LAW - Earnings call transcript Q2 2024

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to CS Disco's second quarter of fiscal year 2024 conference call. [Operator Instructions] I would now like to hand the conference over to your first speaker today, Head of Investor Relations, Aleksey Lakchakov.

So go ahead.

Aleksey Lakchakov

Good afternoon, and thank you for joining us on today's conference call to discuss the financial results for Disco's second quarter of fiscal year 2024. With me on today's call are Eric Friedrichsen, Disco's Chief Executive Officer; and Michael Lafair, Disco's Chief Financial Officer. Today's call will include forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding our financial outlook and future performance, the impact of changes to our executive leadership, our future capital expenditures, market opportunity, market position, product strategy and growth opportunities, the benefits of our product offerings, and developments in the legal technology industry, including those related to the role of artificial intelligence.

at prepared replay earnings be of our Relations our filings release, found to Investor a and today's website addition remarks, press our SEC on In ir.csdisco.com. call can

unknown Forward-looking statements our results, implied from or performance, by and different that to materially expressed may actual be risks achievements those involve cause uncertainties the and known or forward-looking statements.

or included company's quarterly management's beliefs in the time March of on the its made. Risk for on ended XX, Information report Form Form as on financial with and June company's with the the affect is quarter only our factors ended assumptions represent XX, SEC filed could statements upcoming quarter to SEC the in the the Forward-looking and report Factors XXXX, filings time XXXX, results the May XX-Q XX-Q that quarterly session date from XXXX. including X, for company's the titled

and non-GAAP of non-GAAP equivalent the call the versus non-GAAP financial today's In for of call, during GAAP financial GAAP. Eric. These using with GAAP our financial as a to is like their limitations closest earnings not on to, or turn addition, are to performance discuss superior and substitute accordance measures measures we non-GAAP in Reconciliations in with and available or addition measures. financial release. And prepared measures I'd will discussion between that, over to measures

Eric Friedrichsen

throughout meet reflections. customers, had days ago, the know share my business, about on Since and and be discuss Disco. share Second to the and to with and the Disco. get to everyone, I our for and XXXX strategy joined Call. you plans top I go happy Disco's welcome just of am to people forward to our here of Hello, and Earnings I'm all my April of Quarter the many excited opportunity XXth, thoughts Disco XXX to results with learn to I've over to

However, second versus I'd revenue was like for the year. up first, viable same X% to the last XXXX results. Total of million, quarter quarter to go $XX

million, in a Software was of our quarter revenue over high up for and Services total business watermark in year. This X% the revenue. QX for $X.X million was the second fifth a EBITDA our exciting XX% discuss or million and row new negative with X,XXX $XX.X year-over-year ended this was growth EBITDA prior customers, in quarter Adjusted There things are the quarter. want I many $XXX was $X.X that to negative million quarter. the adjusted no of total margin. We cash, revenue debt.

progress is observations considerable development, in position revenue and sales ultimate in and will from X I made team at first market. my share Disco. further my our first, our months today's goal our growth product On While to the call, to strengthen accelerate

focus revenue areas highlight our Second, approach to growth. of primary accelerating I will our and

caliber, I share future. Third, convinced eager, globe all some a more is the than front. From high bright have ever who Disco. talented updates a that employees observations, exciting various and met am fantastic in Disco many offices across product departments. we company It to the will with of on I our employees clear dedicated and are my have that visited is I initial with

strategic team hours of Cecilia with to is expressed our competitors' leveraging our They their ambition Law made reliability. brightest that customers met reference love It's efficiency, Virtually a Q&A, have ease every of our stories love our with more about do that services solution significant product's by want XXX corporate directly from pivotal the with, industry evidence has as used by customers. and solutions points. is use, hundreds been them evident. past, market The gaining improvement most partner. in our a a appreciation have from customer minds I these to mostly ediscovery, Consistently, from past. I customer quickly value largest XX and the of speed, finding base. Hearing the directly Their of a to is with legal to that for products which provides the valuable the in enlightening. with products workflow opportunity. used true for and work me who they our very clear in services customers also over customers the best the solid Am saving that I've Disco. to some clear have heard the over significant to they've it technology Disco strong of that in position absolute face-to-face customers, switching We Disco deliver and legacy met make Disco

