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CS Disco (LAW)
NYSE:LAW
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CS Disco
(NYSE:LAW)
Rating:57Neutral
Price Target:
$4.00
▼(-2.20%Downside)
Positive Factors
Customer Growth
CS Disco disclosed that it now has 318 $100K+ spend customers, +3 q-o-q and +8% y-o-y, collectively representing ~76% of Disco’s revenue.
Financial Performance
CS Disco was FCF profitable for the second consecutive Q4, and with nearly $130M in balance sheet cash, Disco has plenty of runway to fund the business to profitability.
Product Adoption
Multi-product attach is now up to 17% of customers, from 15% a year ago, some of which is being driven by the adoption of Disco’s AI products, most notably Cecilia Q&A, which is seeing promising early signs of utilization.
Negative Factors
Market Valuation
The stock is too cheap at 1.2x EV/R on C2026 for a business that has the potential to get back to double-digit growth.
Net Revenue Retention
Net revenue retention remains under 100%, which implies total revenue growth will need to be driven more by net new logo growth.
Revenue Growth
The business has a revenue growth profile below its small-cap software peers, and adjusted EBITDA margins are yet to inflect positive.
CS Disco (LAW) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$250.53M
Dividend YieldN/A
Average Volume (3M)139.36K
Price to Earnings (P/E)―
Beta (1Y)0.76
Revenue Growth3.84%
EPS Growth-76.01%
CountryUS
Employees561
SectorTechnology
Sector Strength81
IndustrySoftware - Application
Share Statistics
EPS (TTM)-0.08
Shares Outstanding60,807,053
10 Day Avg. Volume143,299
30 Day Avg. Volume139,364
Financial Highlights & Ratios
PEG Ratio-0.03
Price to Book (P/B)1.66
Price to Sales (P/S)0.00
P/FCF Ratio-7.37
Enterprise Value/Market Cap9.08
Enterprise Value/Revenue3.95
Enterprise Value/Gross Profit21.10
Enterprise Value/Ebitda-13.73
Forecast
1Y Price Target
$7.33Price Target Upside79.22% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering3
CS Disco Business Overview & Revenue Model
Company DescriptionCS Disco, Inc., a legal technology company, provides cloud-native and artificial intelligence-powered legal solutions for ediscovery, legal document review, and case management for enterprises, law firms, legal services providers, and governments. The company offers DISCO Ediscovery, a solution that automates ediscovery process and saves legal departments from manual tasks associated with collecting, processing, enriching, searching, reviewing, analyzing, producing, and using enterprise data that is at issue in legal matters. It also provides DISCO Review, an AI-powered document review solution, which consistently delivers legal document reviews; and DISCO Case Builder, a solution that allows legal professionals to collaborate with teams to build a compelling case by offering a single place to search, organize, and review witness testimony and other legal data. The company's tools are used in various legal matters comprising litigation, investigation, compliance, and diligence. CS Disco, Inc. was founded in 2012 and is headquartered in Austin, Texas.
How the Company Makes MoneyCS Disco makes money primarily through a subscription-based revenue model, where clients pay for access to its software solutions on a recurring basis. The company offers various pricing tiers based on the size and needs of the client, which can include additional fees for extra storage, advanced features, or increased user access. Key revenue streams include licensing fees for its software products and services related to data processing, hosting, and project management. Strategic partnerships with legal firms and corporate legal departments also contribute to its earnings by expanding its customer base and enhancing its market reach.
CS Disco Earnings Call Summary
Earnings Call Date:May 07, 2025
(Q1-2025)
| % Change Since: 12.67%|
Next Earnings Date:Aug 07, 2025
Earnings Call Sentiment Neutral
The earnings call presented a mixed picture. While there were positive developments in revenue growth, customer expansion, and adoption of new AI technologies, the company continues to face challenges with negative EBITDA and increasing net losses. The strong cash position and strategic initiatives provide optimism for future improvement.Q1-2025 Updates
Positive Updates
Revenue and Customer Growth
Total revenue for Q1 2025 was $36.7 million, up 3% year over year. Software revenue was $30.9 million, with a notable increase in customers spending more than $100,000, up 8% year over year.
