Earnings call transcript: CS Disco Q2 2025 reveals narrower EPS loss

CS Disco, a legal technology company, reported its second-quarter 2025 earnings, revealing a narrower-than-expected loss per share compared to forecasts. The company’s earnings per share (EPS) came in at a loss of $0.04, beating the forecasted loss of $0.07. Despite this positive earnings surprise, revenue fell short of expectations, reaching $32.7 million against a projected $37.58 million, translating to a 12.99% revenue miss. Following the earnings announcement, CS Disco’s stock price showed a slight increase of 0.49% to close at $4.13. According to InvestingPro analysis, the company appears undervalued at current levels, with a FAIR overall financial health rating.

Key Takeaways

• CS Disco reported a narrower EPS loss of $0.04, beating expectations.
• Revenue missed forecasts by 12.99%, totaling $32.7 million.
• Stock price increased by 0.49% in aftermarket trading.
• The company launched new AI-driven products, including DISCO AutoReview.
• CS Disco aims for EBITDA breakeven by 2026.

Company Performance

CS Disco’s performance in the second quarter highlighted both progress and challenges. The company’s total revenue increased by 6% year-over-year to $38.1 million, with software revenue growing by 12% to $32.7 million. Adjusted EBITDA improved to a loss of $2.7 million, a $2 million enhancement from the previous year. The net loss decreased to $2.8 million, compared to a $4.4 million loss in the same period last year. InvestingPro data shows the company maintains strong liquidity with a current ratio of 7.5, and holds more cash than debt on its balance sheet, providing financial flexibility during its growth phase.

Financial Highlights

• Revenue: $38.1 million, up 6% year-over-year
• Software Revenue: $32.7 million, up 12% year-over-year
• Adjusted EBITDA: -$2.7 million, a $2 million improvement from 2024
• Net Loss: $2.8 million, down from $4.4 million in 2024

Earnings vs. Forecast

CS Disco’s EPS of -$0.04 was a positive surprise, outperforming the expected -$0.07 by 42.86%. However, revenue fell short, with actual figures at $32.7 million against a forecast of $37.58 million, marking a 12.99% miss. This divergence reflects the company’s ongoing efforts to balance growth and profitability.

Market Reaction

Following the earnings release, CS Disco’s stock experienced a modest increase of 0.49%, closing at $4.13 in aftermarket trading. This movement suggests a cautious investor response, likely influenced by the EPS beat despite the revenue shortfall. The stock remains within its 52-week range of $3.31 to $6.64. InvestingPro identifies significant stock price volatility, with two analysts recently revising their earnings estimates upward for the upcoming period. Get access to 8 more exclusive ProTips and comprehensive analysis with an InvestingPro subscription.

Outlook & Guidance

Looking ahead, CS Disco projects third-quarter revenue between $37.5 million and $39.5 million, and fiscal year 2025 revenue guidance between $148 million and $158 million. The company remains focused on achieving EBITDA breakeven by 2026, with a target growth trajectory of over 20%. InvestingPro data reveals a 5-year revenue CAGR of 24%, supporting management’s growth targets. Discover detailed growth projections and 1,400+ comprehensive Pro Research Reports through an InvestingPro subscription.

Executive Commentary

CEO Eric Friedrichsen emphasized the company’s growth potential, stating, "We believe this business can be a 20% plus grower." CFO Michael LaFaire outlined financial goals, noting, "Our goal is to be adjusted EBITDA positive or breakeven in 2026." These statements underscore CS Disco’s strategic focus on growth and financial stability.

Risks and Challenges

• Revenue shortfall highlights potential market challenges.
• High competition in the legal tech industry may pressure margins.
• Execution risks in new product launches could impact growth.
• Economic uncertainties could affect customer spending.
• Achieving EBITDA breakeven by 2026 remains a significant challenge.

Q&A

During the earnings call, analysts raised questions about the company’s strategy to drive software revenue through services and talent acquisition in the sales team. CS Disco also addressed the growing adoption of its Cecilia AI in large-scale matters, reinforcing its competitive edge in AI-driven legal solutions.

