CS Disco Inc

Previous wording

DISCO 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. We leverage a cloud-native architecture and powerful artificial intelligence, or AI, models to automatically identify legally relevant documents and improve the accuracy and speed of legal document review. Our AI models continuously learn from legal work conducted on our product offerings and can be reused across legal matters, which further strengthens our ability to help our customers find evidence and resolve matters faster as they expand usage of our product offerings. We provide legal departments with the ability to centralize legal data into a single platform, improving security and privacy for our customers, enabling transparent collaboration with other legal industry participants and allowing customers to reuse data and lawyer work product across legal matters. By automating the manual, time-consuming and error-prone parts of legal hold, legal request, ediscovery, legal document review and case management, we empower legal departments to focus on delivering better legal outcomes.

Current wording

DISCO 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. We leverage a cloud-native architecture and powerful artificial intelligence, or AI, models to automatically identify legally relevant documents and improve the accuracy and speed of legal document review. Our AI models continuously learn from legal work conducted on our product offerings and can be reused across legal matters, which further strengthens our ability to help our customers find evidence and resolve matters faster as they expand usage of our product offerings. We provide legal departments with the ability to centralize legal data into a single platform, improving security and privacy for our customers, enabling transparent collaboration with other legal industry participants and allowing customers to reuse data and lawyer work product across legal matters. By automating the manual, time-consuming and error-prone parts of legal hold, legal request, ediscovery, legal document review and case management, we empower lawyers to focus on delivering better legal outcomes.

Previous wording

We generate substantially all of our revenue from our customers’ actual usage of ourproduct offerings. Customers generally do not commit to purchase a specific amount of usage on ourproduct offerings and their usage can fluctuate based on the number and nature of legal matters they have at any particular time. As a result, our revenue and other financial results can fluctuate from period to period given the inherent unpredictability of the timing, duration and scope of legal casework. We also offer our customers the option to enter into subscriptions based on committed minimum usage on an annual or multi-year basis, which represented 11% of our revenue in each of the years ended December 31, 2023 and 2022. In addition, we generate revenue from a range of professional services aimed at accelerating the time-to-value for our customers.

Current wording

We generate substantially all of our revenue from our customers’ actual usage of ourproduct offerings. Customers generally do not commit to purchase a specific amount of usage on ourproduct offerings and their usage can fluctuate based on the number and nature of legal matters they have at any particular time. As a result, our revenue and other financial results can fluctuate from period to period given the inherent unpredictability of the timing, duration and scope of legal casework. We also offer our customers the option to enter into subscriptions based on committed minimum usage on an annual or multi-year basis, which represented 11% of our revenue in each of the years ended December 31, 2024 and 2023. Inaddition, we generate revenue from a range of professional services aimed at accelerating the time-to-value for our customers.

Previous wording

Our customers include a diverse set of enterprises across a broad set of industries, as well as law firms, legal services providers of all sizes and government organizations. While we serve customers across many different industries, the way in which lawyers and legal professionals use ourproduct offerings is similar regardless of the specific industry in which each customer operates. This commonality has created efficiencies in our sales and marketing and research and development activities because we do not need to tailor our sales and marketing activities to a wide range of different customer use cases. As of December 31, 2023, we had 1,441 customers, increasing from 1,327 customers as of December 31, 2022. We define a customer as an entity that we have a contract with and from whom we have recognized revenue during the preceding month. As of December 31, 2023 we had 289 large customers, defined as customers with revenue in excess of $100,000 over the previous 12-month period, increasing from 265 large customers as of December 31, 2022. Large customers accounted for approximately 75%, and 78% of our revenue for the years ended December 31, 2023 and 2022, respectively.