Strong Cash Position
The company ended Q1 with $118.8 million in cash and short-term investments and no debt, providing a solid financial foundation.
Growth in Large Multi-Terabyte Matters
There was continued growth in revenue from large multi-terabyte matters, indicating potential future revenue expansion.
Cecilia Generative AI Suite Expansion
The number of Cecilia Q&A customers grew five times from Q1 2024, showing strong momentum and customer adoption.
Munch Hart Contract Renewal
Renewed a three-year subscription with law firm Munch Hart, doubling their commitment compared to their prior contract.
Negative Updates
Negative Adjusted EBITDA
Adjusted EBITDA for Q1 was negative $5.1 million, representing a negative 14% margin, although slightly better than guidance.
Increase in Operating Loss
Operating loss in Q1 was $6.2 million, representing a negative 17% margin, slightly improving from negative 18% in the previous year.
Net Loss Increase
Net loss in Q1 was $4.9 million, or negative 14% of revenue, slightly higher than the previous year's net loss of $4.7 million.
Increase in R&D Expense
Research and development expense for Q1 was $12.2 million or 33% of revenue, up from 28% in Q1 of the prior year.
Company Guidance
During the first quarter of fiscal year 2025, CS Disco, Inc. reported total revenue of $36.7 million, with software revenue contributing $30.9 million. The company recorded an adjusted EBITDA of negative $5.1 million, surpassing the high end of its guidance range. CS Disco ended the quarter with $118.8 million in cash and short-term investments, maintaining a customer base where 318 clients generated over $100,000 in the past twelve months, marking an 8% increase year over year. These customers accounted for 76% of the overall revenue. Looking ahead, CS Disco provided guidance for Q2 2025, projecting total revenue between $36.5 million and $38.5 million and software revenue between $31.25 million and $32.25 million. For the full fiscal year 2025, the company anticipates total revenue in the range of $146 million to $158 million and software revenue between $125.5 million and $131.5 million, with an adjusted EBITDA expectation of negative $18 million to negative $15 million. This positive outlook reflects an increase in their previous estimates.CS Disco Financial Statement Overview
Summary
CS Disco demonstrates strong gross margins and low leverage, indicating operational resilience and financial stability. However, persistent losses and negative cash flows pose risks to long-term sustainability. Strategic improvements in operational efficiency and revenue growth are necessary for future profitability.Income Statement
The gross profit margin remains strong at around 74% in TTM, showcasing effective cost management despite negative net income margins. Revenue growth is slow, with a TTM increase of just 0.75% over the previous year. However, persistent negative EBIT and EBITDA margins highlight ongoing operational inefficiencies.65
Positive
Balance Sheet
The company maintains a healthy equity ratio of 84.6% in TTM, indicating strong asset financing through equity. However, the negative ROE due to net losses signals a lack of profitability. A low debt-to-equity ratio of 0.06 suggests minimal leverage, yet high reliance on equity might limit financial flexibility.55
Neutral
Cash Flow
Free cash flow remains negative, although it has improved slightly over the year with a growth rate of -26.12% in TTM. The negative operating cash flow to net income ratio indicates cash flow challenges, while the improving free cash flow to net income ratio suggests better cash management.50
