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CS Disco (LAW)
NYSE:LAW
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CS Disco
(NYSE:LAW)
46Neutral
Positive Factors
AI 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.
Customer Growth
The firm announced that it now has 315 large customers, those spending more than $100K per year, which is up roughly 9% from a year ago.
Financial Performance
CS Disco posted Q4 revenue at the high-end of its guidance range, which amounts to 4% growth, and EBITDA losses that were better than expected.
Negative Factors
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 Profile
The business has a revenue growth profile below its small-cap software peers, and adjusted EBITDA margins are yet to inflect positive.
Total Customer Count
Total customer count fell to 1,439, declining 1% year-over-year.
CS Disco (LAW) vs. S&P 500 (SPY)
Market Cap
$223.42M
Dividend YieldN/A
Average Volume (3M)83.78K
Price to Earnings (P/E)―
Beta (1Y)0.77
Revenue Growth4.89%
EPS Growth-31.44%
CountryUS
Employees561
SectorTechnology
Sector Strength68
IndustrySoftware - Application
Share Statistics
EPS (TTM)-0.93
Shares Outstanding60,383,446
10 Day Avg. Volume67,727
30 Day Avg. Volume83,780
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.00
Price to Cash Flow (P/CF)0.00
P/FCF Ratio0.00
Enterprise Value/Market Cap0.81
Enterprise Value/RevenueN/A
Enterprise Value/Gross Profit1.68
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$7.67Price Target Upside107.30% 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 generates revenue primarily through a subscription-based model, charging clients for access to its software platforms. These subscriptions can vary based on user count, data volume, and specific features accessed, providing a scalable pricing structure that accommodates different sizes and types of legal operations. Additionally, the company may earn revenue from professional services, such as training and implementation support, offered to clients to ensure effective utilization of their solutions. Strategic partnerships with other legal technology providers and integrations with third-party platforms can also enhance CS Disco's value proposition, potentially boosting its customer base and revenue streams.
CS Disco Financial Statement Overview
Summary
CS Disco is experiencing revenue growth and maintains a strong gross margin, yet the company faces significant challenges in achieving profitability and positive cash flow. The debt-free balance sheet provides some financial stability, but ongoing net losses and negative cash flows present risks. The company must focus on enhancing operational efficiency to improve its financial health.Income Statement
CS Disco's revenue has shown growth, increasing from $138.09 million in 2023 to $144.84 million in 2024, indicating a positive trajectory. However, the company continues to face profitability challenges, with net losses widening from $42.15 million in 2023 to $55.77 million in 2024. The company maintains a strong gross profit margin of 74.18% in 2024, but negative EBIT and EBITDA margins highlight ongoing operational inefficiencies.45
Neutral
Balance Sheet
The balance sheet reflects a stable equity position with stockholders' equity declining slightly to $147.51 million in 2024. The company is debt-free, which is a positive indicator of financial stability. However, the equity ratio has decreased, and the return on equity is negative due to persistent net losses, highlighting issues with profitability despite a solid asset base.60
Neutral
Cash Flow
CS Disco's cash flow statement reveals a challenging environment with negative operating and free cash flows, though there has been some improvement from the previous year. Operating cash flow improved to -$8.75 million in 2024 from -$25.53 million in 2023. The cash flow to net income ratios indicate continued struggles in converting earnings into cash flow, limiting the company's financial flexibility.40
Negative
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 144.84M | 138.09M | 135.19M | 114.34M | 68.44M | Gross Profit |
| 107.43M | 103.14M | 101.03M | 83.24M | 47.99M | EBIT |
| -61.72M | -49.84M | -71.81M | -23.83M | -22.50M | EBITDA |
| -50.96M | -37.55M | -65.68M | -20.99M | -20.72M | Net Income Common Stockholders |
| -55.77M | -42.15M | -70.77M | -24.34M | -22.87M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 129.13M | 159.55M | 203.24M | 255.48M | 58.57M | Total Assets |
| 180.32M | 231.55M | 256.32M | 287.40M | 79.11M | Total Debt |
| 9.30M | 9.16M | 10.91M | 989.00K | 2.12M | Net Debt |
| -43.47M | -150.39M | -192.33M | -254.49M | -56.45M | Total Liabilities |
| 32.81M | 31.21M | 32.69M | 18.72M | 174.03M | Stockholders Equity |
| 147.51M | 200.34M | 223.64M | 268.68M | -94.92M |
| Cash Flow | Free Cash Flow | |||
| -11.53M | -44.39M | -50.39M | -24.75M | -24.62M | Operating Cash Flow |
| -8.75M | -25.53M | -46.01M | -21.64M | -22.71M | Investing Cash Flow |
| -78.03M | -20.04M | -9.69M | -3.11M | -1.90M | Financing Cash Flow |
| -20.00M | 1.87M | 3.47M | 221.66M | 59.96M |
CS Disco Technical Analysis
Neutral
3.70
Price Trends
4.16
Negative
4.71
Negative
5.22
Negative
Market Momentum
-0.13
Negative
45.17
Neutral
71.38
