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What factors drove the changes in CS Disco's revenue and profit?

- **Revenue Growth**: Software up 17% YoY to $35.2M, driven by large multi-terabyte cases and AI adoption.
- **AI Innovation**: Cecilia AI usage tripled YoY; Auto Review adoption grew sequentially.
- **Financial Health**: 77% gross margin, $113.5M cash, and Q4 EBITDA target of -$3.5M to -$1.5M.
- **Strategic Focus**: Targeting high-stakes IP litigation and complex matters with tight timelines.
- **Future Outlook**: On track for Q4 2026 EBITDA breakeven, with potential for earlier profitability.


**【Management Remarks】**
- Presented Q3 2025 financial results and forward-looking statements, emphasizing revenue growth and operational execution.
- Highlighted the company's focus on large multi-terabyte matters and generative AI capabilities.
- Discussed the contingent case contributing $1.3M in Q3 revenue.

**【CEO Commentary】**
- **Revenue Growth**: Software revenue up 17% YoY to $35.2M, total revenue $40.9M (13% YoY). Excluding the contingent case, growth was 13% (software) and 9% (total).
- **Customer Success**: 326 customers with >$100K ARR (76% of revenue). A large customer chose DISCO for a 10+ TB case due to platform scalability and AI-driven efficiency.
- **AI Adoption**: Cecilia AI usage tripled YoY; Auto Review adoption grew sequentially.
- **Market Recognition**: Named a leader in IDC MarketScape for eDiscovery software.
- **IP Litigation Focus**: Initiative targeting high-stakes, complex cases with tight timelines, leveraging AI for speed and accuracy.

**【CFO Financial Commentary】**
- **Gross Margin**: 77% (vs. 74% prior year).
- **Expenses**: Sales & marketing down 33% of revenue (vs. 38% prior year); R&D up 28% of revenue (vs. 31% prior year).
- **Adjusted EBITDA**: -$0.3M (1% margin), improving from -12% YoY.
- **Cash Position**: $113.5M in cash with no debt.
- **Q4 Guidance**: Total revenue $38.75M-$40.75M; software $33.75M-$34.75M. EBITDA target: -$3.5M to -$1.5M.

**【Q&A Highlights】**
- **Contingent Cases**: Rare but impactful; 1-2 such cases annually. Q3 case was unique in size and timing.
- **EBITDA Breakeven**: Targeting Q4 2026, with potential for earlier profitability if investments accelerate growth.
- **Investment Strategy**: Balancing growth, innovation, and margin improvement.


CS Disco, Inc. (LAW) Q3 2025 Earnings Call Transcript

Revenue

Sales and Services Revenue

Financing Services Revenue

Other Revenue

Cost of Revenue

Cost of Goods and Services

Cost of Financing Services

Other Cost

Gross Profit

Other Operating Income

Operating Expenses

Selling, General and Administrative Expenses

Selling and Marketing Expenses

General and Administrative Expenses

Research and Development Expenses

Loss on Bad Debts

Loss on Impairment of Other Assets

Loss on Disposal of Assets

Other Operating Expenses

Operating Income

Non-Operating Income (Loss)

Income (Loss) from Affiliates

Income (Loss) from Associates

Income (Loss) from Joint ventures

Gain (Loss) on Other Investment

Gain (Loss) on Change in Fair Value

Gain (Loss) on Foreign Currency Exchange

Other Non-Operating Income (Loss)

Net Interest Expense

Interest Expense

Interest Income

Pretax Income From Continuing Operations

Income Tax Expense

Current Income Tax

Deferred Income Tax

Income Tax Adjustments

Net Income from Continuing Operations

Income from Discontinued Operations

Other Items Before Net Income

Net Income

Net Income Attributable to Minority Interests

Net Income Attributable to Owners of the Company

Preferred Stock Dividends

Other Adjustments

Net Income Attributable to Common Stockholders

Other Comprehensive Income

Total Comprehensive Income

Total Comprehensive Income Attributable to Minority Interests

Total Comprehensive Income Attributable to Owners of the Company

Basic EPS

Basic EPS from Continuing Operations

Basic EPS from Discontinued Operations

Diluted EPS

Diluted EPS from Continuing Operations

Diluted EPS from Discontinued Operations

LAW

LAW fundamentals

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