So a customer-focused organization in is X it's are that operational cultural focus, about effectiveness, Those focus, we'll Becoming our all customer improvement. areas drive terms of and where paramount. revenue will the acceleration. absolutely

focus Over our our the attention prospects. began on shifting to the and we customers top most last and few months, important resources customer segmented base

We by have valued legal a organization and and provides that's services that platform outcomes. experiences teams a highly world-class

at our organizations. We're firsthand customers a plan on executing need within Disco Disco's that now right platform exactly do that. they our customer heard enable to help their champions I several However, champions to from largest our in promoting

our just be understand and inherent are elegantly. and and and the and rebuilding roles, needs to help to solve our solutions systems the space, U.S. requirements their that sales and problems and exceptionally related able design value function team in complicated. marketing and the Our to propositions. We're we enablement sales well that's needs, Because do customer's complex international that. our workflows to have the are regulations address or rules legal industry of unique The complexity

board. across talent past We've that we adding already navigate adding just offering, additional and process, are believe performance entire added quarters sales with not on We're enterprise-level with talent account-based in quarter Disco's line sell how focused sales the motions. in in reps value, will sales and be focused this sales the quota-carrying in our We our We and existing reps several the the our that coming potential the will experienced platform is solution. communicate high-caliber will talented who objections leaders improve point sales just and managers enterprise experienced augmenting plan. elevate sophisticated on

We corporate, align big success development, predominantly have marketing, larger started customers, top and law, customer our which and to are sales teams litigation to resource and our boutiques.

of this added believe that Finally, we're quarter, focused when as to in it and comes President ruling strategy are We marketing out customer better a our to generation ensure targeting focus, account initiatives support significant these our demand account-based demand and Vice this better top focused on marketing an a to as that key customers customer outcomes well of events. We've of resources that result more drive changes we within software. on priorities roles to and senior set including for amount support more and currently other our experiences field shifting for working Demand we're Generation initiative. will is

approach a of Next, focus commercially and operations clear at sales, working team. Richard to priorities. legacy organizations. pleased his of more of well experience and especially our Disco love the the and that he Disco to of end-to-end if life of an and a to This and to wealth the intense improvements Product and we effectiveness improves outcomes. customer-focused from a into time business faster growing further has minded also announce Richard cross-functional operational is sets experience, discipline bring will effectiveness enhance people We're as I processes and our Emburse aligning they our has underway business to need long revenue. leading BXB a effectiveness our to to that enhance approach extensively is tailwind winning and our cycle. scalable teams and scaling to brings ensure growing Richard of and organizational our our internal is improve to product we visibility our around to key to enable Chief joined effort am decisions. and elements drive These Crum want our relate Office. internal with Richard he customers. products, work is and systems, quote-to-cash customer Customers will I customer

is who and reward as result. is place with enjoyable will an that Engaged our employees cultural to will satisfied more rewarding work. business about Lastly, and a better serve a It's customers improvement Disco win-win. us ensuring

When is improving showed comes Disco culture, builds respect. have shove, and hallways in and at and Disco in I'm based practices push We collaborative work improvement palpable. data ethics, around starts and top, significant ensuring to transparent, to to significant healthy, the work a environment. The our promote including done our on reputation energy internal integrity, the culture a already, culture that committed remarkable

for future path down As Continuing culture a success. a key Drucker building lunch. culture be said, strong eats of Peter company ingredient in our strategy will our

and us to of We will have overnight. a enable journey not it happen business this ahead

we in in to this. steps direction. from more clear material expect don't But very change a XXXX. cost We a are taking will EBITDA adjusted speak right perspective, Michael to the our

on firm, would some Now on and like to matters I manages a is number Am during over Q&A of matter. one long-standing team to quarter. Disco the thoroughly and our This I of currently recent large a past great customers. complex Cecilia our with work Law customer a was has which significant piloting a on the relationship has visit product done focus impressed platform, our highlights

receive responses with users their a natural As along use narrative a in citations. language specific documents Q&A is questions reminder, Disco's tool to allows the that and source Cecilia about databases detailed

