0001625641FALSE00016256412024-08-082024-08-08

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Date of Report (date of earliest event reported): August 8, 2024
 
CS Disco, Inc.

(Exact name of Registrant, as specified in its charter)
Delaware001-4062446-4254444
(State or other jurisdiction of incorporation)(Commission File Number)(I.R.S. Employer Identification Number)

111 Congress Avenue
Suite 900
Austin, Texas 78701
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code: (833) 653-4726

Former name or address, if changed since last report: Not Applicable

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: 
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) 
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) 
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) 
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, par value $0.005 LAW New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). 
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒



Item 2.02          Results of Operations and Financial Condition
On August 8, 2024, CS Disco, Inc. (the "Company") issued a press release announcing its financial results for the quarter ended June 30, 2024. A copy of the earnings release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
The information contained in this Item 2.02, including Exhibit 99.1 hereto, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing made by the Company under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filings, unless expressly incorporated by specific reference in such filing.

Item 9.01          Financial Statements and Exhibits
 
(d) Exhibits
 
Exhibit No.
99.1
104Cover Page Interactive Data File (embedded within the Inline XBRL document)


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 CS Disco, Inc.
   
Date: August 8, 2024By:/s/ Michael S. Lafair
 Name:Michael S. Lafair
 Title:Executive Vice President, Chief Financial Officer



DISCO Announces Second Quarter 2024 Financial Results

Total Revenue of $36.0 Million, A Year over Year Increase of 5%
AUSTIN, Texas - August 8, 2024 - CS Disco, Inc. (“DISCO”) (NYSE: LAW) today announced financial results for its second quarter ended June 30, 2024.

“I am energized by another quarter with record-breaking revenue and the introduction of several new highly sought after features released within our product,” said Eric Friedrichsen, Chief Executive Officer. “Over my first 100 days at DISCO, I have had the pleasure of speaking directly with many of our top customers and am more convinced than ever that DISCO is a fantastic company with a strong market position. I look forward to continuing to release features that our customers are excited about and working with our employees to drive operational effectiveness that will help us scale to the next level.”

Second Quarter 2024 Financial Highlights:

•Software revenue was $29.3 million, up 8% compared to the second quarter of 2023.
•Total revenue was $36.0 million, up 5% compared to the second quarter of 2023.
•GAAP net loss was $10.8 million, compared to $14.9 million in the second quarter of 2023.
•Adjusted EBITDA was $(4.7) million, compared to $(7.4) million in the second quarter of 2023.

Recent Business Highlights:

•New CPO: DISCO appointed Richard Crum as the new Chief Product Officer of DISCO, beginning July 15, 2024.
•Customer Count: DISCO grew to 1,449 customers as of June 30, 2024.
•Mass Redactions: DISCO released in-app mass redactions, a new tool that allows users to redact thousands of gigabytes worth of data all at once.
•Cecilia Doc Summaries: DISCO unveiled Cecilia Doc Summaries, a generative AI tool that provides detailed and high-level takeaways of individual documents at a user’s request.

Third Quarter and Full Year 2024 Financial Outlook

As of August 8, 2024, DISCO is issuing the following outlook for the third quarter of 2024 and fiscal year 2024:

Third quarter of 2024:

•Software revenue in the range of $29.5 million - $30.5 million.
•Total revenue in the range of $35.3 million - $37.3 million.
•Adjusted EBITDA in the range of $(7.0) million - $(5.0) million.

Fiscal year 2024:

•Software revenue guidance in the range of $118.5 million - $120.5 million.
•Total revenue guidance in the range of $143.0 million - $147.0 million.
•Adjusted EBITDA in the range of $(23.0) million - $(19.0) million.

DISCO’s third quarter and fiscal year 2024 financial outlook is based on assumptions that are subject to change, many of which are outside of its control. If actual results vary from these assumptions, these expectations may change. There can be no assurance that DISCO will achieve these results.

