Product Officer of DISCO, beginning July 15, 2024. Customer Count: DISCO grew to 1,449 customers as of June 30, 2024. Mass Redactions: DISCO released in-app mass redactions, a new tool that allows users to redact thousands of gigabytes worth of data all at once. Cecilia Doc Summaries: DISCO unveiled Cecilia Doc Summaries, a generative AI tool that provides detailed and high-level takeaways of individual documents at a user’s request. Third Quarter and Full Year 2024 Financial Outlook As of August 8, 2024, DISCO is issuing the following outlook for the third quarter of 2024 and fiscal year 2024: Third quarter of 2024: Software revenue in the range of $29.5 million - $30.5 million. Total revenue in the range of $35.3 million - $37.3 million. Adjusted EBITDA in the range of $(7.0) million - $(5.0) million. Fiscal year 2024: Software revenue guidance in the range of $118.5 million - $120.5 million. Total revenue guidance in the range of $143.0 million - $147.0 million. Adjusted EBITDA in the range of $(23.0) million - $(19.0) million. DISCO’s third quarter and fiscal year 2024 financial outlook is based on assumptions that are subject to change, many of which are outside of its control. If actual results vary from these assumptions, these expectations may change. There can be no assurance that DISCO will achieve these results. Reconciliation of Adjusted EBITDA on a forward-looking basis to net loss, the most directly comparable GAAP measure, is not available without unreasonable efforts due to the high variability and complexity and low visibility with respect to the charges excluded from this non-GAAP measure; in particular, the effects of stock-based compensation expense specific to equity compensation awards that are directly impacted by unpredictable fluctuations in DISCO’s stock price. DISCO expects the variability of the above charges to have a significant, and potentially unpredictable, impact on its future GAAP financial results. Conference Call Information DISCO will host a conference call and webcast at 4:00 p.m. CT (5:00 p.m. ET) today, August 8, 2024, to discuss its second quarter 2024 financial results and business highlights. The conference call can be accessed by dialing (888) 300-4030 from the United States or +1 (646) 970-1443 internationally with conference ID 8394292. The live webcast of the conference call and other materials related to DISCO’s financial performance can be accessed from DISCO’s investor relations website at ir.csdisco.com. Following the completion of the call until 10:59 p.m. CT (11:59 p.m. ET) on Thursday, August 29, 2024, a telephone replay will be available by dialing (800) 770-2030 from the United States or +1 (609) 800-9909 internationally with conference ID 8394292. A webcast replay will also be available at ir.csdisco.com for 12 months. About DISCO DISCO (NYSE: LAW) provides cloud-native, artificial intelligence-powered legal product offerings that simplify legal hold, legal request, ediscovery, legal document review and case management for enterprises, law firms, legal services providers and governments. Our scalable, integrated product offerings enable legal departments to easily collect, process and review enterprise data that is relevant or potentially relevant to legal matters. References to “DISCO,” the “Company,” “our” or “we” in this press release refer to CS Disco, Inc. and its subsidiaries on a consolidated basis. Use of Non-GAAP Financial Measures DISCO uses the following non-GAAP financial measures: Adjusted EBITDA, Adjusted EBITDA margin; non-GAAP cost of revenue; non-GAAP gross profit; non-GAAP gross margin; non-GAAP research and development expense; non-GAAP research and development expense as a percentage of revenue; non-GAAP sales and marketing expense; non-GAAP sales and marketing expense as a percentage of revenue; non-GAAP general and administrative expense; non-GAAP general and administrative expense as a percentage of revenue; non-GAAP loss from operations; non-GAAP operating margin; non-GAAP net loss attributable to common stockholders, non-GAAP net loss attributable to common stockholders per share (basic and diluted) and non-GAAP net loss attributable to common stockholders as a percentage of revenue. Management believes that these non-GAAP financial measures are useful measures of operating performance because they exclude items that DISCO does not consider indicative of its core performance. In the case of Adjusted EBITDA and Adjusted EBITDA margin, DISCO adjusts net loss for such items as depreciation and amortization expense; income tax provision; interest and other, net; stock-based compensation expense; payroll tax expense on employee stock transactions; restructuring charges; expenses associated with stockholder litigation; and other one-time, non-recurring