formulate a actionable ask Cecilia of and Q&A Q&A could this be for with ability can documents supporting or able team early and a broader recommendations. This subtle case particular misconduct. pilot search support client was The the the customer. tailored to X language in the to demonstrate a on natural much effective. with and documents to legal questions. provide million generic their In very was of population early the Q&A's submit was informed also its responses traditional search and large precise of rendered for references a ability the to a effectively these case its assess language, to traditional pilot's prove this to strategy allegations over client that Relying key ability takeaways with complex relevant Cecilia limited querying now potential less with to Effective initial of tool subject documents using with understand chose questions early was help due customer investigative in receive legal case. the making on less than powerful with highly identify led documented documents. be and The number to findings is the Q&A's impressed team quickly refute case team more which documents leveraged finding team Cecilia example, appealing matter, responses to So risks Cecilia size in assist The and to decisions. questions techniques legal to receive highly to documents

now of Review next Disco's to Auto available metrics, Auto Cecilia of launch the XX% at and were XX% showcased firms, Law Cecilia customer an the over reviewers. from period, a on documents equivalent announce data ILTA than demonstrated and set our X-hour review generally week. conference precision Am day. of to testing recall speeds pleased X,XXX are And a XXX-person the And per XX-hour we Review outstanding. review working typical human team Next, be to top to higher with testing results hour

bring efficient technology weeks even describe Our Review can times language and maintaining natural to tagged, very to Q&A software this Cecilia a pass feedback leverage has reviews. or number effective have show from been our months begin review. their meaningful released. from customers. Cecilia excited of eager workflows, an Using accelerate will using shown technology to and Auto documents Cecilia promising live been tags growth implemented. their to customers early to Cecilia already customers, in technology We Q&A X revenue this a We're seeing quality. while We're offers its in and cases be indications our customers to it's reducing solution. for Firms where to matters first first revolutionize positive adopting hours uplift powerful and this improving Auto now since review has

our of ultimately, the and platform current remains and vast most of anticipate material we with is revenue these our ediscovery. today. take the that It heartbeat impact will core about offering time, in of our don't majority year. The we're customers significant care However, adoption technologies cautious

thousands sensitive and called expansive capability redact a and We a no because mass are data of reflecting the key market matters it committed for to task. sensitive spend this in we release large longer ediscovery will to and users to targeted is In information, feedback QX, our of enables at product Lawyers hours in on one the had providing worth data, redaction documents by need draw boxes is gigabytes scour for upcoming one leading customers' once. over redactions. in-app specifically significant the This functionality releases. solution

patterns card excited specific had summary, been user credit first numbers, on and XXX terms redacted frequently our information This strong other it's at customers been can for interface. addresses, days numbers, relying this requested quarter. start or to Now with wonderful has revenue and simple be security a social release like we're We it. In Disco. a

Our growing. business is

and impressed around our customers. energized what to am have over aligned with customers last I'll our team product incredibly the few Michael. to proud I'm We priorities. need and turn optimistic by accomplished X,XXX it our the outcomes. satisfied our We getting over everyone about are team and we I'm same we and future. With I do, I'm amazing what of months, over has that, know

Michael Lafair

revenues total million, XXXX, Thank X% were $XX you, In year-over-year. up Eric. QX

strong X% April May up decline some full XXXX. saw and but improvement to otherwise unless that net decline revenue Services the In our Adjusted specified, is June. the in and from year-over-year. loss measure. to had all financial impacted services review we a please down quarter, gross of also year-over-year $XX.X X% of million, year-over-year. operating QX the million, a statement, software revenues usage are margin, income Software that remainder in We due were $X.X basis. on in note in The softness is we were expenses, EBITDA a discussing non-GAAP in references non-GAAP saw

Our QX was in gross margin XX%.

on to mentioned our the fluctuate our usage. we period margins customers' before, from As of nature gross based period

to was combination of a Research of year-over-year of by managed marketing. driven compared QX XX% on and for in of total or XX% redistribution revenue of the and marketing data expense was $XX.X year. to expense XX% lower headcount revenue platform. or for types development For million sales decline million ingested revenue predominantly of The our in XX% $XX.X compared of amount and and the Sales our of example, is the QX and revenue prior within and QX QX year. investment prior of