Full transcript - CS Disco LLC (LAW) Q2 2025:

Conference Operator: Ladies and gentlemen, thank you for standing by, and welcome to CS DISCO’s Second Quarter Fiscal Year twenty twenty five Conference Call. At this time, all participants are in a listen only mode. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. I would now like to hand the conference over to your first speaker today, Head of Investor Relations, Alexey Lakhchavkov.

Please go ahead.

Alexey Lakhchavkov, Head of Investor Relations, CS DISCO: Good afternoon, and thank you for joining us on today’s conference call to discuss the financial results for Disko’s second quarter of fiscal year twenty twenty five. With me on today’s call are Eric Friedrichsen, Disko’s Chief Executive Officer and Michael LaFaire, Disko’s Chief Financial Officer. Today’s call will include forward looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding our financial outlook and future performance, our future capital expenditures, market opportunity, market position, product and go to market strategies and growth opportunities and the benefits of our product offerings and developments in the legal technology industry. In addition to our prepared remarks, our earnings press release, SEC filings and a replay of today’s call can be found on our Investor Relations website at ir.csdisco.com. Forward looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward looking statements.

Forward looking statements represent our management’s beliefs and assumptions only as of the date made. Information on factors that could affect the company’s financial results is included in its filings with the SEC from time to time, including the section settled Risk Factors in the company’s annual report on Form 10 ks for the year ended 12/31/2024, filed with the SEC on 02/20/2025, and the company’s upcoming quarterly report on Form 10 Q for the quarter ended 06/30/2025. In addition, during today’s call, we will discuss non GAAP financial measures. These non GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Reconciliation between GAAP and non GAAP financial measures and a discussion of the limitations of using non GAAP measures versus our closest GAAP equivalent is available in our earnings release.

And with that, I’d like to turn the call over to Eric.

Eric Friedrichsen, Chief Executive Officer, CS DISCO: Good afternoon, everyone. I’m very happy to report DISCO’s 2025 results. Over the past few quarters, we have discussed the changes that we’re making to accelerate growth and achieve sustainable profitability for Disco, and we are now starting to see some of the benefits from those changes. Software revenue in Q2 was $32,700,000 up 12% year over year. And total revenue in Q2 was $38,100,000 up 6% year over year.

Adjusted EBITDA for Q2 was negative $2,700,000 representing an adjusted EBITDA margin of negative 7%, which is a $2,000,000 improvement over 2024. We finished the quarter with $114,500,000 of cash and short term investments and no debt. We are pleased with the acceleration of growth this quarter. As we have mentioned previously, we are focused on targeting customers with larger eDiscovery wallets and larger Matters, and that focus is starting to pay off. We saw strong growth stemming from increased usage on our platform and expansion of multi terabyte Matters.

Matters. We ended Q2 with three twenty three customers who each contributed more than $100,000 in total revenue over the last twelve months, up 6% year over year. The story this quarter continues to be the execution of our strategy. Based on the changes that we made to the business, we are pleased to see the type of results that we’re reporting today, notably the growth of multi terabyte matters. However, this is only the start of what I believe is a much broader improvement.

I believe that the value proposition that we’re bringing to the market in With You In Every Case is a chief reason for our improved results. To remind you, With You and Every Case captures the essence of how DISCO is shaping the future of litigation. Our industry leading platform equips legal teams with tools not previously available to the legal world. And when paired with our expert services team, we’re enabling customers to tackle the most complex high stakes matters with confidence. This value proposition is embedded in our marketing, sales, products, and operations, ensuring that our customers understand the full value of what Disco can offer them.

To that end, we believe with you in every case is enabling faster revenue growth of our e discovery and adjacent products, growth of large customers, and increase in the number of multi terabyte matters on our platform. Also, it’s enabling improved operations, allowing us to be faster, more adaptable, and business friendly with few organizational silos. All of this ultimately allows us to provide a better product to our customers and drive revenue in a more efficient manner. Let me touch on that with a bit more detail. This quarter, we saw strong growth in both the quantity of multi terabyte matters as well as software revenue generated from these matters.