items, when applicable. In the case of non-GAAP cost of revenue, non-GAAP gross profit and non-GAAP gross margin, DISCO adjusts the respective GAAP balances for stock-based compensation expense. In the case of non-GAAP research and development expense, non-GAAP research and development expense as a percentage of revenue, non-GAAP sales and marketing expense and non-GAAP sales and marketing expense as a percentage of revenue, DISCO adjusts the respective GAAP balances for stock-based compensation expense, restructuring charges, and other one-time, non-recurring items, when applicable. In the case of non-GAAP general and administrative expense, non-GAAP general and administrative expense as a percentage of revenue, non-GAAP loss from operations, non-GAAP operating margin, non-GAAP net loss attributable to common stockholders, non-GAAP net loss attributable to common stockholders per share (basic and diluted) and non-GAAP net loss attributable to common stockholders as a percentage of revenue, DISCO adjusts the respective GAAP balances for stock-based compensation expense, restructuring charges, expenses associated with stockholder litigation, and other one-time, non-recurring items, when applicable. There are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies. Certain items that are excluded from these non-GAAP financial measures can have a material impact on operating loss and net loss. As a result, these non-GAAP financial measures have limitations and should be considered in addition to, not as a substitute for or superior to, the closest GAAP measures, or other financial measures prepared in accordance with GAAP. DISCO's management uses these non-GAAP measures as measures of operating performance; to prepare DISCO's annual operating budget; to allocate resources to enhance the financial performance of DISCO's business; to evaluate the effectiveness of DISCO's business strategies; to provide consistency and comparability with past financial performance; to facilitate a comparison of DISCO's results with those of other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and in communication with DISCO’s board of directors concerning financial performance. Forward-Looking Statements This press release contains forward-looking statements, including, among other things, statements regarding DISCO’s future financial performance. Words such as “may,” “should,” “will,” “believe,” “expect,” “anticipate,” “target,” “project,” and similar phrases that denote future expectation or intent regarding DISCO’s financial results, operations, and other matters are intended to identify forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties, and other factors that may cause DISCO’s actual results, performance, or achievements to differ materially, including (i) our history of operating losses; (ii) our limited operating history; (iii) our ability to maintain and advance our innovation and brand; (iv) our ability to effectively add new customers; (v) our ability to effectively increase usage and penetration with our existing customer base; (vi) our ability to expand our sales coverage and establish a digital sales channel; (vii) our ability to expand internationally; (viii) our ability to extend and strengthen our channel partnerships and integrations; (ix) our ability to expand our offering portfolio to a wider range of legal processes outside of our current core offerings; (x) our dependence on revenue from customer usage, which fluctuates based on the timing of and activity driven by legal matters for which our product offerings are used, and any shortfall of large matters on our platform; (xi) our ability to pursue strategic acquisitions and strategic investments to expand the functionality and value of our product offerings; (xii) our ability to comply or remain in compliance with laws and regulations that currently apply or become applicable to our business in the jurisdictions in which we operate; (xiii) the potential that our computer or electronic systems, applications or services, or those of any third parties on whom we depend, fail or suffer security or data privacy breaches or other unauthorized or improper access to, use of, or destruction of our proprietary or confidential data, employee data, or personal data; (xiv) our ability to compete effectively with existing competitors and new market entrants; (xv) the impact of fluctuations in general macroeconomic conditions, such as the current inflationary environment and fluctuating interest rates; and (xvi) the impact that global events, such as the Russia-Ukraine and Israel-Hamas wars and any related economic downturn could have on our or our customers’ businesses, financial condition and results of operations. The forward-looking statements contained in this press