Reconciliation of Adjusted EBITDA on a forward-looking basis to net loss, the most directly comparable GAAP measure, is not available without unreasonable efforts due to the high variability and complexity and low visibility with respect to the charges excluded from this non-GAAP measure; in particular, the effects of stock-based compensation expense specific to equity compensation awards that are directly impacted by unpredictable fluctuations in DISCO’s stock price. DISCO expects the variability of the above charges to have a significant, and potentially unpredictable, impact on its future GAAP financial results.



Conference Call Information

DISCO will host a conference call and webcast at 4:00 p.m. CT (5:00 p.m. ET) today, August 8, 2024, to discuss its second quarter 2024 financial results and business highlights. The conference call can be accessed by dialing (888) 300-4030 from the United States or +1 (646) 970-1443 internationally with conference ID 8394292. The live webcast of the conference call and other materials related to DISCO’s financial performance can be accessed from DISCO’s investor relations website at ir.csdisco.com.

Following the completion of the call until 10:59 p.m. CT (11:59 p.m. ET) on Thursday, August 29, 2024, a telephone replay will be available by dialing (800) 770-2030 from the United States or +1 (609) 800-9909 internationally with conference ID 8394292. A webcast replay will also be available at ir.csdisco.com for 12 months.

About DISCO

DISCO (NYSE: LAW) provides cloud-native, artificial intelligence-powered legal product offerings that simplify legal hold, legal request, ediscovery, legal document review and case management for enterprises, law firms, legal services providers and governments. Our scalable, integrated product offerings enable legal departments to easily collect, process and review enterprise data that is relevant or potentially relevant to legal matters.

References to “DISCO,” the “Company,” “our” or “we” in this press release refer to CS Disco, Inc. and its subsidiaries on a consolidated basis.

Use of Non-GAAP Financial Measures

DISCO uses the following non-GAAP financial measures: Adjusted EBITDA, Adjusted EBITDA margin; non-GAAP cost of revenue; non-GAAP gross profit; non-GAAP gross margin; non-GAAP research and development expense; non-GAAP research and development expense as a percentage of revenue; non-GAAP sales and marketing expense; non-GAAP sales and marketing expense as a percentage of revenue; non-GAAP general and administrative expense; non-GAAP general and administrative expense as a percentage of revenue; non-GAAP loss from operations; non-GAAP operating margin; non-GAAP net loss attributable to common stockholders, non-GAAP net loss attributable to common stockholders per share (basic and diluted) and non-GAAP net loss attributable to common stockholders as a percentage of revenue. Management believes that these non-GAAP financial measures are useful measures of operating performance because they exclude items that DISCO does not consider indicative of its core performance.

In the case of Adjusted EBITDA and Adjusted EBITDA margin, DISCO adjusts net loss for such items as depreciation and amortization expense; income tax provision; interest and other, net; stock-based compensation expense; payroll tax expense on employee stock transactions; restructuring charges; expenses associated with stockholder litigation; and other one-time, non-recurring items, when applicable. In the case of non-GAAP cost of revenue, non-GAAP gross profit and non-GAAP gross margin, DISCO adjusts the respective GAAP balances for stock-based compensation expense. In the case of non-GAAP research and development expense, non-GAAP research and development expense as a percentage of revenue, non-GAAP sales and marketing expense and non-GAAP sales and marketing expense as a percentage of revenue, DISCO adjusts the respective GAAP balances for stock-based compensation expense, restructuring charges, and other one-time, non-recurring items, when applicable. In the case of non-GAAP general and administrative expense, non-GAAP general and administrative expense as a percentage of revenue, non-GAAP loss from operations, non-GAAP operating margin, non-GAAP net loss attributable to common stockholders, non-GAAP net loss attributable to common stockholders per share (basic and diluted) and non-GAAP net loss attributable to common stockholders as a percentage of revenue, DISCO adjusts the respective GAAP balances for stock-based compensation expense, restructuring charges, expenses associated with stockholder litigation, and other one-time, non-recurring items, when applicable.

There are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies. Certain items that are excluded from these non-GAAP financial measures can have a material impact on operating loss and net loss. As a result, these non-GAAP financial measures have limitations and should be considered in addition to, not as a substitute for or superior to, the closest GAAP measures, or other financial measures prepared in accordance with GAAP.