These are some of the most complex litigation matters in the world and require exceptional enterprise grade performance from our product and complete trust in our services and customer support teams. One example I wanna highlight is the work we did for a chambers recognized national full service law firm. This customer approached us with a complex and urgent issue. One of their matters involved a large volume of data from their client’s corrupted email environment. There was no readily available software that could recover the data, and the original software vendor had been long out of business.

To add to that issue, the data was in a nonstandard format. The customer approached other providers who told them that the data was not salvageable, but DISCO took this on as a challenge. Our engineering, forensics, and data operations teams worked together to recover the data, establish a solution capable of supporting the dataset, identified a method to access this data for them, including supporting decades old software, and migrated it into a fully searchable and modern functional environment within DISCO. The result was a client that found a solution to a seemingly insurmountable problem in a 10 terabyte 43,000,000 document matter added to disco. Another example is our success with an Amlaw 100 firm.

Historically, this firm leaned on one of our competitors for e discovery. While we had a limited relationship with them going back to 2022 and 2023, that changed this year. Our sales and project management teams engaged closely with multiple groups within the firm, demonstrating the power of our platform, particularly in large complex matters, and showcasing the differentiated value of our generative AI offerings, including Cecilia and AutoReview, along with our broader services capabilities. As a result, the expanded adoption of DISCO launching several new matters to leverage our AI capabilities. Given the volume of high stakes litigation involved, we see this as the beginning of a strategic partnership with a meaningful long term potential.

Each of these is an example of our team collaborating across multiple departments in unison to deliver an amazing outcome for our customer, showcasing that Disco is truly with you in every case. Supporting our customers in this matter is key to achieving our goals. We have continued to tighten operations across all areas. Within sales and marketing, we continue to enhance our talent pool and allocate resources to customers with the highest wallet share opportunity and within our ideal customer profile. I am very pleased by the talent that we’ve attracted to Disco in the past few months, particularly reps with a history of selling successfully to enterprise grade customers.

We further continue to invest in our customer success team, including bringing on a new highly experienced leader for that organization as well as experienced talent. And finally, we’ve made changes to our lead generation team, shifting from a focus on account qualification to a more strategically aligned territory based account orchestration model. This quarter, we saw very concrete progress in our strategic approach, but it’s only the start. I am optimistic that the steps we are taking operationally will continue to accelerate our revenue growth. Within the product side, we remain focused on releasing AI and core capabilities that help customers with their complex matters.

We are starting to see some nice uplift and growth in these products. This quarter, we are proud to have brought DISCO auto review capabilities to The EU and UK markets, where we are already seeing strong interest. With auto review, clients are now capable of reviewing up to 32,000 documents per hour. At that rate, auto review can tag as many documents in a single day as what would take a 20 person review team over three months to accomplish. And it’s not only fast, it’s accurate.

AutoReview has been delivering precision and recall metrics exceeding 90% in many cases, much better than the industry standard of 75% for recall. We have seen several clients experience the power of this technology in practice and are excited for the future growth of this capability. We launched Cecilia in 2023 as the first to market solution capable of answering lawyer questions in real time based on the data in their proprietary databases. In the first half of the year, we saw 150% growth in multi terabyte matters leveraging Cecilia from where we ended 2024. We’ve observed that the largest matters are also finding the most use of this product and for good reason.

The largest matters often have the largest legal teams and the most sensitive and complex topics. Where a solution like Cecilia can make a lawyer’s job much easier and more effective. While we are seeing lawyers use Cecilia to find key documents and receive fast case related answers, we are also seeing them use Cecilia in more unique situations, like during a live trial to help question a witness, preparing for depositions, or helping understand unfamiliar terms and concepts. I also wanna highlight a core e discovery capability we launched into crawl called searchable AV transcriptions. This capability allows customers to automatically convert audio and video files into searchable, reviewable text.