release are also subject to additional risks, uncertainties, and factors, including those more fully described in our filings with the Securities and Exchange Commission (“SEC”), including our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed with the SEC on May 9, 2024. Further information on potential risks that could affect actual results will be included in the subsequent periodic and current reports and other filings that we make with the SEC from time to time, including our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024. Forward-looking statements represent DISCO’s management’s beliefs and assumptions only as of the date such statements are made. We undertake no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law. CS DISCO, INC. Condensed Consolidated Balance Sheets (in thousands, except par value amounts) (unaudited) June 30, 2024 December 31, 2023 Assets Current assets: Cash and cash equivalents $ 130,005 $ 159,551 Accounts receivable, net 25,334 26,993 Prepaid expenses and other current assets 4,812 5,795 Total current assets 160,151 192,339 Property and equipment, net 9,232 9,663 Operating lease right-of-use assets 7,372 8,143 Primary law intangible asset, net 14,000 14,000 Other intangible assets, net 540 681 Goodwill 5,898 5,898 Other assets 808 823 Total assets $ 198,001 $ 231,547 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 4,040 $ 5,234 Accrued expenses 5,457 5,502 Accrued salary and benefits 5,513 6,230 Deferred revenue 3,518 4,285 Operating leases 1,905 1,826 Finance leases 41 41 Total current liabilities 20,474 23,118 Operating leases, non-current 6,262 7,136 Finance leases, non-current 137 158 Other liabilities 238 800 Total liabilities 27,111 31,212 Commitments and contingencies Stockholders’ equity Preferred stock $0.005 par value, 100,000 shares authorized and no shares issued and outstanding as of June 30, 2024 and December 31, 2023 — — Common stock $0.005 par value, 1,000,000 shares authorized as of June 30, 2024 and December 31, 2023; 59,434 and 61,010 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively 298 306 Additional paid-in capital 433,664 440,408 Accumulated deficit (263,072 ) (240,379 ) Total stockholders’ equity 170,890 200,335 Total liabilities and stockholders’ equity $ 198,001 $ 231,547 CS DISCO, INC. Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share amounts) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revenue $ 36,005 $ 34,276 $ 71,576 $ 67,405 Cost of revenue 9,288 9,039 18,140 17,316 Gross profit 26,717 25,237 53,436 50,089 Operating expenses: Research and development 12,888 13,258 24,967 29,030 Sales and marketing 15,498 18,053 31,306 37,113 General and administrative 10,715 10,917 21,879 23,217 Total operating expenses 39,101 42,228 78,152 89,360 Loss from operations (12,384 ) (16,991 ) (24,716 ) (39,271 ) Other income (expense) Interest and other income 1,735 2,129 3,721 4,076 Interest and other expense (80 ) 4 (230 ) 12 Loss from operations before income taxes (10,729 ) (14,858 ) (21,225 ) (35,183 ) Income tax provision (105 ) (57 ) (191 ) (97 ) Net loss attributable to common stockholders $ (10,834 ) $ (14,915 ) $ (21,416 ) $ (35,280 ) Net loss per share attributable to common stockholders, basic and diluted $ (0.18 ) $ (0.25 ) $ (0.35 ) $ (0.59 ) Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted 59,815 59,856 60,508 59,648 CS DISCO, INC. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Six Months Ended June 30, 2024 2023 Cash flow from operating activities: Net loss $ (21,416 ) $ (35,280 ) Adjustments to reconcile net loss to cash used in operations: Depreciation and amortization 2,103 1,957 Stock-based compensation 11,731 14,092 Charge to allowance for credit losses 1,126 1,356 Loss (Gain) on disposal of long-lived assets (2 ) 1 Non-cash operating lease costs 771 699 Changes in operating assets and liabilities: Accounts receivable 533 (3,214 ) Prepaid expenses and other current assets 984 1,819 Other long-term assets 14 (124 ) Accounts payable (816 ) (3,186 ) Accrued expenses and other (1,365 ) 1,616 Deferred revenue (767 ) (790 ) Operating lease liabilities (796 ) (722 ) Other liabilities (80 ) (30 ) Net cash used in operating activities (7,980 ) (21,806 ) Cash flow from investing activities: Purchases of property, equipment and capitalized software development costs (1,346 ) (2,497 ) Proceeds from disposal of equipment 2 1 Cash paid for acquisitions — (1,180 ) Net cash used in investing activities (1,344 ) (3,676 ) Cash flow from financing activities: Proceeds from exercise of stock options 18 283 Net proceeds from issuance of common stock under Employee Stock Purchase Plan 360 932 Repurchase of common stock related to net share settlement (71 ) (38 ) Repurchase of common stock related to share repurchase program (20,052 ) — Cash paid for acquisitions (457 ) — Principal payments on finance lease obligations (20 ) (20 ) Net cash provided by (used in) financing activities (20,222 ) 1,157 Net decrease in cash and cash equivalents: (29,546 ) (24,325 ) Cash and cash equivalents at beginning of period 159,551 203,244 Cash and cash equivalents at end of period $ 130,005 $ 178,919 Supplemental disclosure: Cash paid for taxes $ 464 $ 430 Non-cash investing and financing activities: Property and equipment included in accounts payable and accrued liabilities $ 79 $ 203 Contingent consideration related to acquisition $ 481 $ 753 CS DISCO, INC. Reconciliation from GAAP to Non-GAAP Results (in thousands, except for percentages and per share amounts) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net loss $ (10,834 ) $ (14,915 ) $ (21,416 ) $ (35,280 ) Depreciation and amortization expense 1,028 1,005 2,103 1,957 Income tax provision 105 57 191 97 Interest and other, net (1,655 ) (2,133 ) (3,491 ) (4,088 ) Stock-based compensation expense 6,058 6,868 11,731 14,092 Payroll tax expense on employee stock transactions 178 134 371 244 Restructuring charges — 1,574 — 2,590 Expenses associated with stockholder litigation 384 — 583 — Adjusted EBITDA $ (4,736 ) $ (7,410 ) $ (9,928 ) $ (20,388 ) Adjusted EBITDA margin (13 )% (22 )% (14 )% (30 )% Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Cost of revenue $ 9,288 $ 9,039 $ 18,140 $ 17,316 Non-GAAP adjustments: Stock-based compensation expense (432 ) (271 ) (817 ) (502 ) Non-GAAP cost of revenue $ 8,856 $ 8,768 $ 17,323 $ 16,814 Non-GAAP gross profit $ 27,149 $ 25,508 $ 54,253 $ 50,591 Non-GAAP gross margin 75 % 74 % 76 % 75 % Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Research and development $ 12,888 $ 13,258 $ 24,967 $ 29,030 Non-GAAP adjustments: Stock-based compensation expense (2,084 ) (1,729 ) (4,176 ) (3,919 ) Restructuring charges — (1,001 ) — (1,510 ) Non-GAAP research and development $ 10,804 $ 10,528 $ 20,791 $ 23,601 Non-GAAP research and development as a % of revenue 30 % 31 % 29 % 35 % Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Sales and marketing $ 15,498 $ 18,053 $ 31,306 $ 37,113 Non-GAAP adjustments: Stock-based compensation expense (1,171 ) (1,360 ) (2,251 ) (2,751 ) Restructuring charges — (471 ) — (648 ) Non-GAAP sales and marketing $ 14,327 $ 16,222 $ 29,055 $ 33,714 Non-GAAP sales and marketing as a % of revenue 40 % 47 % 41 % 50 % Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 General and administrative $ 10,715 $ 10,917 $ 21,879 $ 23,217 Non-GAAP adjustments: Stock-based compensation expense (2,371 ) (3,508 ) (4,487 ) (6,920 ) Restructuring charges — (102 ) — (432 ) Expenses associated with stockholder litigation (384 ) — (583 ) — Non-GAAP general and administrative $ 7,960 $ 7,307 $ 16,809 $ 15,865 Non-GAAP general and administrative as a % of revenue 22 % 21 % 23 % 24 % Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Loss from operations $ (12,384 ) $ (16,991 ) $ (24,716 ) $ (39,271 ) Operating margin (34 )% (50 )% (35 )% (58 )% Non-GAAP adjustments: Stock-based compensation expense 6,058 6,868 11,731 14,092 Restructuring charges — 1,574 — 2,590 Expenses associated with stockholder litigation 384 — 583 — Non-GAAP loss from operations $ (5,942 ) $ (8,549 ) $ (12,402 ) $ (22,589 ) Non-GAAP operating margin (17 )% (25 )% (17 )% (34 )% Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net loss attributable to common stockholders $ (10,834 ) $ (14,915 ) $ (21,416 ) $ (35,280 ) Non-GAAP adjustments: Stock-based compensation expense 6,058 6,868 11,731 14,092 Restructuring charges — 1,574 — 2,590 Expenses associated with stockholder litigation 384 — 583 — Non-GAAP net loss attributable to common stockholders $ (4,392 ) $ (6,473 ) $ (9,102 ) $ (18,598 ) Non-GAAP net loss per share, basic and diluted $ (0.07 ) $ (0.11 ) $ (0.15 ) $ (0.31 ) Weighted average shares used to compute basic and diluted net loss per share 59,815 59,856 60,508 59,648 Non-GAAP net loss attributable to common stockholders as a % of revenue (12 )% (19 )% (13 )% (28 )% View source version on businesswire.com: https://www.businesswire.com/news/home/20240807296588/en/Contacts Investor Relations Contact IR@csdisco.com