DISCO's management uses these non-GAAP measures as measures of operating performance; to prepare DISCO's annual operating budget; to allocate resources to enhance the financial performance of DISCO's business; to evaluate the effectiveness of DISCO's business strategies; to provide consistency and comparability with past financial performance; to facilitate a comparison of DISCO's results with those of other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and in communication with DISCO’s board of directors concerning financial performance.

Forward-Looking Statements

This press release contains forward-looking statements, including, among other things, statements regarding DISCO’s future financial performance. Words such as “may,” “should,” “will,” “believe,” “expect,” “anticipate,” “target,” “project,” and similar phrases that denote future expectation or intent regarding DISCO’s financial results, operations, and other matters are intended to identify forward-looking statements. You should not rely upon forward-looking statements as predictions of future events.

The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties, and other factors that may cause DISCO’s actual results, performance, or achievements to differ materially, including (i) our history of operating losses; (ii) our limited operating history; (iii) our ability to maintain and advance our innovation and brand; (iv) our ability to effectively add new customers; (v) our ability to effectively increase usage and penetration with our existing customer base; (vi) our ability to expand our sales coverage and establish a digital sales channel; (vii) our ability to expand internationally; (viii) our ability to extend and strengthen our channel partnerships and integrations; (ix) our ability to expand our offering portfolio to a wider range of legal processes outside of our current core offerings; (x) our dependence on revenue from customer usage, which fluctuates based on the timing of and activity driven by legal matters for which our product offerings are used, and any shortfall of large matters on our platform; (xi) our ability to pursue strategic acquisitions and strategic investments to expand the functionality and value of our product offerings; (xii) our ability to comply or remain in compliance with laws and regulations that currently apply or become applicable to our business in the jurisdictions in which we operate; (xiii) the potential that our computer or electronic systems, applications or services, or those of any third parties on whom we depend, fail or suffer security or data privacy breaches or other unauthorized or improper access to, use of, or destruction of our proprietary or confidential data, employee data, or personal data; (xiv) our ability to compete effectively with existing competitors and new market entrants; (xv) the impact of fluctuations in general macroeconomic conditions, such as the current inflationary environment and fluctuating interest rates; and (xvi) the impact that global events, such as the Russia-Ukraine and Israel-Hamas wars and any related economic downturn could have on our or our customers’ businesses, financial condition and results of operations.

The forward-looking statements contained in this press release are also subject to additional risks, uncertainties, and factors, including those more fully described in our filings with the Securities and Exchange Commission (“SEC”), including our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed with the SEC on May 9, 2024. Further information on potential risks that could affect actual results will be included in the subsequent periodic and current reports and other filings that we make with the SEC from time to time, including our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024.

Forward-looking statements represent DISCO’s management’s beliefs and assumptions only as of the date such statements are made. We undertake no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law.

Investor Relations Contact
IR@csdisco.com


CS DISCO, INC.
Condensed Consolidated Balance Sheets
(in thousands, except par value amounts)
(unaudited)
June 30,
2024		December 31,
2023
Assets
Current assets:
Cash and cash equivalents$130,005 $159,551 
Accounts receivable, net25,334 26,993 
Prepaid expenses and other current assets4,812 5,795 
Total current assets160,151 192,339 
Property and equipment, net9,232 9,663 
Operating lease right-of-use assets7,372 8,143 
Primary law intangible asset, net14,000 14,000 
Other intangible assets, net540 681 
Goodwill5,898 5,898 
Other assets808 823 
Total assets$198,001 $231,547 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$4,040 $5,234 
Accrued expenses5,457 5,502 
Accrued salary and benefits5,513 6,230 
Deferred revenue3,518 4,285 
Operating leases1,905 1,826 
Finance leases41 41 
Total current liabilities20,474 23,118 
Operating leases, non-current6,262 7,136 
Finance leases, non-current137 158 
Other liabilities238 800 
Total liabilities27,111 31,212 
Commitments and contingencies
Stockholders’ equity
Preferred stock $0.005 par value, 100,000 shares authorized and no shares issued and outstanding as of June 30, 2024 and December 31, 2023
— — 
Common stock $0.005 par value, 1,000,000 shares authorized as of June 30, 2024 and December 31, 2023; 59,434 and 61,010 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively
298 306 
Additional paid-in capital433,664 440,408 
Accumulated deficit(263,072)(240,379)
Total stockholders’ equity 170,890 200,335 
Total liabilities and stockholders’ equity$198,001 $231,547 