This streamlines the review process, reduces manual error, and empowers attorneys to quickly identify relevant facts. Reviewers can view transcribed content side by side with original media, integrate it with Cecilia doc summaries and q and a, and ask targeted questions to drive faster, more accurate analysis. We continue to release capabilities like this and others every quarter, allowing our customers to find key evidence quickly and efficiently and to make DISCO the ideal platform for managing large complex matters. Finally, being a customer focused organization means breaking down silos to create efficiency across our operations. In our legal department, we assessed our contracting approach and slimmed our standard contract by more than 50% while maintaining standard risk and other terms for DISCO.

While this may not sound revolutionary, simplifying legal contracts has significantly reduced bottlenecks in the sales process and helped minimize friction points for customers. These kinds of changes make us a more approachable, efficient company to do business with. In human resources, we made meaningful progress in several areas, including automating HR processes related to the year end compensation and performance reviews. Many of these legacy processes were time consuming and distracting to our teams. By making administrative tasks faster and the overall year end process more transparent, we are reducing distractions from the business.

In summary, this quarter was about execution of our strategy. We saw meaningful acceleration in our software business. We are seeing continued adoption of Cecilia, and we are excited about the traction of auto review. The strategic changes that we made in recent quarters across nearly every area of the business from how we go to market to how we support our customers to how we operate internally are starting to bear fruit. We are confident in the strategy that we have set and the alignment that we’ve achieved across our teams.

While there’s more work ahead, we are confident in our ability to execute and that the foundation that we’re laying today will drive sustainable growth and increase efficiency going forward. Before I turn it over to Michael to go over the financials, I’d like to take a moment to address the news that we shared in our earnings press release that Michael will be stepping down from his role as CFO at the end of this year. We have initiated a search for our next CFO and Michael will remain at the helm until the end of the year unless a successor is appointed sooner. Since joining the company in 2018, Michael has played a critical role in transforming DISCO from an early stage startup to a successful public company, leading DISCO through multiple private funding rounds, our IPO and our secondary offering. I cannot thank Michael enough for all he has done so far for Disco, and I am looking forward to continuing to work with him over the next several months as we complete the search and transition process.

With that, I’ll now turn it over to Michael. Michael?

Michael LaFaire, Chief Financial Officer, CS DISCO: Thanks, Eric. My time at DISCO has been an amazing journey, and it is a privilege to work alongside such a talented and dedicated team. I’m immensely proud of what we have been able to achieve to this point. I feel that DISCO is in a great position for this transition, and I’m looking forward to working with Eric and the team over the next few months to deliver great results and to complete the search for and transition to my successor. And now for our q two financial results.

In q two twenty twenty five, total revenues were $38,100,000 up 6% year over year. Software revenues were $32,700,000 up 12% year over year. In software, we saw strong growth stemming from net new usage on our platform and expansion of multi terabyte matters. Our software performance exceeded the high end of our guidance, while total revenue came in towards the top end of our guidance. The big drivers this quarter were our e discovery product where we saw growth largely from a net increase of multi terabyte matters and contribution from Cecilia, which is starting to have a nice uplift on our software growth, especially as case teams with larger matters tend to be stronger consumers of Cecilia.

Services revenues, include disco manager review and professional services were 5,400,000.0. We continue to see softness in the review business. However, we are starting to see growth within auto review where we remain optimistic. In discussing the remainder of the income statement, please note that unless otherwise specified, all references to our gross margin, operating expenses and net loss are on a non GAAP basis. Adjusted EBITDA is also a non GAAP financial measure.

Our gross margin in Q2 was 76%. As we mentioned before, our gross margins fluctuate from period to period based on the nature of our customers usage, for example, the amount and types of data ingested and managed on our platform. Sales and marketing expense for Q2 was $13,800,000 or 36% of revenue compared to 40% of revenue in Q2 of the prior year. The year over year dollar decline is predominantly due to lower employee and marketing expenses. Research and development expense for Q2 was 11,700,000.0 or 31% of revenue compared to 30% of revenue in Q2 of the prior year.

