CS Disco (LAW) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue reached $36.3 million, up 4% year-over-year, with software revenue at $30.2 million, up 6% year-over-year.

• Net loss widened to $9.2 million in Q3 2024 from $1.0 million in Q3 2023; adjusted EBITDA was $(4.5) million, unchanged from Q3 2023.

• Strategic focus shifted to larger, high-value customers, with multi-year deals signed with Fortune 500 companies and large law firms.

• Leadership changes included hiring a new Chief Sales Officer and senior leaders in legal and operations.

• Product innovation included the launch of Cecilia Auto Review and expansion of the Cecilia AI platform in North America, EU, and UK.

Financial highlights

• Gross profit for Q3 2024 was $26.5 million, with gross margin at 74%.

• Sales and marketing expense was $13.8 million (38% of revenue), down from 44% last year.

• Operating loss was $5.6 million (-15% margin), improved from -17% last year.

• Net cash used in operating activities for the nine months ended September 30, 2024 was $10.8 million, improved from $28.7 million in the prior year.

• Cash, equivalents, and investments totaled $126.8 million at quarter-end, with no debt.

Outlook and guidance

• Q4 2024 revenue guidance: $35.2–$37.2 million; software revenue: $30–$31 million.

• Q4 Adjusted EBITDA expected between $(7.6) million and $(5.6) million.

• FY 2024 revenue guidance: $143–$145 million; software revenue: $119.4–$120.4 million.

• FY 2024 Adjusted EBITDA expected between $(22.0) million and $(20.0) million.

• Management expects continued revenue growth driven by new customer acquisition and increased usage among existing customers.