CS Disco's Q1 2025 Earnings Call: Navigating Contradictions in AI Adoption, Customer Strategy, and Growth Prospects

AI adoption and market saturation, customer acquisition strategy, focus on customer count vs. large clients, strategic focus on economic downturns, revenue growth strategy are the key contradictions discussed in CS Disco's latest 2025Q1 earnings call.



Revenue and Customer Growth:
- DISCO reported total revenue of $36.7 million for Q1 of fiscal year 2025, towards the high end of the guidance range.
- The company ended Q1 with 318 customers each contributing more than $100,000 in total revenue over the last 12 months, up 8% year-over-year.
- Growth in revenue and customer base is attributed to increased engagement with strategic customers and the expansion of large multi-terabyte matters.

Product Innovation and AI Expansion:
- The number of customers using DISCO's Cecilia Q&A service grew 5x from Q1 2024.
- The company continues to see strong momentum with Cecilia Auto Review, demonstrating speeds of up to 3,800 documents per hour.
- These advancements in AI capabilities have driven customer engagement and contributed to revenue growth, particularly in larger matters.

Operational Efficiency and Cost Management:
- Adjusted EBITDA for Q1 was negative $5.1 million or negative 14%, approximately $1 million above the high end of the guidance range.
- DISCO ended Q1 with $118.8 million in cash and short-term investments and no debt.
- Improved operational efficiency and cost management have helped the company maintain a strong financial position despite investments in growth initiatives.

Macroeconomic Resilience and Strategic Focus:
- DISCO believes it is well-positioned to weather potential economic downturns, with the potential for litigation volume increases in areas like bankruptcy and securities litigation.
- The company has focused on strategic initiatives to ensure its customers work with them on large matters, mitigating downturn risks.
- This strategic approach leverages DISCO's platform to provide cost savings and better outcomes, positioning it for long-term growth and stability.