Current wording

Our customers include a diverse set of enterprises across a broad set of industries, as well as law firms, legal services providers of all sizes and government organizations. While we serve customers across many different industries, the way in which lawyers and legal professionals use ourproduct offerings is similar regardless of the specific industry in which each customer operates. This commonality has created efficiencies in our sales and marketing and research and development activities because we do not need to tailor our sales and marketing activities to a wide range of different customer use cases. We define a customer as an entity that we have a contract with and from whom we have recognized revenue during the preceding month. Legal departments that use our product offerings and use many law firms across their legal matters, as well as law firms and service providers that use our product offerings for multiple clients, are generally treated as one customer. However, in some cases where they have separate billing terms, we may count these as multiple customers. As of December 31, 2024, we had 1,478 customers, increasing from 1,463 customers as of December 31, 2023. As of December 31, 2024 we had 315 large customers, defined as customers with revenue in excess of $100,000 over the previous 12-month period, increasing from 289 large customers as of December 31, 2023. Large customers accounted for approximately 76%, and 75% of our revenue for the years ended December 31, 2024 and 2023, respectively.

Previous wording

Our go-to-market strategy is focused on acquiring new customers and driving continued use and increased usage of ourproduct offerings for existing customers. We primarily sell through a direct sales force, which is organized based on the stages of our sales motion. Our sales organization is primarily segmented into sales development representatives, field sales, inside sales and our customer success team. In addition, ourplatform is designed such that customers can grant access to third parties, including law firms and other legal service providers, to use our product offerings on the customers’ behalf. This access facilitates widespread adoption of ourproduct offerings, as these law firms and other legal service providers often become customers on their own or recommend ourproduct offerings to other legal industry participants after realizing the benefits of ourproduct offerings. Likewise, if a law firm is our customer, the law firm may add users from its clients’ legal departments to ourplatform in order to collaborate with them. These users may then become champions and encourage the companies they work for to become customers.

Current wording

Our go-to-market strategy is focused on acquiring new customers and driving continued use and increased usage of ourproduct offerings for existing customers. We primarily sell through a direct sales force, which is organized based on the stages of our sales motion. Our sales organization is primarily segmented into sales development representatives, field sales, inside sales and our customer success team. In addition, ourplatform is designed such that customers can grant access to third parties, including law firms and other legal service providers, to use our product offerings on the customers’ behalf. This access facilitates adoption of ourproduct offerings, as these law firms and other legal service providers can become customers on their own or recommend ourproduct offerings to other legal industry participants after realizing the benefits of ourproduct offerings. Likewise, if a law firm is our customer, the law firm may add users from its clients’ legal departments to ourplatform in order to collaborate with them. These users may then become champions and encourage the companies they work for to become customers.

Previous wording

As of December 31, 2023, we had $159.6 million of cash and cash equivalents. We generated revenue of $138.1 million and $135.2 million in the years ended December 31, 2023 and 2022, respectively, representing a period-over-period growth of 2%. Our net loss was $42.2 million and $70.8 million for the years ended December 31, 2023 and 2022, respectively. We generated Adjusted EBITDA of $(25.9) million and $(44.5) million for the years ended December 31, 2023 and 2022, respectively. See the section titled “—Non-GAAP Financial Measure” for the definition of Adjusted EBITDA, as well as a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure stated in accordance with GAAP.

Current wording

As of December 31, 2024, we had $52.8 million of cash and cash equivalents and $76.4 million of short-term investments. We generated revenue of $144.8 million and $138.1 million in the years ended December 31, 2024 and 2023, respectively, representing a period-over-period growth of 5%. Our net loss was $55.8 million and $42.2 million for the years ended December 31, 2024 and 2023, respectively. We generated Adjusted EBITDA of $(18.7) million and $(25.9) million for the years ended December 31, 2024 and 2023, respectively. See the section titled “—Non-GAAP Financial Measure” for the definition of Adjusted EBITDA, as well as a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure stated in accordance with GAAP.

Previous wording

Unfavorable conditions in the economy, both in the United States and abroad, may negatively affect the growth of our business and our results of operations. For example, negative conditions in the general economy both in the United States and abroad, including conditions resulting from inflation, rising interest rates, and the Russia-Ukraine and Israel-Hamas wars have led to economic uncertainty globally. Historically, during periods of economic uncertainty and downturns, businesses may slow spending on information technology, which may impact our business and our customers’ businesses.