This increase was primarily driven by an increase in research and development talent to support our innovation. General and administrative expense in Q2 was $7,200,000 or 19% of revenue compared to 22% of revenue in Q2 of the prior year. Operating loss in Q2 was $3,800,000 representing an operating margin of negative 10 compared to negative 17% in Q2 of the prior year. Adjusted EBITDA was negative $2,700,000 in Q2, representing an adjusted EBITDA margin of negative 7% compared to an adjusted EBITDA margin of negative 13% in Q2 of the prior year. This represents a beat of the high end of the guidance range we provided last quarter and $2,000,000 year over year improvement.

Net loss in Q2 was $2,800,000 or negative 7% of revenue compared to a net loss of $4,400,000 or negative 12% of revenue in Q2 of the prior year. Net loss per share for Q2 was $04 compared to $07 per share for Q2 of the prior year. Turning to the balance sheet and cash flow statement. We ended Q2 with 114,500,000 in cash and short term investments and no debt. Operating cash flow for the 2025 was negative $14,700,000 compared to negative $8,000,000 in the same period of the year prior.

Turning to the outlook. For Q3 twenty twenty five, we are providing total revenue guidance in the range of $37,500,000 $39,500,000 and software revenue guidance in the range of $32,750,000 to $33,750,000 We expect adjusted EBITDA to be in the range of negative $5,000,000 to negative 3,000,000 For fiscal year twenty twenty five, we are providing total revenue guidance in the range of $148,000,000 to $158,000,000 and software revenue guidance in the range of $128,000,000 to $134,000,000 We expect adjusted EBITDA to be in the range of negative $17,000,000 to negative $13,000,000 Our fiscal year twenty twenty five guidance for total revenue, software revenue and adjusted EBITDA represents an increase of $1,000,000 $2,500,000 and $1,500,000 respectively at the midpoint from our guidance last quarter. Now I’d like to turn the call over to the operator to open up the line for Q and A. Operator?

Conference Operator: Our first question comes from the line of D. J. Hynes with Canaccord Genuity. Please go ahead.

D.J. Hynes, Analyst, Canaccord Genuity: Congrats on the quarter. So I know there’s been this push for With You in Every Case and sort of raising this awareness around, you know, the holistic offerings of the platform and service capabilities. Are you thinking of, you know, services and, you know, kind of working with clients as like a tip of the spear for new customer acquisition or more expansion within existing customers?

Alexey Lakhchavkov, Head of Investor Relations, CS DISCO: Yeah. Thanks, D. J.

Eric Friedrichsen, Chief Executive Officer, CS DISCO: Let me tell you how I think about services or or or more specifically with you in every case because with you in every case is really about being able to support our customers with whatever they need for their largest and most complex cases. And, you know, when we really dug in and met with our customers over the last several quarters to try to determine, you know, in in situations where they’re not putting their largest cases into disco, why aren’t they doing that? And, the most common, reason that we heard was that they needed to leverage services or needed the access to services. And that, you know, typically could be project management, forensics, ingestion type services. And so we recognized that we needed to do a much better job educating the market that we have those types of services capabilities.

And we’ve seen great results in increasing our software revenue, specifically related to doing better education around that exact topic. I you know, last quarter, I shared an example of a customer that I met within The UK in February, where once we educated them about their services, they they tripled their software revenue with us, in the first three months. After that, since then, they’ve doubled again. And so that’s just an example, and there’s many examples across the where by educating customers that we have these types of services available, they’re more inclined to leverage us. So we’re not trying to promote our services.

We’re not trying to drive up our services revenue. That’s not in the least fit the point. The point is we’re with them. And whether they leverage our services, whether they leverage a partner’s services, or whether they leverage their internal services, some of the bigger law firms have centralized litigation support teams or centralized e discovery teams that can serve them really well, and we could support those teams. But, again, it’s not about driving up the software revenue.

It’s about driving up I’m sorry. It’s not about driving up the services revenue. It’s about helping our customer and driving up our software revenues.