CS DISCO, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Revenue$36,005 $34,276 $71,576 $67,405 
Cost of revenue9,288 9,039 18,140 17,316 
Gross profit26,717 25,237 53,436 50,089 
Operating expenses:
Research and development12,888 13,258 24,967 29,030 
Sales and marketing15,498 18,053 31,306 37,113 
General and administrative10,715 10,917 21,879 23,217 
Total operating expenses39,101 42,228 78,152 89,360 
Loss from operations(12,384)(16,991)(24,716)(39,271)
Other income (expense)
Interest and other income1,735 2,129 3,721 4,076 
Interest and other expense(80)4 (230)12 
Loss from operations before income taxes(10,729)(14,858)(21,225)(35,183)
Income tax provision(105)(57)(191)(97)
Net loss attributable to common stockholders$(10,834)$(14,915)$(21,416)$(35,280)
Net loss per share attributable to common stockholders, basic and diluted$(0.18)$(0.25)$(0.35)$(0.59)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted59,815 59,856 60,508 59,648 


CS DISCO, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

Six Months Ended
June 30,
20242023
Cash flow from operating activities:
Net loss$(21,416)$(35,280)
Adjustments to reconcile net loss to cash used in operations:
Depreciation and amortization2,103 1,957 
Stock-based compensation11,731 14,092 
Charge to allowance for credit losses1,126 1,356 
Loss (Gain) on disposal of long-lived assets(2)1 
Non-cash operating lease costs771 699 
Changes in operating assets and liabilities:
Accounts receivable533 (3,214)
Prepaid expenses and other current assets984 1,819 
Other long-term assets14 (124)
Accounts payable(816)(3,186)
Accrued expenses and other(1,365)1,616 
Deferred revenue(767)(790)
Operating lease liabilities(796)(722)
Other liabilities(80)(30)
Net cash used in operating activities(7,980)(21,806)
Cash flow from investing activities:
Purchases of property, equipment and capitalized software development costs(1,346)(2,497)
Proceeds from disposal of equipment2 1 
Cash paid for acquisitions— (1,180)
Net cash used in investing activities(1,344)(3,676)
Cash flow from financing activities:
Proceeds from exercise of stock options18 283 
Net proceeds from issuance of common stock under Employee Stock Purchase Plan360 932 
Repurchase of common stock related to net share settlement(71)(38)
Repurchase of common stock related to share repurchase program(20,052)— 
Cash paid for acquisitions(457)— 
Principal payments on finance lease obligations(20)(20)
Net cash provided by (used in) financing activities(20,222)1,157 
Net decrease in cash and cash equivalents:(29,546)(24,325)
Cash and cash equivalents at beginning of period159,551 203,244 
Cash and cash equivalents at end of period$130,005 $178,919 
Supplemental disclosure:
Cash paid for taxes$464 $430 
Non-cash investing and financing activities:
Property and equipment included in accounts payable and accrued liabilities$79 $203 
Contingent consideration related to acquisition$481 $753 


CS DISCO, INC.
Reconciliation from GAAP to Non-GAAP Results
(in thousands, except for percentages and per share amounts)
(unaudited)

Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Net loss$(10,834)$(14,915)$(21,416)$(35,280)
Depreciation and amortization expense1,028 1,005 2,103 1,957 
Income tax provision105 57 191 97 
Interest and other, net(1,655)(2,133)(3,491)(4,088)
Stock-based compensation expense6,058 6,868 11,731 14,092 
Payroll tax expense on employee stock transactions178 134 371 244 
Restructuring charges— 1,574 — 2,590 
Expenses associated with stockholder litigation384 — 583 — 
Adjusted EBITDA$(4,736)$(7,410)$(9,928)$(20,388)
Adjusted EBITDA margin(13)%(22)%(14)%(30)%

Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Cost of revenue$9,288 $9,039 $18,140 $17,316 
Non-GAAP adjustments:
Stock-based compensation expense(432)(271)(817)(502)
Non-GAAP cost of revenue$8,856 $8,768 $17,323 $16,814 
Non-GAAP gross profit$27,149 $25,508 $54,253 $50,591 
Non-GAAP gross margin75 %74 %76 %75 %

Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Research and development$12,888 $13,258 $24,967 $29,030 
Non-GAAP adjustments:
Stock-based compensation expense(2,084)(1,729)(4,176)(3,919)
Restructuring charges— (1,001)— (1,510)
Non-GAAP research and development$10,804 $10,528 $20,791 $23,601 
Non-GAAP research and development as a % of revenue30 %31 %29 %35 %

Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Sales and marketing$15,498 $18,053 $31,306 $37,113 
Non-GAAP adjustments:
Stock-based compensation expense(1,171)(1,360)(2,251)(2,751)
Restructuring charges— (471)— (648)
Non-GAAP sales and marketing$14,327 $16,222 $29,055 $33,714 
Non-GAAP sales and marketing as a % of revenue40 %47 %41 %50 %




Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
General and administrative$10,715 $10,917 $21,879 $23,217 
Non-GAAP adjustments:
Stock-based compensation expense(2,371)(3,508)(4,487)(6,920)
Restructuring charges— (102)— (432)
Expenses associated with stockholder litigation(384)— (583)— 
Non-GAAP general and administrative$7,960 $7,307 $16,809 $15,865 
Non-GAAP general and administrative as a % of revenue22 %21 %23 %24 %

Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Loss from operations$(12,384)$(16,991)$(24,716)$(39,271)
Operating margin(34)%(50)%(35)%(58)%
Non-GAAP adjustments:
Stock-based compensation expense6,058 6,868 11,731 14,092 
Restructuring charges— 1,574 — 2,590 
Expenses associated with stockholder litigation384 — 583 — 
Non-GAAP loss from operations$(5,942)$(8,549)$(12,402)$(22,589)
Non-GAAP operating margin(17)%(25)%(17)%(34)%

Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Net loss attributable to common stockholders$(10,834)$(14,915)$(21,416)$(35,280)
Non-GAAP adjustments:
Stock-based compensation expense6,058 6,868 11,731 14,092 
Restructuring charges— 1,574 — 2,590 
Expenses associated with stockholder litigation384 — 583 — 
Non-GAAP net loss attributable to common stockholders$(4,392)$(6,473)$(9,102)$(18,598)
Non-GAAP net loss per share, basic and diluted$(0.07)$(0.11)$(0.15)$(0.31)
Weighted average shares used to compute basic and diluted net loss per share59,815 59,856 60,508 59,648 
Non-GAAP net loss attributable to common stockholders as a % of revenue(12)%(19)%(13)%(28)%



v3.24.2.u1
Cover
Aug. 08, 2024
Cover [Abstract]  
Document Type 8-K
Entity Central Index Key 0001625641
Amendment Flag false
Document Period End Date Aug. 08, 2024
Entity Registrant Name CS Disco, Inc.
Entity Incorporation, State or Country Code DE
Entity File Number 001-40624
Entity Tax Identification Number 46-4254444
Entity Address, Address Line One 111 Congress Avenue
Entity Address, Address Line Two Suite 900
Entity Address, City or Town Austin
Entity Address, State or Province TX
Entity Address, Postal Zip Code 78701
City Area Code 833
Local Phone Number 653-4726
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common stock, par value $0.005
Trading Symbol LAW
Security Exchange Name NYSE
Entity Emerging Growth Company true
Entity Ex Transition Period true
CS Disco (NYSE:LAW)
Gráfica de Acción Histórica
De Oct 2024 a Nov 2024 Haga Click aquí para más Gráficas CS Disco.
CS Disco (NYSE:LAW)
Gráfica de Acción Histórica
De Nov 2023 a Nov 2024 Haga Click aquí para más Gráficas CS Disco.