$X.X prior and QX in $X.XX flat a relatively net XX% to for million the EBITDA General of share an XX% adjusted share the R&D spend. General million was prior were are EBITDA in to million, flat QX revenue prior operating was negative negative administrative relatively QX compared year. We loss margin expense negative Operating loss prior XX% XX% margin negative revenue in expenses QX, year-over-year. was to year. of in loss of adjusted $X.X to of EBITDA of an and negative loss representing compared XX% of of QX $X.X year-over-year revenue per of in to million of year. of Adjusted was was an year. Net or compared of in of QX XX% negative XX% compared per revenue QX for or Net QX the administrative $X.XX prior or the year. our with $X of representing compared XX% QX QX $X.X million in in negative margin the

Turning Operating program of X completed in the was cash included share no flow QX year. of million the million repurchase We with equivalents to and flow negative the and the of $XX cash debt. ended cash balance the the to $XX.X in $X quarters for This quarter. period $XXX XXXX million sheet impact million statement. cash compared and the negative same in prior first

outlook. the to Turning

million XXXX, $XX.X to QX the in $XX.X revenue revenue For of we $XX.X in to total software million range are million. guidance the guidance range providing and of $XX.X million

to adjusted negative expect EBITDA range negative $X to of million. the $X be million We in

we to guidance million. range $XXX.X and range XXXX, software revenue $XXX of total to in $XXX million the anticipate the revenue year fiscal $XXX.X of For million in guidance million

the EBITDA million. negative be of expect $XX $XX negative in We million range to adjusted to

to line Now to the to the Operator? for I'd turn call Q&A. like over the operator open up

Operator

line [Operator JPMorgan. Your from Instruction] Essex the first question with Brian comes of

Brian Essex

litigation for from what of like it just as the cohort? large that than the law if -- of a customers, customer And number rest us of we customers? base, to like the how Maybe understand bucket? it within help growing faster see? relates Eric, underlying And into that customer behavior the to fall dynamics Is sense the could corporate customer total you your would get many X,XXX-plus boutique is maybe

Eric Friedrichsen

Brian, at And Am producer the revenue us. Sure, are comprised customers group. XX% you in law, revenue, XXX XXX few biggest our our Law of that of customers top Big in absolutely. look XXX a customers in of if Law for Am quite fact, is approximately generate they general, which

Brian Essex

way, Or we off? and net customers of growing the a if going your how on at within kind you to a look customer like So smaller to kind managing adds this quarter, customer rest base the customer across within retain of of customers churning put maybe of the like and the base? the like that the it the are for ability larger what's platform? And function stabilize different the is

Eric Friedrichsen

was at about new our larger big on or of shifted customers small -- Disco as largest focus Historically, customers we put was really net put Disco small regardless on or focus of customers Yes. managing customer customers. We've or whether more customers. with those big potential were was any kind We've customers acquiring customers also really rate. acquiring focus potential. It acquisition all our

a just corporations lot managing litigation law, like that tend big acquisition big boutiques standpoint. litigation. from an we're same of doing the so to And and We're have thing

as focused have and we think value customers to the -- can acquiring we grow. we're on where most much the customers very we're we So where acquiring add right opportunity the

Brian Essex

for one last me. Maybe

customer for focused new within base you installed those Is at going how opportunity attach primarily those lands? penetration of out or on terms logo do or large customers, large rate of the penetration that terms increasing in In your look customers? of

