LAW — CS Disco, Inc.

Summary of CS Disco, Inc. Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Q4 2025 Results:

  • 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 (margin of -5%), improved from -12% in Q4 2024.
  • Net Loss: $2.5 million (negative 6% of revenue), compared to a net loss of $4.3 million in Q4 2024.

• Full-Year 2025 Results:

  • 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 (margin of -7%), improved from -13% in 2024.
  • Net Loss: $10.7 million (negative 7% of revenue), compared to a net loss of $17.2 million in 2024.

2. Strategic Updates and Business Highlights

• Leadership Changes: Aaron Barfoot joined as CFO, bringing expertise in enterprise software and AI-driven transformation.
• Product Innovation: Introduction of generative AI capabilities, including Cecilia, which enhances document review and evidence finding.
• Customer Growth: Increased customer base with 330 customers generating over $100,000 in revenue, accounting for 76% of total revenue.
• New Pricing Model: All Cecilia AI features will be included in the core offering, simplifying pricing and reducing friction for customers.
• Market Positioning: Focus on larger matters and strategic customers, with a goal to increase wallet share and accelerate adoption of AI capabilities.

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: Expected to be 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.
  • Adjusted EBITDA: Expected to be negative $8.5 million to negative $4.5 million.

• Long-Term Goals: Aim for adjusted EBITDA breakeven by 2026, with aspirations for growth rates exceeding 20%.

4. Bad News, Challenges, or Points of Concern

• Declining Services Revenue: Services revenue decreased by 3% in Q4 and 8% for the full year, primarily due to a decline 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 foundational model companies targeting legal tech, although management believes their specialized AI capabilities provide a competitive edge.

5. Notable Q&A Insights

• Pricing Model Changes: Management emphasized that the new pricing model was driven by customer feedback, aimed at reducing friction in the sales process and improving win rates.
• Growth Potential: CEO Eric Friedrichsen expressed optimism about achieving over 20% growth, citing the potential for increased wallet share and the adoption of AI capabilities.
• Competitive Landscape: Management noted that customers have not reported using general AI for e-discovery, reinforcing their belief in the unique position of CS Disco, Inc. in the litigation space.
• Visibility of Usage Model: CFO Aaron Barfoot highlighted that the usage-based model provides increasing predictability as the business scales, although some service revenue remains less predictable.

This summary encapsulates the key points from CS Disco, Inc.'s Q4 2025 earnings call, providing a balanced view of the company's performance, strategic direction, and challenges ahead.