LAW — CS Disco, Inc.

Summary of CS Disco, Inc. Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Q4 2025 Performance:

  • Total Revenue: $41.2 million, up 11% year-over-year.
  • Software Revenue: $35.1 million, up 14% year-over-year.
  • Adjusted EBITDA: Negative $2.2 million, improving from negative $4.3 million in Q4 2024.
  • Net Loss: $2.5 million, or negative 6% of revenue, compared to a net loss of $4.3 million in Q4 2024.

• Full-Year 2025 Performance:

  • Total Revenue: $156.8 million, up 8% year-over-year.
  • Software Revenue: $134.0 million, up 12% year-over-year.
  • Adjusted EBITDA: Negative $10.2 million, improving from negative $17.2 million in 2024.
  • Cash Position: $114.6 million in cash and equivalents, no debt.

2. Strategic Updates and Business Highlights

• Leadership Changes: Aaron Barfoot joined as CFO, bringing experience in enterprise software and AI.
• Product Innovations: Introduction of generative AI capabilities (Cecilia) and Auto Review, enhancing the e-discovery process.
• Customer Growth: Increased customer base with 330 clients generating over $100,000 in revenue, contributing 76% of total revenue.
• Adoption of AI: 41% increase in the adoption of generative AI features, with significant improvements in efficiency and accuracy in document review processes.
• New Pricing Model: Transition to a simplified pricing structure that includes all AI capabilities in one offering, aimed at reducing friction in sales and increasing customer adoption.

3. Forward Guidance and Outlook

• Q1 2026 Guidance:

  • Total Revenue: $39.0 million to $41.5 million.
  • Software Revenue: $33.75 million to $35.25 million.
  • Adjusted EBITDA: Negative $6.0 million to negative $4.0 million.

• Fiscal Year 2026 Guidance:

  • Total Revenue: $167.0 million to $177.0 million.
  • Software Revenue: $145.5 million to $152.5 million.
  • Expected path to adjusted EBITDA breakeven by 2026.

4. Bad News, Challenges, or Points of Concern

• Decline in Services Revenue: Services revenue decreased by 3% in Q4 and 8% for the full year, attributed to a reduction in traditional review services.
• Operating Cash Flow: Negative operating cash flow of $14.9 million in 2025, worsening from negative $8.7 million in 2024.
• Competitive Pressures: Concerns about competition from general AI models entering the legal tech space, although management believes their specialized platform is well-positioned to withstand this.

5. Notable Q&A Insights

• Pricing Model Changes: Management emphasized that the new pricing model was driven by customer feedback, aiming to simplify the purchasing process and improve sales efficiency.
• Growth Potential: CEO Eric Friedrichsen expressed optimism about achieving over 20% growth in the future, supported by larger customer engagements and increased adoption of AI capabilities.
• Competitive Landscape: Management noted that while general AI tools are gaining traction in other areas, they have not seen significant adoption in e-discovery, which requires specialized solutions due to the complexity and sensitivity of litigation data.
• Visibility of Usage Model: CFO Aaron Barfoot highlighted that as the business scales, the predictability of the usage-based model improves, although some service revenues remain less predictable.

Overall, CS Disco, Inc. demonstrated solid revenue growth and strategic advancements in Q4 2025, despite facing challenges in service revenue and competitive pressures. The company is optimistic about future growth and profitability, particularly through the adoption of AI and a simplified pricing model.