Eric Friedrichsen

-- customers their last wallet little of the we organizations. New the champions I've #X, And over in help firms they our to that. in in over are days usage Dallas us they they of product. in everywhere. in customers of use think want them D.C., from we Brian, have want expand #X, as the And platform I'm XX XXX firms. Philly, We #X, I've consistently, have. might as Jersey, that, our within love our what glad a Yes. London, to York, in been you we those share asked bit and expand in their product New of within don't #X, heard big

exactly and industry, you're ERP when in to we're a it long built could our so very expanding industry, actually be on within we're approach, a and wallet your focused times out wallet I with you're Emburse, time champion concurrent Those And base. a what cycles, complex. I doing. with are displace point of the industries, SAP. enablement customer those pretty challenging. spent expense We've lot lot at management that's and those in the our share out, competitor, of to win And trying share, sales trying are should

interesting One advantages but be some matter to might matters necessarily things our and sense there also and there's in big that, market begin to the of some right about have single win to that end, every is matters the we that away. disadvantages don't that

our And the bit win opportunity to got the standardize to more We and to a get once shares little win the we where within third we've base. win customer the we get sixth the fifth start to very matter, large some second next wallet the have or matter, traction. That's and matter. we

Operator

comes of Markets. Mark Next from the Schappel with Loop question line City

Mark Schappel

priority as leader area? your this the your with second Eric, Loop to this is any driving on operational basically in throughout on this as reviews organization. you that was for Capital. a front well Hello, you in during What Schappel company changes it a new bring question effectiveness caused of Mark

Eric Friedrichsen

Yes.

about in think Richard Chief be Product our I speaking you Is new may bringing Officer. Crum, correct? that

Mark Schappel

Yes. right. That's

Eric Friedrichsen

Yes.

Emburse. customer is great product the customers. brings Yes. organizations. that help mindset. he bring And customer-focused Richard before of They of He was a I with making to I when our oriented. got wallet They talent we're within work the use their cross-functionally an Product priorities had XX very that at does Chief which products. is Okay. extremely a was Emburse, Officer expand at doing just helpful in our been think He commercially right I've around people their needs. the And got base. again, tell tell communicator, throughout you, Great. opportunity aligning our to to the clear It need in opportunity. had Crum, really I front Richard to in our you, I of Richard sure you our are job like on expanding love he's go customer when really share extremely a perfect about worked

brought And Richard I so why on that's board.

Mark Schappel

bit board type target on respect rep with the are typically just to the different talk XXX more maybe you you're sales reps. then go-to-market we a can focusing to type the customers. Law bringing changes, And And those about of That Am of on requires little customers.

Eric Friedrichsen

a the Yes, to we've is you're approach. absolutely more been continuing sale. important got Disco, talent some have understand within of a understand do and new enterprise-oriented space. few that last the It's so. It's that right. to that we legal adding that buyers hired and multiple leaders It tech here we're sales people type different great at months, and talent. We've reps several We

that share for at enablement and within looking building out we're that profile our new of function enabling in a bringing our as our teams we're our do wallet also expanding we're to obviously, but ensuring sales So all of better type customer we're sales base. job people, a

Operator

Your ] next [ with Ian Needham. the line comes from question of Black

Unknown Analyst

Review How differ product? existing does Auto the your from new Disco review Cecilia

Eric Friedrichsen

is excited a can't believe reduce to efficient, costs they're legal Yes, all, on on more are typically review, ways about. I areas outside technology that excited AI focus first they are and to require pressure judgment. GCs then cost at I to to counsels putting in counsel that to you find am Ian. Auto that their for for technology some And looking less general very their and review. legal reduce but providing get judgment, excited I how tell of that's corporations mean be auto innovation firm to their to from is AI take efficient, there. And then it They as an themselves are them one opportunity differentiate our get potentially ability look way can more be to at to but not case able to an get competitors. where customers do clients early about them even law associated on their in only with also them give case very able to perspective the early an assessment quickly their help quickly to with case come strategy. more potentially their generative risks general about or up great, ways

at to of look law an outcomes it to they for outcomes deliver And So as clients. better opportunity differentiate and be firm to faster able want their our themselves. many customers

in I are up is to lawyers risk-averse. set review document one -- is the help every the we Every really auto typically way the single designed risk-averse can mix, we review single that But of document. lawyers. with can can't Auto technology-assisted to all, point of out the first every review Review things have that's types review every And that even think Cecilia important we typically most single whereas review document of document.