Neutral
| Breakdown | |||||
| TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 145.92M | 144.84M | 138.09M | 135.19M | 114.34M | 68.44M | Gross Profit |
| 107.86M | 107.43M | 103.14M | 101.03M | 83.24M | 47.99M | EBIT |
| -62.00M | -61.72M | -49.84M | -71.81M | -23.83M | -22.50M | EBITDA |
| -55.62M | -51.52M | -37.55M | -65.68M | -20.99M | -20.72M | Net Income Common Stockholders |
| -56.59M | -55.77M | -42.15M | -70.77M | -24.34M | -22.87M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 118.81M | 129.13M | 159.55M | 203.24M | 255.48M | 58.57M | Total Assets |
| 168.03M | 180.32M | 231.55M | 256.32M | 287.40M | 79.11M | Total Debt |
| 8.82M | 9.30M | 9.16M | 10.91M | 989.00K | 2.12M | Net Debt |
| -25.71M | -43.47M | -150.39M | -192.33M | -254.49M | -56.45M | Total Liabilities |
| 25.86M | 32.81M | 31.21M | 32.69M | 18.72M | 174.03M | Stockholders Equity |
| 142.17M | 147.51M | 200.34M | 223.64M | 268.68M | -94.92M |
| Cash Flow | Free Cash Flow | ||||
| -14.54M | -11.53M | -44.39M | -50.39M | -24.75M | -24.62M | Operating Cash Flow |
| -11.92M | -8.75M | -25.53M | -46.01M | -21.64M | -22.71M | Investing Cash Flow |
| -85.00M | -78.03M | -20.04M | -9.69M | -3.11M | -1.90M | Financing Cash Flow |
| -17.23M | -20.00M | 1.87M | 3.47M | 221.66M | 59.96M |
CS Disco Technical Analysis
Negative
4.09
Price Trends
3.86
Positive
4.30
Negative
4.97
Negative
Market Momentum
0.07
Positive
50.38
Neutral
24.31
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For LAW, the sentiment is Negative. The current price of 4.09 is below the 20-day moving average (MA) of 4.09, above the 50-day MA of 3.86, and below the 200-day MA of 4.97, indicating a neutral trend. The MACD of 0.07 indicates Positive momentum. The RSI at 50.38 is Neutral, neither overbought nor oversold. The STOCH value of 24.31 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for LAW.
CS Disco Risk Analysis
CS Disco disclosed 66 risk factors in its most recent earnings report. CS Disco reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
CS Disco Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
69 Neutral | $201.76M | ― | -10.44% | ― | 7.65% | -96.35% | |
66 Neutral | $283.38M | 1.58 | -10.56% | 4.62% | -11.07% | 953.01% | |
62 Neutral | $11.92B | 10.03 | -7.37% | 3.70% | 7.32% | -8.25% | |
61 Neutral | $239.72M | ― | -9.90% | ― | -6.52% | -2.19% | |
57 Neutral | $250.53M | ― | -33.75% | ― | 3.84% | -76.01% | |
50 Neutral | $228.94M | ― | -24.47% | ― | -8.39% | 7.79% | |
48 Neutral | $300.19M | ― | -104.69% | ― | -1.64% | 9.99% |
* Technology Sector Average
Performance Comparison
LAW
CS Disco
4.09
-1.53
-27.22%
SSTI
SoundThinking Inc
15.72
3.02
23.78%
EB
Eventbrite
2.52
-2.30
-47.72%
MKTW
MarketWise
17.43
-4.65
-21.06%
NRDY
Nerdy
1.61
-0.12
-6.94%
ONTF
ON24
5.37
-0.38
-6.61%
CS Disco Corporate Events
Executive/Board ChangesShareholder Meetings
CS Disco Holds Annual Meeting, Elects New Directors
Neutral
Jun 10, 2025
On June 10, 2025, CS Disco, Inc. held its Annual Meeting of Stockholders where key decisions were made, including the election of three Class I directors to serve until 2028. Additionally, stockholders ratified the selection of Ernst & Young LLP as the independent registered public accounting firm for the fiscal year ending December 31, 2025, reflecting confidence in the company’s governance and financial oversight.
The most recent analyst rating on (LAW) stock is a Buy with a $8.00 price target. To see the full list of analyst forecasts on CS Disco stock, see the LAW Stock Forecast page.
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.