CS Disco, Inc. Q4 FY2025 earnings call

Eric welcomed Aaron Barfoot as CFO. Introduced CS Disco, Inc.'s AI-native stack with four layers: data layer, core eDiscovery solution, generative AI layer (Cecilia), and managed services layer (Auto Review). 2025 performance contributors included overall growth in usage, increases in large matters, and acceleration of AI adoption. Richard noted AI's importance in legal industry, company's purpose-built AI for high-stakes litigation, and introduced new pricing and contracting model, integrating Cecilia AI capabilities, adopting industry-standard pricing, and offering flexible contracting options. Aaron discussed Q4 and full-year results, software growth, service revenue changes, software dollar-based net retention over 103%, total dollar-based net retention 98%, gross margin details, sales and marketing, research and development, and general and administrative expenses.

In Q4 2025, total revenue grew 11% year over year to $41,200,000, and software revenue grew 14% year over year to $35,100,000. Full-year 2025 total revenue was $156,800,000, up 8% year over year, while software revenue was $134,000,000, up 12% year over year. Adjusted EBITDA was negative $2,200,000 in Q4, representing an adjusted EBITDA margin of negative 5%, compared to an adjusted EBITDA margin of negative 12% in Q4 of the prior year. Full-year 2025 adjusted EBITDA was negative $10,200,000, a margin of negative 7% compared to a margin of negative 13% in 2024. Q4 set record highs in total terabytes on the platform with accelerated year-over-year growth. Finished the year with double-digit growth in multi-terabyte matters and revenue growing over 30% from those matters year over year in Q4. Increased customers that generated more than $100,000 in total revenue during the last twelve months to 330, with revenue attributable to these customers totaling $119,000,000 in 2025, representing 76% of total revenue. Significant acceleration in the adoption of generative AI capabilities, including 4,100% attributable to these features.

For Q1 2026, total revenue guidance in the range of $39,000,000 to $41,500,000 and software revenue guidance in the range of $33,750,000 to $35,250,000. Adjusted EBITDA expected to be in the range of negative $6,000,000 to negative $4,000,000. For fiscal year 2026, total revenue guidance in the range of $167,000,000 to $177,000,000 and software revenue guidance in the range of $145,500,000 to $152,500,000. Adjusted EBITDA expected to be in the range of negative $8,500,000 to negative $4,500,000. Anticipated to achieve adjusted EBITDA breakeven by 2026 as revenue grows and one-time costs in first half do not reoccur.

Forward-looking statements involve known and unknown risks and uncertainties that may cause actual results, performance, or achievements to be materially different from those expressed or implied by the forward-looking statements. 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 titled “Risk Factors” in the company’s Quarterly Report on Form 10-Q for the quarter ended 09/30/2025, filed with the SEC on 11/05/2025, and the company’s upcoming Annual Report on Form 10-K for the year ended 12/31/2025.

Q: Scott Berg asked about pricing and packaging changes and follow-up on growth.

A: Eric and Richard responded on pricing driven by customer demand and Eric expressed optimism for 20% plus growth.

Q: David E. Hynes asked about competition from foundational model companies and visibility of new financial model.

A: Eric stated no customers using general AI for eDiscovery and Aaron talked about visibility of usage-based model.

Q: Mark Schappel asked about trade-offs of new commercial model and sales org changes.

A: Eric responded on trade-offs from customer feedback and sales org strategy focusing on larger customers and matters with shifts in sales approach and comp plan changes.