Current wording

Unfavorable conditions in the economy, both in the United States and abroad, may negatively affect the growth of our business and our results of operations. For example, negative conditions in the general economy both in the United States and abroad, including conditions resulting from fluctuations in inflation and interest rates, the potential imposition of tariffs in the United States and abroad, and the Russia-Ukraine war and conflict in the Middle East, have led to economic uncertainty globally. Historically, during periods of economic uncertainty and downturns, businesses may slow spending on information technology, which may impact our business and our customers’ businesses.

Previous wording

Our success depends in part on our ability to maintain and advance our innovation and brand. We have a strong history of innovation, demonstrated by our DISCO Hold, DISCO Request, DISCO Ediscovery, DISCO Review and DISCO Case Builder offerings, and have built a research and development process that reliably produces features for these product offerings. We intend to continue combining our deep legal domain expertise and commitment to world-class software engineering to continue delivering features and introducing new product offerings to address more areas of legal work, such as our ediscovery chatbot, Cecilia, which was released in the fourth quarter of 2023 in the U.S., and access to sources of primary law, which we acquired through our Fastcase license and intend to launch in 2024. Our future success is dependent on our ability to successfully develop, market and sell our product offerings to both new and existing customers.

Current wording

Our success depends in part on our ability to maintain and advance our innovation and brand. We have a strong history of innovation, demonstrated by our DISCO Hold, DISCO Request, DISCO Ediscovery, DISCO Review and DISCO Case Builder offerings, and have built a research and development process that reliably produces features for these product offerings. We intend to continue combining our deep legal domain expertise and commitment to world-class software engineering to continue delivering features and introducing new product offerings to address more areas of legal work, such as our ediscovery chatbot, Cecilia, which was released in the fourth quarter of 2023 in the United States and in the third quarter of 2024 in Europe. Our future success is dependent on our ability to successfully develop, market and sell our product offerings to both new and existing customers.

Previous wording

Our large base of customers represents a significant opportunity for further sales expansion. We believe that we will be able to continue expanding customer relationships by increasing customers’ usage of offerings that they already buy from us, selling more of our current offerings to existing customers, and introducing additional offerings to sell to existing customers. Our long-term offerings strategy is aimed at building features and offerings that address more and more types of legal work so that customers can continue to centralize on our platform as the system of record and engagement for the legal function. Our ability to increase sales to existing customers will depend on a number of factors, including our customers’ satisfaction with our product offerings, competition, pricing and overall changes in our customers’ spending levels. Even if our customers expand their usage of our product offerings, we cannot guarantee that they will maintain those usage levels for any meaningful period of time or that they will renew their commitments.

Current wording

Our large base of customers, particularly those customers with significant annual ediscovery spend, large practice teams, and practices in legal areas with significant ediscovery needs, represents a significant opportunity for further sales expansion. We believe that we will be able to continue expanding customer relationships by increasing customers’ usage of offerings that they already buy from us, selling more of our current offerings to existing customers, and introducing additional offerings to sell to existing customers. Our long-term offering strategy is aimed at building features and offerings that address more and more types of legal work so that customers can continue to centralize on our platform as the system of record and engagement for the legal function. Our ability to increase sales to existing customers will depend on a number of factors, including our customers’ satisfaction with our product offerings, competition, pricing and overall changes in our customers’ spending levels. Even if our customers expand their usage of our product offerings, we cannot guarantee that they will maintain those usage levels for any meaningful period of time or that they will renew their commitments.

Previous wording

An indication of the propensity of our customers to continue to work with and expand their relationship with us over time is our dollar-based net retention rate, which compares our revenue from the same set of customers in one period to the prior year period. As of December 31, 2023 and 2022, our dollar-based net retention rate was 92% and 106%, respectively. We calculate our dollar-based net retention rate as of the end of a period by using (a) the revenue from all customers during the twelve months ending one year prior to such period as the denominator and (b) the revenue from all customers during the twelve months ending as of the end of such period minus the revenue from all customers who are new customers during those twelve months as the numerator. Our dollar-based net retention rate could decrease over time as our customer base matures and the amount of revenue used in the denominator to calculate net retention grows.