D.J. Hynes, Analyst, Canaccord Genuity: Okay. Gotcha. And then maybe a quick follow-up for Michael. So, you know, we have your target for, you know, I know I know we’re still probably about six, give or six quarters, give or take away from the quarterly EBITDA targets you gave us. But But it still sounds like you guys are working to implement a couple changes operationally.

So do you think, you know, achieving these targets is gonna hinge more on an inflection in revenue growth, or do you think operational prudence is what’s gonna get us there?

Michael LaFaire, Chief Financial Officer, CS DISCO: CJ, that’s a good question. I you know, the guide the feedback we’ve provided previously and we’re standing by that feedback is our goal is to be adjusted EBITDA positive or breakeven in 2026. And we that continues to be the goal and it obviously there’s revenue growth assumptions in that. From an expense structure, we’re planning on keeping our expenses relatively the same. There might be a modest uptick in certain departments.

But most of what we’re doing on the expense side is primarily reallocation in areas of the business that we continue to believe will drive growth and that we’ve been doing over the last couple of quarters.

Eric Friedrichsen, Chief Executive Officer, CS DISCO: Yeah. And just to add on to that, I mean, I’m extremely pleased that we were able to beat the high end of our EBITDA guidance in Q2 pretty considerably. Look, I think this business can be a 20% plus grower. We’re charting our path towards that. Part of that is going to involve continuing with some of the investments that we have committed to around building out things like customer success, sales enablement, finishing out the implementation of our quote to cash system.

And these are just critical investments that we need to be able to make to accelerate our growth to get to that 20% plus number over time and to take advantage of this huge market opportunity. We’re absolutely committed, as Michael mentioned, to being EBITDA breakeven adjusted EBITDA breakeven in 2026. And we’ve had some good success along the way at beating our expectations around EBITDA, but we still are going to make some investments along the way.

Alexey Lakhchavkov, Head of Investor Relations, CS DISCO: Okay. Thanks guys. Appreciate it.

Eric Friedrichsen, Chief Executive Officer, CS DISCO: You bet.

Conference Operator: Your next question comes from the line of Scott Berg with Needham and Company. Please go ahead.

Ian Black, Analyst, Needham and Company: Hi. This is Ian Black on for Scott Berg. Congratulations on the great quarter. As you guys move upmarket into larger matters, how does that increase your revenue visibility and durability?

Eric Friedrichsen, Chief Executive Officer, CS DISCO: Yeah. That’s a great question, Ian. I I think one one important thing to point out, you know, obviously, we’re a usage based business. And as we’ve spoken as we have spoken about in the past, you know, matters begin and then revenue begins. Matters end and revenue ends.

That’s the vast majority of the the revenue that comes in for disco. One one of the the things not only are larger matters, larger revenue, but they tend to last a lot longer as well, which gives us the opportunity to, have a little bit better, I guess, predictability, from a revenue standpoint over time as well. The other thing is those larger matters oftentimes are coming from our larger customers. And larger customers tend to have larger wallets. They tend to have more matters.

And the more traction that we get with those customers, the more opportunity we have to expand even further within those customers, and it becomes a much more efficient cost of sale, through that expansion. So as I mentioned in the past, you know, we’ve got well, now we’re up to we actually just grew 6%, but we’re up to three twenty three customers that spend over 100 k a year with us, up 6% year over year. And in many of those customers, we might only have 10 or 15% of their wallet share, and we’re hyper focused on growing our wallet share within those customers. So larger matters equals more wallet share. Larger matters equals longer, longer revenue streams.

Ian Black, Analyst, Needham and Company: Thank you. And then one quick follow-up. You guys called out, significant growth in Cecilia. What is the revenue uplift of that product?

Michael LaFaire, Chief Financial Officer, CS DISCO: So good question. So we’re really, really pleased with our overall software performance in q two and also coming in, about 900 k above the guidance range we have provided. Really, really strong execution across the board. In terms of Cecilia, we don’t break out that actual number, but we’re really pleased with the number of, databases using Cecilia. And the other thing that we’re really pleased about is, a lot of our larger multi terabyte matters, the use force in Cecilia has gone up a fair amount.