CS Disco, Inc. (“DISCO”) (NYSE: LAW) today announced financial results for its second quarter ended June 30, 2024. “I am energized by another quarter with record-breaking revenue and the introduction of several new highly sought after features released within our product,” said Eric Friedrichsen, Chief Executive Officer. “Over my first 100 days at DISCO, I have had the pleasure of speaking directly with many of our top customers and am more convinced than ever that DISCO is a fantastic company with a strong market position. I look forward to continuing to release features that our customers are excited about and working with our employees to drive operational effectiveness that will help us scale to the next level.” Second Quarter 2024 Financial Highlights: Software revenue was $29.3 million, up 8% compared to the second quarter of 2023. Total revenue was $36.0 million, up 5% compared to the second quarter of 2023. GAAP net loss was $10.8 million, compared to $14.9 million in the second quarter of 2023. Adjusted EBITDA was $(4.7) million, compared to $(7.4) million in the second quarter of 2023. Recent Business Highlights: New CPO: DISCO appointed Richard Crum as the new Chief Product Officer of DISCO, beginning July 15, 2024. Customer Count: DISCO grew to 1,449 customers as of June 30, 2024. Mass Redactions: DISCO released in-app mass redactions, a new tool that allows users to redact thousands of gigabytes worth of data all at once. Cecilia Doc Summaries: DISCO unveiled Cecilia Doc Summaries, a generative AI tool that provides detailed and high-level takeaways of individual documents at a user’s request. Third Quarter and Full Year 2024 Financial Outlook As of August 8, 2024, DISCO is issuing the following outlook for the third quarter of 2024 and fiscal year 2024: Third quarter of 2024: Software revenue in the range of $29.5 million - $30.5 million. Total revenue in the range of $35.3 million - $37.3 million. Adjusted EBITDA in the range of $(7.0) million - $(5.0) million. Fiscal year 2024: Software revenue guidance in the range of $118.5 million - $120.5 million. Total revenue guidance in the range of $143.0 million - $147.0 million. Adjusted EBITDA in the range of $(23.0) million - $(19.0) million. DISCO’s third quarter and fiscal year 2024 financial outlook is based on assumptions that are subject to change, many of which are outside of its control. If actual results vary from these assumptions, these expectations may change. There can be no assurance that DISCO will achieve these results. Reconciliation of Adjusted EBITDA on a forward-looking basis to net loss, the most directly comparable GAAP measure, is not available without unreasonable efforts due to the high variability and complexity and low visibility with respect to the charges excluded from this non-GAAP measure; in particular, the effects of stock-based compensation expense specific to equity compensation awards that are directly impacted by unpredictable fluctuations in DISCO’s stock price. DISCO expects the variability of the above charges to have a significant, and potentially unpredictable, impact on its future GAAP financial results. Conference Call Information DISCO will host a conference call and webcast at 4:00 p.m. CT (5:00 p.m. ET) today, August 8, 2024, to discuss its second quarter 2024 financial results and business highlights. The conference call can be accessed by dialing (888) 300-4030 from the United States or +1 (646) 970-1443 internationally with conference ID 8394292. The live webcast of the conference call and other materials related to DISCO’s financial performance can be accessed from DISCO’s investor relations website at ir.csdisco.com. Following the completion of the call until 10:59 p.m. CT (11:59 p.m. ET) on Thursday, August 29, 2024, a telephone replay will be available by dialing (800) 770-2030 from the United States or +1 (609) 800-9909 internationally with conference ID 8394292. A webcast replay will also be available at ir.csdisco.com for 12 months. About DISCO DISCO (NYSE: LAW) provides cloud-native, artificial intelligence-powered legal product offerings that simplify legal hold, legal request, ediscovery, legal document review and case management for enterprises, law firms, legal services providers and governments. Our scalable, integrated product offerings enable legal departments to easily collect, process and review enterprise data that is relevant or potentially relevant to legal matters. References to “DISCO,” the “Company,” “our” or “we” in this press release refer to CS Disco, Inc. and its subsidiaries on a consolidated basis. Use of Non-GAAP Financial Measures DISCO uses the following non-GAAP financial measures: Adjusted EBITDA, Adjusted EBITDA margin; non-GAAP cost of revenue; non-GAAP gross profit; non-GAAP gross margin; non-GAAP research and development expense; non-GAAP research and development expense as a percentage of revenue; non-GAAP sales and marketing expense; non-GAAP sales and marketing expense as a percentage of revenue; non-GAAP general and administrative expense; non-GAAP general and administrative expense as a percentage of revenue; non-GAAP loss from operations; non-GAAP operating margin; non-GAAP net loss attributable to common stockholders, non-GAAP net loss attributable to common stockholders per share (basic and diluted) and non-GAAP net loss attributable