Current wording

An indication of the propensity of our customers to continue to work with and expand their relationship with us over time is our dollar-based net retention rate, which compares our revenue from the same set of customers in one period to the prior year period. As of December 31, 2024 and 2023, our dollar-based net retention rate was 96% and 92%, respectively. We calculate our dollar-based net retention rate as of the end of a period by using (a) the revenue from all customers during the twelve months ending one year prior to such period as the denominator and (b) the revenue from all customers during the twelve months ending as of the end of such period minus the revenue from all customers who are new customers during those twelve months as the numerator. Our dollar-based net retention rate could decrease over time as our customer base matures and the amount of revenue used in the denominator to calculate net retention grows.

Previous wording

We believe we have a significant opportunity to continue to grow our customer base. As enterprises continue their digital transformation journeys and the demand for differentiation in the competitive market for legal services continues to grow, we expect more and more companies will struggle with existing legal solutions and ultimately will adopt an integrated, easy-to-use platform like DISCO to improve productivity and legal outcomes. We believe our market leadership and differentiated product offerings will enable us to efficiently acquire new customers across all channels. As of December 31, 2023, we had 1,441 customers, increasing from 1,327 customers as of December 31, 2022. Our ability to attract new customers will depend on a number of factors, including the effectiveness and pricing of our products, the offerings of our competitors and the effectiveness of our sales and marketing efforts. We will need to dedicate significant resources to further develop the market for our product offerings and expand, retain and motivate our sales and marketing personnel.

Current wording

We believe we have a significant opportunity to continue to grow our customer base, particularly those customers with significant annual ediscovery spend, large practice teams, and practices in legal areas with significant ediscovery needs. As enterprises continue their digital transformation journeys and the demand for differentiation in the competitive market for legal services continues to grow, we expect more and more companies will struggle with existing legal solutions and ultimately will adopt an integrated, easy-to-use platform like DISCO to improve productivity and legal outcomes. We believe our market leadership and differentiated product offerings will enable us to efficiently acquire new customers across all channels. As of December 31, 2024, we had 1,478 customers, increasing from 1,463 customers as of December 31, 2023. Our ability to attract new customers will depend on a number of factors, including the effectiveness and pricing of our products, the offerings of our competitors and the effectiveness of our sales and marketing efforts. We will need to dedicate significant resources to further develop the market for our product offerings and expand, retain and motivate our sales and marketing personnel.

Previous wording

We believe that our technology, and especially our approach to automation and AI, is applicable to a wider range of legal processes outside of our current core offerings. We intend to leverage our technology to introduce further offerings that increase lawyer productivity across more and more areas of legal work over time. We may expend significant resources in the development of additional offerings. For example, our ediscovery chatbot, Cecilia, which was released in the fourth quarter of 2023 in the U.S., and we intend to offer our customers access to sources of primary law, which we acquired through our Fastcase license and intend to launch in 2024. Our ability to successfully develop, market and sell new offerings will depend on a number of factors, including the availability of capital to invest in innovation, our customers’ satisfaction with such offerings, competition, pricing and overall changes in our customers’ spending levels.

Current wording

We believe that our technology, and especially our approach to automation and AI, is applicable to a wider range of legal processes outside of our current core offerings. We intend to leverage our technology to introduce further offerings that increase lawyer productivity across more and more areas of legal work over time. We may expend significant resources in the development of additional offerings. For example, our ediscovery chatbot, Cecilia, which was released in the fourth quarter of 2023 in the United States and in the third quarter of 2024 in Europe. Our ability to successfully develop, market and sell new offerings will depend on a number of factors, including the availability of capital to invest in innovation, our customers’ satisfaction with such offerings, competition, pricing and overall changes in our customers’ spending levels.