services as Secondly, a the documents and which the AI right into the metrics, explanations the our that XX% on based than single of we XX% wrapped get And was tag tag description precision then to very they such into are review we that consulting And recall every product, why reporting process make services clients as are are is part way. there were writing have tagged helping the sure well. providing instructions that document tagged, beginning. in -- then as human given the at and for better we're wrapped the

very, have able But to an early So -- being Auto it's Cecilia very excited Review. there. that about the it's days. our optimistic the testing about clients in and documents process X,XXX pretty early prospects we're the future it's Obviously, the very review done, for hour,

Operator

next [Operator with line Instructions] Jefferies. question the Brent of from Your comes Thill

Luv Sodha

This for for Disco first been you, is now Sodha a Brent one few Eric, days. Luv on for at Maybe that you've Thill.

the Crum? just what obviously, changes terms need you opportunity in about the Given hiring, what your besides And of have assessments execution, made to time improving set? make do there, Richard are you

Eric Friedrichsen

Luv. Thanks, Yes.

As to that I got a office office, they're mean, the trips I've I've strong that's working where about India incredible offices, and people is been how our far really that we headquarters. areas of been as I York team tech threats one our ediscovery I've of every the cross-functional had multiple at impressed got so to first an our egos, lot our to just the different to Austin very have then, that industry And a talent versed We've that far, think our specifically, our of I many to course, covers one many say observations London and customers. business, New very of a well in low care been really legal together, lot collaboration. would

So that part's obviously very, very positive.

helped do Disco hundreds about Crum. there who Product We the there's revenue, and we've talked it of I of think people And about sales to where from begun is it. Richard have Chief and multiple I done reps. hiring sales talked that. talent, leaders our millions we've opportunities hiring and and companies Officer, for done us scale more experienced before to add been today,

We in of General a for process for a in process vice senior interviewing president the the operations. of Counsel and are interviewing also of

scale success some And to are so process the much $XXX how able and be there the out then some come. through of certainly we and put kind talent, about processes as in now to things team. has building team future. revenue, enablement to speak. just we're going And but far right in customer that talked there's project, also building that investments company to to opportunity our in us are round making we going customers, bigger some our quote-to-cash X,XXX systems, into things our Disco and incredible like of the It's a sales are we're million out that that a position much, we

Luv Sodha

through if for in more will. quarters you if Michael, what like cadence the in the some I And come half guide. guess confidence a us you're a to the few just may. Michael, pulling quick obviously, second had follow-up you've future? getting Could of one more you've walk where you give beat-and-raise I guide, line you would with in

Michael Lafair

really been is remarks. Thanks, in changes I the confident have that feel put in that I business prepared Luv. mean already his outlined place going. the And strategy direction the Eric that it about and

we of we -- think finish land. the was on each In terms estimate we first also as narrowed finish best QX, based in range based on on have the full the guide, our of QX, for quarter, to half based finish performance where and how year our we're the going

give would of I'm we And -- better. the the optimistic about direction we the it business, land, think good now, to we're on company. also and the the strategic but to right end like really about closer on the based of did narrow I and a going the bit do of course, year. that the we feel Of direction range to guestimate the little best fact we're where we

Luv Sodha

you in quick Or -- philosophy the conservatism the sorry. just before? is second Are as a additional you Are same baking in follow-up, half? it

Michael Lafair

philosophy same the as It's before.

Operator

call further time. turn remarks. the to back Eric Fredricson, will no I are there CEO, over at closing And this for questions

Eric Friedrichsen

your you continued earnings you today thanks for our for much, call interest joining support to and and your and in very Disco. Thank all of

to partners Disco to customers Once maintaining are to invaluable. initiatives, look capture commitment to growth. we're poised our your support our supporters drives employees To us again, I to innovation ahead. time of the our and as we've in hard dedicated day. my milestones, gratitude trust to in and sustainable our opportunities been forward We results We success your to for sharing have deliver Disco. Together, for work and significant transparent well your driving who executing our want confidence Your our extend strategic have quarters progress foundation whose achieved unwavering remain greater amazing and and the as your you even focused Thank value are investment thank long-term come. you and today. great to our on communication. a investors, and strong

Operator

concludes conference This Thank you. call. today's

now may You disconnect.

CS Disco (LAW) 8 Aug 242024 Q2 Earnings call transcript