to common stockholders as a percentage of revenue. Management believes that these non-GAAP financial measures are useful measures of operating performance because they exclude items that DISCO does not consider indicative of its core performance. In the case of Adjusted EBITDA and Adjusted EBITDA margin, DISCO adjusts net loss for such items as depreciation and amortization expense; income tax provision; interest and other, net; stock-based compensation expense; payroll tax expense on employee stock transactions; restructuring charges; expenses associated with stockholder litigation; and other one-time, non-recurring items, when applicable. In the case of non-GAAP cost of revenue, non-GAAP gross profit and non-GAAP gross margin, DISCO adjusts the respective GAAP balances for stock-based compensation expense. In the case of non-GAAP research and development expense, non-GAAP research and development expense as a percentage of revenue, non-GAAP sales and marketing expense and non-GAAP sales and marketing expense as a percentage of revenue, DISCO adjusts the respective GAAP balances for stock-based compensation expense, restructuring charges, and other one-time, non-recurring items, when applicable. In the case of non-GAAP general and administrative expense, non-GAAP general and administrative expense as a percentage of revenue, non-GAAP loss from operations, non-GAAP operating margin, non-GAAP net loss attributable to common stockholders, non-GAAP net loss attributable to common stockholders per share (basic and diluted) and non-GAAP net loss attributable to common stockholders as a percentage of revenue, DISCO adjusts the respective GAAP balances for stock-based compensation expense, restructuring charges, expenses associated with stockholder litigation, and other one-time, non-recurring items, when applicable. There are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies. Certain items that are excluded from these non-GAAP financial measures can have a material impact on operating loss and net loss. As a result, these non-GAAP financial measures have limitations and should be considered in addition to, not as a substitute for or superior to, the closest GAAP measures, or other financial measures prepared in accordance with GAAP. DISCO's management uses these non-GAAP measures as measures of operating performance; to prepare DISCO's annual operating budget; to allocate resources to enhance the financial performance of DISCO's business; to evaluate the effectiveness of DISCO's business strategies; to provide consistency and comparability with past financial performance; to facilitate a comparison of DISCO's results with those of other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and in communication with DISCO’s board of directors concerning financial performance. Forward-Looking Statements This press release contains forward-looking statements, including, among other things, statements regarding DISCO’s future financial performance. Words such as “may,” “should,” “will,” “believe,” “expect,” “anticipate,” “target,” “project,” and similar phrases that denote future expectation or intent regarding DISCO’s financial results, operations, and other matters are intended to identify forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties, and other factors that may cause DISCO’s actual results, performance, or achievements to differ materially, including (i) our history of operating losses; (ii) our limited operating history; (iii) our ability to maintain and advance our innovation and brand; (iv) our ability to effectively add new customers; (v) our ability to effectively increase usage and penetration with our existing customer base; (vi) our ability to expand our sales coverage and establish a digital sales channel; (vii) our ability to expand internationally; (viii) our ability to extend and strengthen our channel partnerships and integrations; (ix) our ability to expand our offering portfolio to a wider range of legal processes outside of our current core offerings; (x) our dependence on revenue from customer usage, which fluctuates based on the timing of and activity driven by legal matters for which our product offerings are used, and any shortfall of large matters on our platform; (xi) our ability to pursue strategic acquisitions and strategic investments to expand the functionality and value of our product offerings; (xii) our ability to comply or remain in compliance with laws and regulations that currently apply or become applicable to our business in the jurisdictions in which we operate; (xiii) the potential that our computer or electronic systems, applications or services, or those of any third parties on whom we depend, fail or suffer security or data privacy breaches or other unauthorized or