Previous wording

Our market is global and we believe there is a significant opportunity to expand internationally. In 2023, less than 10% of our revenue was generated by customers outside of the United States. We expect to continue to expand our global employee headcount in India. International expansion, including our global sales efforts, will add increased complexity and cost to our business.

Current wording

Our market is global and we believe there is a significant opportunity to expand our international customer base, particularly in the United Kingdom, and further expand our operations internationally, particularly in India. In the year ended 2024, less than 10% of our revenue was generated by customers outside of the United States. Operationally, we expect to continue to expand our global employee headcount in India.

Previous wording

In February 2022, we acquired legal workflow products from Congruity360, LLC, or Congruity, in a purchase that expanded our offerings to provide a modern digital solution for legal hold obligations and legal request compliance. We intend to continue to selectively pursue acquisitions and strategic investments that we believe can expand the functionality and value of our product offerings and bring talent to our company. We believe that the combination of our market leadership, deep legal expertise and powerful end-to-end platform provides an advantage in pursuing select acquisitions. We may be required to expend significant resources in connection with the pursuit of acquisitions and investments.

Current wording

We intend to continue to selectively pursue acquisitions and strategic investments that we believe can expand the functionality and value of our product offerings and bring talent to our company. We believe that the combination of our market leadership, deep legal expertise and powerful end-to-end platform provides an advantage in pursuing select acquisitions. We may be required to expend significant resources in connection with the pursuit of acquisitions and investments.

Previous wording

Sales and marketing expenses consist primarily of personnel-related costs directly associated with our sales and marketing staff, including salaries, benefits, bonuses, commissions, stock-based compensation and allocated overhead costs. Sales and marketing expenses also include advertising costs and other expenses associated with our marketing and business development programs. In addition, sales and marketing expenses consist of travel-related expenses, software services dedicated for use by our sales and marketing organizations and outside services contracted for sales and marketing purposes. In the near term, we expect that our sales and marketing expenses will remain relatively consistent in absolute dollars but will continue to be our largest operating expense for the foreseeable future as we grow our business. Our sales and marketing expenses may fluctuate as a percentage of our revenue over time.

Current wording

Sales and marketing expenses consist primarily of personnel-related costs directly associated with our sales and marketing staff, including salaries, benefits, bonuses, commissions, stock-based compensation and allocated overhead costs. Sales and marketing expenses also include advertising costs and other expenses associated with our marketing and business development programs. In addition, sales and marketing expenses consist of travel-related expenses, software services dedicated for use by our sales and marketing organizations and outside services contracted for sales and marketing purposes. We expect that our sales and marketing expenses will increase in absolute dollars and continue to be our largest operating expense for the foreseeable future as we grow our business. Our sales and marketing expenses may fluctuate as a percentage of our revenue over time.

Previous wording

General and administrative expenses consist of personnel-related costs associated with our finance, legal, human resources and administrative personnel, including salaries, benefits, bonuses, stock-based compensation and allocated overhead costs. General and administrative expenses also include external legal, accounting and other professional services fees, software services dedicated for use by our general and administrative functions, insurance and other corporate expenses. In the near term, we expect that our general and administrative expenses will increase in absolute dollars as our business grows but may fluctuate as a percentage of total revenue from period to period.

Current wording

General and administrative expenses consist of personnel-related costs associated with our finance, legal, human resources and administrative personnel, including salaries, benefits, bonuses, stock-based compensation and allocated overhead costs. General and administrative expenses also include external legal, accounting and other professional services fees, software services dedicated for use by our general and administrative functions, insurance and other corporate expenses. In the near term, we expect that our general and administrative expenses will remain relatively consistent in absolute dollars but may fluctuate as a percentage of total revenue from period to period.

Previous wording

Other income (expense), net consists primarily of interest income, income related to non-operating activities, interest expense and gains and losses from foreign currency transactions and remeasurements of foreign currency-denominated monetary assets and liabilities to the U.S. dollar.

