CS Disco (LAW) Q2 2025 earnings summary

Executive summary

• Q2 2025 total revenue reached $38.1M, up 6% year-over-year, with software revenue rising 12% to $32.7M.

• Adjusted EBITDA improved to -$2.7M (-7% margin), a significant year-over-year improvement; GAAP net loss was $10.8M, stable year-over-year.

• 323 customers contributed over $100K in revenue in the last 12 months, highlighting a strong enterprise client base.

• Strategic focus on large, complex e-discovery matters, AI-driven solutions, and expanding within large customers is driving growth.

• Launched Auto Review in the EU/UK and Searchable AV Transcriptions; 150% increase in multi-terabyte matters using Cecilia AI Platform since Dec 2024.

Financial highlights

• Software revenue exceeded guidance, driven by increased usage and multi-terabyte matters; services revenue declined 20% year-over-year.

• Gross margin was 75–76%; sales and marketing expense declined to 36% of revenue, R&D expense rose to 31%.

• Adjusted EBITDA for Q2 2025 was -$2.7M; net loss per share was $0.18, unchanged year-over-year.

• Ended Q2 with $114.5M in cash and short-term investments, no debt.

• Operating cash flow for the first half was -$14.7M, compared to -$8.0M a year ago.

Outlook and guidance

• Q3 2025 revenue guidance: $37.5M–$39.5M; software revenue: $32.75M–$33.75M; adjusted EBITDA: -$5M to -$3M.

• FY 2025 revenue guidance: $148M–$158M; software revenue: $128M–$134M; adjusted EBITDA: -$17M to -$13M.

• Guidance midpoints raised by $1M (total revenue), $2.5M (software), and $1.5M (adjusted EBITDA) from last quarter.

• Targeting adjusted EBITDA break-even by Q4 2026, with expense structure largely stable.

• Guidance based on assumptions subject to change; reconciliation to GAAP net loss not provided due to variability in stock-based compensation.