CS Disco (LAW) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue reached a record $36.0 million, up 5% year-over-year, with software revenue rising 8% to $29.3 million and services revenue declining 7%.

• Adjusted EBITDA loss improved to $(4.7) million (-13% margin), and GAAP net loss narrowed to $10.8 million from $14.9 million in Q2 2023.

• Usage-based contracts accounted for 89% of revenue, with subscription revenue at 11% for the quarter.

• Ended the quarter with 1,449 customers, $130 million in cash, and no debt.

• Continued investment in AI-powered legal solutions, new product launches, and leadership changes, including the appointment of a new Chief Product Officer.

Financial highlights

• Gross margin was 75% in Q2 2024, with gross profit of $26.7 million.

• Sales and marketing expense was $14.3 million (40% of revenue), down from 47% a year ago; R&D expense was $10.8 million (30% of revenue), flat year-over-year.

• Net loss per share improved to $(0.18) from $(0.25) year-over-year; non-GAAP net loss per share was $(0.07), improved from $(0.11).

• Operating cash flow for the first half was $(8.0) million, a significant improvement from $(21.8) million in the prior year.

• Completed a $20 million share repurchase program, repurchasing approximately 2.6 million shares.

Outlook and guidance

• Q3 2024 revenue guidance: $35.3M–$37.3M; software revenue: $29.5M–$30.5M; Adjusted EBITDA: $(7.0)M to $(5.0)M.

• FY 2024 revenue guidance: $143M–$147M; software revenue: $118.5M–$120.5M; Adjusted EBITDA: $(23.0)M to $(19.0)M.

• Management expects continued revenue growth, product innovation, and primary law integration in 2025.

• No material change expected in Adjusted EBITDA for 2024.

• Macroeconomic uncertainty, including inflation and geopolitical events, may impact future results.