CS Disco (LAW) Q1 2025 earnings summary

Executive summary

• Q1 2025 total revenue was $36.7 million, up 3% year-over-year, with software revenue at $30.9 million and services at $5.8 million.

• Adjusted EBITDA was $(5.1) million, nearly flat year-over-year and about $1 million above guidance.

• GAAP net loss widened to $11.4 million from $10.6 million in Q1 2024, while non-GAAP net loss was $4.9 million.

• The number of customers contributing over $100,000 in revenue grew 8% year-over-year to 318, representing 76% of total revenue.

• New product features, board changes, and the launch of the “With You in Every Case” value proposition highlighted recent developments.

Financial highlights

• Gross margin for Q1 2025 was 74%–75%, with gross profit at $27.2 million.

• Research and development expenses rose to $14.3 million (33% of revenue), up from 28% last year.

• Sales and marketing expenses were $13.2–$14.5 million (36% of revenue), down from 41% a year ago.

• Operating loss was $6.2 million (-17% margin); net loss per share was $(0.19) GAAP and $(0.08) non-GAAP.

• Operating cash flow was $(10.5) million, compared to $(7.3) million in Q1 2024.

Outlook and guidance

• Q2 2025 revenue guidance: $36.5M–$38.5M; software revenue: $31.25M–$32.25M; adjusted EBITDA: $(5.5)M–$(3.5)M.

• FY 2025 revenue guidance raised to $146M–$158M; software revenue: $125.5M–$131.5M; adjusted EBITDA: $(18)M–$(15)M.

• Management expects continued revenue growth from new customer acquisition and increased usage, but notes revenue may fluctuate due to legal matter timing.

• The company believes its cash and investments are sufficient to fund operations for at least the next 12 months.