improper access to, use of, or destruction of our proprietary or confidential data, employee data, or personal data; (xiv) our ability to compete effectively with existing competitors and new market entrants; (xv) the impact of fluctuations in general macroeconomic conditions, such as the current inflationary environment and fluctuating interest rates; and (xvi) the impact that global events, such as the Russia-Ukraine and Israel-Hamas wars and any related economic downturn could have on our or our customers’ businesses, financial condition and results of operations. The forward-looking statements contained in this press release are also subject to additional risks, uncertainties, and factors, including those more fully described in our filings with the Securities and Exchange Commission (“SEC”), including our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed with the SEC on May 9, 2024. Further information on potential risks that could affect actual results will be included in the subsequent periodic and current reports and other filings that we make with the SEC from time to time, including our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024. Forward-looking statements represent DISCO’s management’s beliefs and assumptions only as of the date such statements are made. We undertake no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law. CS DISCO, INC. Condensed Consolidated Balance Sheets (in thousands, except par value amounts) (unaudited) June 30, 2024 December 31, 2023 Assets Current assets: Cash and cash equivalents $ 130,005 $ 159,551 Accounts receivable, net 25,334 26,993 Prepaid expenses and other current assets 4,812 5,795 Total current assets 160,151 192,339 Property and equipment, net 9,232 9,663 Operating lease right-of-use assets 7,372 8,143 Primary law intangible asset, net 14,000 14,000 Other intangible assets, net 540 681 Goodwill 5,898 5,898 Other assets 808 823 Total assets $ 198,001 $ 231,547 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 4,040 $ 5,234 Accrued expenses 5,457 5,502 Accrued salary and benefits 5,513 6,230 Deferred revenue 3,518 4,285 Operating leases 1,905 1,826 Finance leases 41 41 Total current liabilities 20,474 23,118 Operating leases, non-current 6,262 7,136 Finance leases, non-current 137 158 Other liabilities 238 800 Total liabilities 27,111 31,212 Commitments and contingencies Stockholders’ equity Preferred stock $0.005 par value, 100,000 shares authorized and no shares issued and outstanding as of June 30, 2024 and December 31, 2023 — — Common stock $0.005 par value, 1,000,000 shares authorized as of June 30, 2024 and December 31, 2023; 59,434 and 61,010 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively 298 306 Additional paid-in capital 433,664 440,408 Accumulated deficit (263,072 ) (240,379 ) Total stockholders’ equity 170,890 200,335 Total liabilities and stockholders’ equity $ 198,001 $ 231,547 CS DISCO, INC. Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share amounts) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revenue $ 36,005 $ 34,276 $ 71,576 $ 67,405 Cost of revenue 9,288 9,039 18,140 17,316 Gross profit 26,717 25,237 53,436 50,089 Operating expenses: Research and development 12,888 13,258 24,967 29,030 Sales and marketing 15,498 18,053 31,306 37,113 General and administrative 10,715 10,917 21,879 23,217 Total operating expenses 39,101 42,228 78,152 89,360 Loss from operations (12,384 ) (16,991 ) (24,716 ) (39,271 ) Other income (expense) Interest and other income 1,735 2,129 3,721 4,076 Interest and other expense (80 ) 4 (230 ) 12 Loss from operations before income taxes (10,729 ) (14,858 ) (21,225 ) (35,183 ) Income tax provision (105 ) (57 ) (191 ) (97 ) Net loss attributable to common stockholders $ (10,834 ) $ (14,915 ) $ (21,416 ) $ (35,280 ) Net loss per share attributable to common stockholders, basic and diluted $ (0.18 ) $ (0.25 ) $ (0.35 ) $ (0.59 ) Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted 59,815 59,856 60,508 59,648 CS DISCO, INC. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Six Months Ended June 30, 2024 2023 Cash flow from operating activities: Net loss $ (21,416 ) $ (35,280 ) Adjustments to reconcile net loss to cash used in operations: Depreciation and amortization 2,103 1,957 Stock-based compensation 11,731 14,092 Charge to allowance for credit losses 1,126 1,356 Loss (Gain) on disposal of long-lived assets (2 ) 1 Non-cash operating lease costs 771 699 Changes in operating assets and liabilities: Accounts receivable 533 (3,214 ) Prepaid expenses and other current assets 984 1,819 Other long-term assets 14 (124 ) Accounts payable (816 ) (3,186 ) Accrued expenses and other (1,365 ) 1,616 Deferred revenue (767 ) (790 ) Operating lease liabilities (796 ) (722 ) Other liabilities (80 ) (30 ) Net