We talked about that a little bit previously. And that is really part of our overall strategy of driving larger matters and also focusing on our larger customers. So we’re just overall really pleased with the adoption of Cecilia.

Eric Friedrichsen, Chief Executive Officer, CS DISCO: Yeah. And to add into that, you know, we’re we’re also pleased with the revenue that we’re getting from Cecilia. So it’s great that we have 150% growth in the first half of the year on the number of large cases, but the revenue associated with those is great too. But equally important honestly is the value that the customers are getting from Cecilia that makes them wanna keep using it. So many of our customers that use Cecilia will use it again and again.

And, and that makes our core eDiscovery product that much stickier.

Ian Black, Analyst, Needham and Company: Thank you and congratulations on the good quarter.

Eric Friedrichsen, Chief Executive Officer, CS DISCO: Great. Thanks Ian.

Conference Operator: Your next question comes from the line of Mark Schappel with Loop Capital. Please go ahead.

Mark Schappel, Analyst, Loop Capital: Hi, thank you for taking my questions. Eric, a couple of questions around go to market. With respect to the increasing focus on larger customers, I was wondering if you could just discuss the progress you’ve made just bringing in the right type of sales rep, bringing them in the the at least the right sales rep that has the capability to sell higher up into the organization?

Eric Friedrichsen, Chief Executive Officer, CS DISCO: Sure. Yeah. I mean, well, I think you know we brought on, Lauren Caruso as our chief sales officer. It’s been about six months ago. I think it was October.

She obviously has a lot of enterprise experience. That’s been super helpful. We have brought on several more enterprise grade salespeople who have experience not just with large accounts, but also in the legal technology industry. So that’s been extremely helpful. And then a lot of it is about focus.

You know, we’ve actually opened up more reps in that space. We’ve, you know, we’ve got less people that are working on small accounts and more people that are working on large accounts. And then it’s the plays that we’re running. So for example, we’ve got a strategic account management program where we have a set of accounts that we have multiple resources working on across the country or in some cases even in The UK and Canada, where it’s not just one experienced enterprise salesperson, it’s multiple because there’s a decentralized aspect and a centralized aspect to how we grow our share within these particular accounts. In addition to that, we’ve got an account based marketing approach, so that, you know, we’re putting again extra very focused resources on, sharing the content, the stories, the value that we’re getting or that our customers are getting within those accounts to try to work to expand.

So it’s a real cross functional approach between sales, sales development, marketing and customer success.

Mark Schappel, Analyst, Loop Capital: Thanks. And then as a follow-up, was wondering if you could just review some of the changes you’ve made to your lead lead gen team.

Eric Friedrichsen, Chief Executive Officer, CS DISCO: Yeah. Well, the so the lead gen team, and just if we just rewind all the way back to, you know, the time before I got here, was really just all about setting up meetings with customers. And those meetings could be and they were incentivized that way. And those meetings could be with small customers. They could be with large customers.

We’ve really changed if if you think about the way I just described our go to market approach and how it’s integrated between sales, sales development, marketing, and customer success. The sales development rep now really orchestrates all of that. So think of them as almost like kinda like the quarterback in a way. Making sure that, you know, they’re taking the inputs from marketing and and, you know, qualifying the opportunity and sending it along to the salesperson and that the customer success person is working in coordination with them. Because, again, a lot of our focus is on these existing accounts where we’re expanding the wallet share.

So it’s very much more now of an orchestration type of an approach rather than just a prospecting type of an approach.

Alexey Lakhchavkov, Head of Investor Relations, CS DISCO: Thank you.

Eric Friedrichsen, Chief Executive Officer, CS DISCO: Yeah. No problem. Thanks,

Conference Operator: And our next question comes from the line of Koja Akeda with Bank of America.

Eric Friedrichsen, Chief Executive Officer, CS DISCO: Hey, guys. Thanks so much for taking the questions. Michael, it’s awesome working with you over the years and best of luck with whatever journey you have next coming for you. I have a question on maybe go to market and any sort of additional pieces, that you may need to bring into the into the company, to kind of execute the long term growth strategy, either from, you know, additional executives or regions or capacity. Mean, just trying to figure out is is there more to go or is the team here in place to really drive, you know, the kind of the next story of growth here for for disco?