Current wording

Other income (expense), net consists primarily of interest income, income related to non-operating activities, interest expense, gains and losses from foreign currency transactions and remeasurements of foreign currency-denominated monetary assets and liabilities to the U.S. dollar.

Previous wording

The following tables set forth our results of operations and such data as a percentage of our revenue for each of the periods presented.

Current wording

The following tables set forth our results of operations and such data as a percentage of our revenue for each of the periods presented (in thousands):

Previous wording

(1)Includes stock-based compensation expense as follows:

Current wording

(1)Includes stock-based compensation expense as follows (in thousands):

Previous wording

(2)Includes restructuring charges as follows:

Current wording

(2)Includes restructuring charges as follows (in thousands):

Previous wording

Total revenue increased by $2.9 million, or 2%, for the year ended December 31, 2023 compared to the same period in 2022. Revenue related to new customers added since December 31, 2022 contributed $13.9 million, which was partially offset by an $11.0 million decrease in revenue from customers that existed as of December 31, 2022. The change in revenue from existing customers was driven by decreases in usage of our product offerings by several of our existing customers.

Current wording

Total revenue increased by $6.8 million, or 5%, for the year ended December 31, 2024 compared to the same period in 2023. Revenue related to new customers added since December 31, 2023 contributed $11.3 million, which was partially offset by a $4.6 million decrease in revenue from customers that existed as of December 31, 2023. The change in revenue from existing customers was driven by decreases in usage of our product offerings by several of our existing customers.

Previous wording

Revenue generated from our software product offerings increased by $3.0 million, or 3%, for the year ended December 31, 2023 compared to the same period in 2022 due to increases in usage of our software product offerings. Revenue generated from our services product offerings decreased $0.1 million, or 0.5%, for the year ended December 31, 2023 compared to the same period in 2022. This change was driven by decreases in usage of our services product offerings by several of our existing customers, particularly within DISCO Managed Review.

Current wording

Revenue generated from our software product offerings increased by $7.9 million, or 7%, for the year ended December 31, 2024 compared to the same period in 2023 due to increases in usage of our software product offerings. Revenue generated from our services product offerings decreased $1.1 million, or 4%, for the year ended December 31, 2024 compared to the same period in 2023. This change was driven by decreases in usage of our services product offerings by several of our existing customers, particularly within managed review.

Previous wording

Total cost of revenue increased by $0.8 million, or 2%, for the year ended December 31, 2023 compared to the same period in 2022. This change was primarily driven by a $0.5 million increase in amortization of internally developed software and a $0.2 million increase in costs for cloud hosting as a result of increased usage of our product offerings.

Current wording

Total cost of revenue increased by $2.5 million, or 7%, for the year ended December 31, 2024 compared to the same period in 2023. This change was primarily driven by a $1.5 million increase in costs for cloud hosting as a result of increased usage of our software product offerings and a $1.7 million increase in salary and benefits costs. This increase was partially offset by a $0.9 million decrease in outsourced staffing vendor fees.

Previous wording

Research and development expenses decreased by $7.6 million, or 13%, for the year ended December 31, 2023 compared to the same period in 2022. The change was primarily driven by a decrease of $6.9 million in personnel costs, including stock-based compensation, as a result of decreased headcount and the expansion of our operations to lower-cost international locations, and a $2.1 million increase in capitalized software development. This decrease was partially offset by $1.5 million in restructuring costs related to our reductions in force in January and May 2023.

Current wording

Research and development expenses decreased by $0.1 million, or less than 1%, for the year ended December 31, 2024 compared to the same period in 2023. The change was primarily driven by a decrease of $0.4 million in personnel costs, including stock-based compensation, as a result of the expansion of our operations to lower-cost international locations, and a $1.5 million decrease in nonrecurring restructuring charges related to our reductions in force in January and May 2023. These decreases were partially offset by a reduction in capitalized software development of $1.5 million and an increase in software costs of $0.5 million.