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For LAW, the sentiment is Neutral. The current price of 3.7 is above the 20-day moving average (MA) of 3.60, below the 50-day MA of 4.16, and below the 200-day MA of 5.22, indicating a neutral trend. The MACD of -0.13 indicates Negative momentum. The RSI at 45.17 is Neutral, neither overbought nor oversold. The STOCH value of 71.38 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral 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 (60)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
64 Neutral | $214.42M | 3.67 | -10.56% | 6.08% | -8.81% | 208.55% | |
62 Neutral | $199.87M | ― | -12.48% | ― | 10.05% | -213.69% | |
60 Neutral | $10.94B | 10.58 | -7.08% | 2.98% | 7.52% | -12.04% | |
56 Neutral | $202.52M | ― | -8.60% | ― | -0.33% | 38.78% | |
48 Neutral | $302.86M | ― | -92.62% | ― | -1.64% | 9.99% | |
48 Neutral | $200.62M | ― | -24.82% | ― | -9.55% | 12.28% | |
46 Neutral | $223.42M | ― | -32.07% | ― | 4.89% | -31.44% |
* Technology Sector Average
Performance Comparison
LAW
CS Disco
3.70
-4.26
-53.52%
SSTI
SoundThinking Inc
15.78
2.28
16.89%
EB
Eventbrite
2.14
-3.48
-61.92%
MKTW
MarketWise
13.15
-17.30
-56.81%
NRDY
Nerdy
1.66
-1.06
-38.97%
ONTF
ON24
4.74
-2.11
-30.80%
CS Disco Earnings Call Summary
Earnings Call Date:Feb 20, 2025
(Q4-2024)
| % Change Since: -26.00%|
Next Earnings Date:May 07, 2025
Earnings Call Sentiment Neutral
The earnings call presented a mix of positive and negative aspects. Highlights included growth in software revenue, increased high-value customers, and improvements in dollar-based net retention. The company is strategically focusing on larger customers and has introduced new product features. However, challenges remain with negative adjusted EBITDA, a decline in services revenue, a significant impairment charge, and a wider guidance range for 2025 suggesting uncertainty. Overall, the positive developments are encouraging, but the financial challenges temper the outlook.Q4-2024 Updates
Positive Updates
Improvement in Software Revenue
Software revenue for fiscal year 2024 was $120.1 million, up 7% over the prior year.
Increase in High-Value Customers
The number of customers contributing more than $100,000 grew by 9% year-over-year, with revenue from these customers growing at more than double the rate of those contributing less.
Positive Growth in Dollar-Based Net Retention (DNR)
Total revenue DNR improved year-over-year from 92% to 96%, and software DNR improved from 97% to 100%.
Strategic Focus on Larger Customers
The company is shifting its go-to-market strategy to focus on larger customers, which is showing early signs of success.
Introduction of New Product Features
New capabilities were introduced, such as advanced reproductions and document-level Bates numbering, enhancing the product's efficiency and international support.
Negative Updates
Negative Adjusted EBITDA
Adjusted EBITDA for fiscal year 2024 was negative $18.7 million, though it was an improvement from the prior year's negative $25.9 million.
Decline in Services Revenue
Services revenue was $24.7 million, down 4% year-over-year, mainly due to a decline in review revenue.
Impairment Charge
A full non-cash impairment charge of $15.2 million was recorded on the primary law asset and related capitalized development.
Wider Guidance Range for 2025
Revenue guidance for fiscal year 2025 was provided with a wider range, indicating potential uncertainty in achieving higher growth rates.
Company Guidance
In the call, CS DISCO provided detailed guidance on their financial performance and strategic priorities. For fiscal year 2024, they reported total revenue of $144.8 million, a 5% increase from the previous year, with software revenue at $120.1 million (up 7%) and services revenue at $24.7 million. Despite a negative adjusted EBITDA of $18.7 million, this represented a $7.2 million improvement from the prior year. The company ended the year with $129.1 million in cash and short-term investments, and they highlighted a 9% increase in the number of customers contributing over $100,000 in revenue. CS DISCO's dollar-based net retention improved from 92% to 96%, with software DNR increasing from 97% to 100%. Looking ahead to fiscal year 2025, the company projected total revenue between $145.5 million and $257.5 million, with adjusted EBITDA expected to range from negative $19 million to negative $15 million. The company aims to reach breakeven-adjusted EBITDA by Q4 2026.CS Disco Corporate Events
Executive/Board Changes
CS Disco Appoints Thomas Bogan as New Director
Neutral
Mar 17, 2025
On March 13, 2025, CS Disco, Inc. announced that Tyson Baber resigned from his position as a Class I director and member of the Audit Committee, effective immediately. His resignation was not due to any disagreements with the company. To fill the vacancy, the board appointed Thomas Bogan as a new Class I director, effective the same day. Bogan, who has an extensive background in corporate development and strategic sourcing, was deemed independent under NYSE rules and will serve until the 2025 annual meeting of stockholders. His compensation includes equity awards and an annual cash retainer.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
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.