cash used in operating activities (7,980 ) (21,806 ) Cash flow from investing activities: Purchases of property, equipment and capitalized software development costs (1,346 ) (2,497 ) Proceeds from disposal of equipment 2 1 Cash paid for acquisitions — (1,180 ) Net cash used in investing activities (1,344 ) (3,676 ) Cash flow from financing activities: Proceeds from exercise of stock options 18 283 Net proceeds from issuance of common stock under Employee Stock Purchase Plan 360 932 Repurchase of common stock related to net share settlement (71 ) (38 ) Repurchase of common stock related to share repurchase program (20,052 ) — Cash paid for acquisitions (457 ) — Principal payments on finance lease obligations (20 ) (20 ) Net cash provided by (used in) financing activities (20,222 ) 1,157 Net decrease in cash and cash equivalents: (29,546 ) (24,325 ) Cash and cash equivalents at beginning of period 159,551 203,244 Cash and cash equivalents at end of period $ 130,005 $ 178,919 Supplemental disclosure: Cash paid for taxes $ 464 $ 430 Non-cash investing and financing activities: Property and equipment included in accounts payable and accrued liabilities $ 79 $ 203 Contingent consideration related to acquisition $ 481 $ 753 CS DISCO, INC. Reconciliation from GAAP to Non-GAAP Results (in thousands, except for percentages and per share amounts) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net loss $ (10,834 ) $ (14,915 ) $ (21,416 ) $ (35,280 ) Depreciation and amortization expense 1,028 1,005 2,103 1,957 Income tax provision 105 57 191 97 Interest and other, net (1,655 ) (2,133 ) (3,491 ) (4,088 ) Stock-based compensation expense 6,058 6,868 11,731 14,092 Payroll tax expense on employee stock transactions 178 134 371 244 Restructuring charges — 1,574 — 2,590 Expenses associated with stockholder litigation 384 — 583 — Adjusted EBITDA $ (4,736 ) $ (7,410 ) $ (9,928 ) $ (20,388 ) Adjusted EBITDA margin (13 )% (22 )% (14 )% (30 )% Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Cost of revenue $ 9,288 $ 9,039 $ 18,140 $ 17,316 Non-GAAP adjustments: Stock-based compensation expense (432 ) (271 ) (817 ) (502 ) Non-GAAP cost of revenue $ 8,856 $ 8,768 $ 17,323 $ 16,814 Non-GAAP gross profit $ 27,149 $ 25,508 $ 54,253 $ 50,591 Non-GAAP gross margin 75 % 74 % 76 % 75 % Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Research and development $ 12,888 $ 13,258 $ 24,967 $ 29,030 Non-GAAP adjustments: Stock-based compensation expense (2,084 ) (1,729 ) (4,176 ) (3,919 ) Restructuring charges — (1,001 ) — (1,510 ) Non-GAAP research and development $ 10,804 $ 10,528 $ 20,791 $ 23,601 Non-GAAP research and development as a % of revenue 30 % 31 % 29 % 35 % Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Sales and marketing $ 15,498 $ 18,053 $ 31,306 $ 37,113 Non-GAAP adjustments: Stock-based compensation expense (1,171 ) (1,360 ) (2,251 ) (2,751 ) Restructuring charges — (471 ) — (648 ) Non-GAAP sales and marketing $ 14,327 $ 16,222 $ 29,055 $ 33,714 Non-GAAP sales and marketing as a % of revenue 40 % 47 % 41 % 50 % Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 General and administrative $ 10,715 $ 10,917 $ 21,879 $ 23,217 Non-GAAP adjustments: Stock-based compensation expense (2,371 ) (3,508 ) (4,487 ) (6,920 ) Restructuring charges — (102 ) — (432 ) Expenses associated with stockholder litigation (384 ) — (583 ) — Non-GAAP general and administrative $ 7,960 $ 7,307 $ 16,809 $ 15,865 Non-GAAP general and administrative as a % of revenue 22 % 21 % 23 % 24 % Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Loss from operations $ (12,384 ) $ (16,991 ) $ (24,716 ) $ (39,271 ) Operating margin (34 )% (50 )% (35 )% (58 )% Non-GAAP adjustments: Stock-based compensation expense 6,058 6,868 11,731 14,092 Restructuring charges — 1,574 — 2,590 Expenses associated with stockholder litigation 384 — 583 — Non-GAAP loss from operations $ (5,942 ) $ (8,549 ) $ (12,402 ) $ (22,589 ) Non-GAAP operating margin (17 )% (25 )% (17 )% (34 )% Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net loss attributable to common stockholders $ (10,834 ) $ (14,915 ) $ (21,416 ) $ (35,280 ) Non-GAAP adjustments: Stock-based compensation expense 6,058 6,868 11,731 14,092 Restructuring charges — 1,574 — 2,590 Expenses associated with stockholder litigation 384 — 583 — Non-GAAP net loss attributable to common stockholders $ (4,392 ) $ (6,473 ) $ (9,102 ) $ (18,598 ) Non-GAAP net loss per share, basic and diluted $ (0.07 ) $ (0.11 ) $ (0.15 ) $ (0.31 ) Weighted average shares used to compute basic and diluted net loss per share 59,815 59,856 60,508 59,648 Non-GAAP net loss attributable to common stockholders as a % of revenue (12 )% (19 )% (13 )% (28 )% View source version on businesswire.com: https://www.businesswire.com/news/home/20240807296588/en/