Yeah. Thanks, Koji. I mean, you know, if I think about the story of the transformation journey that we’re on, I guess, would I would really sort of phase it out. And I would say, you know, the the first phase started when I got here fifteen months ago, and it’s really about digging in deep, learning the business, meeting with our customers. You know, met with over a 100 customers that first year, but, many, many in the first couple quarters.

Digging in deep on our ideal customer profile, understanding, exactly where we can add the most value to customers and where we can generate, you know, significant revenue improvement from customers, looking at the types of matters that we should focus on. So really, you know, digging deep and learning the business. The next phase was all about developing the strategy and developing a very, very clear strategy where we knew exactly who we were gonna focus on, how we were gonna go after them, how we’re gonna drive efficiency into the operations of the business. The third phase was really about team development. You know, the the the the biggest phase of, you know, building out the senior leadership team, which was sort of a combination of taking the, you know, extremely talented people that we have on staff and adding some more been there, done that executives who have helped scale organizations in the past.

So so that was the next phase. And then the next phase was really about alignment, making sure everybody in the company is 100% aligned in our strategy, and that’s that’s what we went through. And then, you know, there’s a lot of phases, but those all happened, you know, quite quickly in succession. And when we launched into 2025 at our company kickoff meeting in January, I told the company that our rally cry for 2025 is it’s go time. And it’s all about execution.

And, you know, I acknowledge the fact that we have more transformation to do. And and and frankly, Koji, we still do. We still do have more transformation to do. But just because we are still doing transformation doesn’t mean that we can’t execute. It doesn’t mean that we can’t start getting results and starting to perform.

And so, look, I think what I would say is there is still more to go, but I consider that a good thing. In fact, you know, there probably always will be something to go. We’re an innovative company. Right? There’ll always be some transformation, but there’s still some more to go.

We’re rolling out new plays. There’s, I think, some more that we can do around specific matter types that we’re starting to execute on where I think we can perform even better. So there’s some more to go there, but, you know, we’re we’re a good chunk of the way through, the transformation such that we can start executing and getting results. Thank you. Yes, you bet.

Conference Operator: And with no further questions in queue, I will now hand the call back over to Eric Friedrichsen, CEO for closing remarks.

Eric Friedrichsen, Chief Executive Officer, CS DISCO: Yes. Thank you very much and thanks really for everybody for joining us today. The Disko team just continues to make strong progress. I’m really encouraged by the momentum that we’re seeing across the entire business. I’m especially pleased that this has enabled us to beat the high end of our guidance for both software and adjusted EBITDA in Q2 and to lift our guidance for the full year.

As I mentioned earlier, right now it’s all about execution. I believe that this business could be a 20% plus grower. We’re really just getting started. There’s much more progress that we can make. At the same time, I’m just incredibly proud of the talented DISCO teammates that we have throughout the entire organization.

I’m optimistic about the road ahead. I believe that the initiatives that we’ve already launched are just starting to show that early impact, and they will serve as long term drivers of our performance. Even though I’m proud of the fact that we had 12% software growth and that we’re able to raise the midpoint of our guidance by $2,500,000 on software for the year, it’s really more about how we got there. You know, we said we were going go focus on expansion within our large customers and acquiring larger customers with larger wallets. We said it was going to be about, starting to work on the most the larger and more strategic matters, from our customers.

And we saw, you know, incredible strides there in terms of both revenue and quantity for those areas, which gives me more and more confidence about the future and gives me that much more confidence to be able to raise the guidance. So while I’m proud of what we accomplished so far, we’re really just getting started. We’ve got the right people. We’ve got the right strategy. We’re starting to see some early results.

But really now it’s about execution. So thank you all for your time. I really appreciate it.

Conference Operator: Thank you again for joining us today. This does conclude today’s conference call. You may now disconnect.

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