CS Disco 2025 Q1 Earnings Misses Targets as Net Loss Widens 7.7%
Daily EarningsThursday, May 8, 2025 6:18 am ET
66min readCS Disco (LAW) reported its fiscal 2025 Q1 earnings on May 7th, 2025. The company saw a 3% increase in total revenue to $36.65 million, surpassing the analyst estimate of $36.32 million. However, the company's earnings per share (EPS) of -$0.19 exceeded the estimated -$0.20. Despite the revenue growth, CS Disco's guidance for Q2 2025 remains cautious, with software revenue expected between $31.25 million and $32.25 million and total revenue forecasted between $36.5 million and $38.5 million. The company's adjusted EBITDA is projected to range from $(5.5) million to $(3.5) million, indicating continued challenges in achieving profitability.
Revenue
The total revenue of CS Disco rose by 3.0% to $36.65 million in Q1 2025, compared to $35.57 million in Q1 2024. Within this increase, the software segment generated $30.89 million, while services contributed $5.77 million, demonstrating growth across both segments.
Earnings/Net Income
CS Disco's financial losses deepened in Q1 2025, with the EPS widening to a loss of $0.19 per share from a loss of $0.17 per share in Q1 2024, marking an 11.8% increase in losses. Additionally, the company's net loss grew to $11.39 million, a 7.7% increase from the $10.58 million loss recorded in the same quarter of the previous year, underscoring persistent financial challenges.
Price Action
The stock price of CS Disco saw a slight increase of 1.11% during the latest trading day, although it experienced a 2.68% decline over the most recent full trading week, and a 5.71% drop month-to-date.
Post-Earnings Price Action Review
Over the past five years, the strategy of purchasing CS Disco (LAW) shares following a quarterly revenue drop and holding them for 30 days has yielded poor results. This approach resulted in a return of -7.40%, significantly underperforming the benchmark return of 84.08%. The excess return was a stark -91.48%, with a compounded annual growth rate (CAGR) of -1.53%, indicating substantial losses. The strategy also faced a high maximum drawdown of -25.32% and a low Sharpe ratio of -0.11, highlighting significant risk and negative returns.
CEO Commentary
“At DISCO, we are shaping the future of litigation and believe our industry-leading platform equips legal teams with tools not previously available to the legal world,” said Eric Friedrichsen, DISCO Chief Executive Officer. He emphasized that DISCO is enabling customers to tackle complex, high-stakes matters with confidence, showcasing a commitment to being “with you in every case.” Despite a GAAP net loss of $11.4 million for Q1 2025, the CEO noted a year-over-year revenue growth of 3% in both software and total revenue, reflecting the company's resilience and focus on delivering innovative solutions.
Guidance
DISCO is issuing an outlook for the second quarter of 2025 with software revenue anticipated in the range of $31.25 million to $32.25 million and total revenue expected between $36.5 million and $38.5 million. Adjusted EBITDA is projected to range from $(5.5) million to $(3.5) million. For fiscal year 2025, the company expects software revenue between $125.5 million and $131.5 million, total revenue in the range of $146.0 million to $158.0 million, and an adjusted EBITDA forecast of $(18.0) million to $(15.0) million.
Additional News
DISCO recently announced the appointment of Tom Bogan to its Board of Directors in March 2025, bringing extensive experience in executive leadership and in developing and scaling global software and SaaS platforms. In another strategic move, DISCO launched its new customer value proposition, "With You In Every Case," emphasizing its unique combination of cutting-edge technology and a world-class professional services team of legal experts. Additionally, DISCO was recognized as a G2 2025 award winner in the “Best Legal Software Products” category, highlighting its leadership in the legal technology sector.
Revenue
The total revenue of CS Disco rose by 3.0% to $36.65 million in Q1 2025, compared to $35.57 million in Q1 2024. Within this increase, the software segment generated $30.89 million, while services contributed $5.77 million, demonstrating growth across both segments.
Earnings/Net Income
CS Disco's financial losses deepened in Q1 2025, with the EPS widening to a loss of $0.19 per share from a loss of $0.17 per share in Q1 2024, marking an 11.8% increase in losses. Additionally, the company's net loss grew to $11.39 million, a 7.7% increase from the $10.58 million loss recorded in the same quarter of the previous year, underscoring persistent financial challenges.
Price Action
The stock price of CS Disco saw a slight increase of 1.11% during the latest trading day, although it experienced a 2.68% decline over the most recent full trading week, and a 5.71% drop month-to-date.
Post-Earnings Price Action Review
Over the past five years, the strategy of purchasing CS Disco (LAW) shares following a quarterly revenue drop and holding them for 30 days has yielded poor results. This approach resulted in a return of -7.40%, significantly underperforming the benchmark return of 84.08%. The excess return was a stark -91.48%, with a compounded annual growth rate (CAGR) of -1.53%, indicating substantial losses. The strategy also faced a high maximum drawdown of -25.32% and a low Sharpe ratio of -0.11, highlighting significant risk and negative returns.
CEO Commentary
“At DISCO, we are shaping the future of litigation and believe our industry-leading platform equips legal teams with tools not previously available to the legal world,” said Eric Friedrichsen, DISCO Chief Executive Officer. He emphasized that DISCO is enabling customers to tackle complex, high-stakes matters with confidence, showcasing a commitment to being “with you in every case.” Despite a GAAP net loss of $11.4 million for Q1 2025, the CEO noted a year-over-year revenue growth of 3% in both software and total revenue, reflecting the company's resilience and focus on delivering innovative solutions.
Guidance
DISCO is issuing an outlook for the second quarter of 2025 with software revenue anticipated in the range of $31.25 million to $32.25 million and total revenue expected between $36.5 million and $38.5 million. Adjusted EBITDA is projected to range from $(5.5) million to $(3.5) million. For fiscal year 2025, the company expects software revenue between $125.5 million and $131.5 million, total revenue in the range of $146.0 million to $158.0 million, and an adjusted EBITDA forecast of $(18.0) million to $(15.0) million.
Additional News
DISCO recently announced the appointment of Tom Bogan to its Board of Directors in March 2025, bringing extensive experience in executive leadership and in developing and scaling global software and SaaS platforms. In another strategic move, DISCO launched its new customer value proposition, "With You In Every Case," emphasizing its unique combination of cutting-edge technology and a world-class professional services team of legal experts. Additionally, DISCO was recognized as a G2 2025 award winner in the “Best Legal Software Products” category, highlighting its leadership in the legal technology sector.
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