Previous wording

Sales and marketing expenses decreased by $4.7 million, or 6%, for the year ended December 31, 2023 compared to the same period in 2022. The change was primarily related to a decrease of $5.0 million in personnel costs, including stock-based compensation and variable compensation, for our sales personnel. Additionally, professional services and travel and entertainment expenses decreased $1.3 million and $0.5 million, respectively. These decreases were partially offset by a $1.8 million increase in marketing expenses as well as $0.8 million in restructuring costs related to our reductions in force in January and May 2023.

Current wording

Sales and marketing expenses decreased by $6.8 million, or 10%, for the year ended December 31, 2024 compared to the same period in 2023. The change was primarily related to a decrease of $4.2 million in personnel costs, including stock-based compensation and variable compensation, for our sales personnel. In addition, marketing expenses decreased $1.0 million and software related costs decreased $0.5 million. Further, $0.6 million of the decrease was also due to nonrecurring restructuring charges related to our reductions in force in January and May 2023.

Previous wording

General and administrative expenses decreased by $7.5 million, or 18%, for the year ended December 31, 2023 compared to the same period in 2022. This change was primarily attributable to a $6.5 million decrease in personnel costs, including stock-based compensation. This decrease included a $7.7 million reversal of stock-based compensation costs related to the cancelled 10-year performance award previously granted to our former CEO (the “CEO Performance Award”). Had the CEO Performance Award not been cancelled, personnel costs would have increased $1.2 million. The decrease is also attributable to $1.3 million in unoccupied lease charges and moving expenses incurred in 2022 related to the opening of our new headquarters in Austin, Texas, as well as $0.4 million in issuance costs related to the CEO Performance Award granted in 2022. Further, corporate insurance costs decreased $0.7 million. These decreases were partially offset by $0.2 million in restructuring costs related to our reductions in force in January and May 2023.

Current wording

General and administrative expenses increased by $7.8 million, or 24%, for the year ended December 31, 2024 compared to the same period in 2023. This change was primarily attributable to a $7.9 million increase in personnel costs, including stock-based compensation, as a result of the $7.7 million reversal of stock-based compensation related to the 10-year performance award previously granted to our former CEO (the “CEO Performance Award”) that was cancelled in 2023. Additionally, professional services increased $1.3 million, of which $0.7 million was due to legal fees related to the stockholder litigation. These increases were partially offset by a $0.6 million decrease in insurance expense and a $0.4 million decrease in nonrecurring restructuring charges related to our reductions in force in January and May 2023.

Previous wording

We report our financial results in accordance with generally accepted accounting principles, or GAAP. However, management believes that Adjusted EBITDA, a non-GAAP financial measure, provides investors with additional useful information in evaluating our performance. We define Adjusted EBITDA as net loss, adjusted to exclude: depreciation and amortization expense; income tax provision; interest and other, net; stock-based compensation expense; payroll tax expense on employee stock transactions; CEO Performance Award issuance expense; unoccupied lease expense; restructuring charges; acquisition revaluation expense; expenses associated with stockholder litigation; and other one-time, non-recurring items, when applicable.

Current wording

We report our financial results in accordance with generally accepted accounting principles, or GAAP. However, management believes that Adjusted EBITDA, a non-GAAP financial measure, provides investors with additional useful information in evaluating our performance. We define Adjusted EBITDA as net loss, adjusted to exclude: depreciation and amortization expense; income tax provision; interest and other, net; stock-based compensation expense; payroll tax expense on employee stock transactions; restructuring charges; acquisition revaluation expense; expenses associated with stockholder litigation; impairment of intangible asset and capitalized development; and other one-time, non-recurring items, when applicable.

Previous wording

The following table presents a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure stated in accordance with GAAP, for the periods presented:

Current wording

The following table presents a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure stated in accordance with GAAP, for the periods presented (in thousands):

Previous wording

We have financed operations primarily through customer payments and net proceeds from sales of equity securities, including our IPO in July 2021. As of December 31, 2023 and 2022, our principal sources of liquidity were cash and cash equivalents, totaling $159.6 million and $203.2 million, respectively. Cash equivalents include highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less. We believe our existing cash and cash equivalents will be sufficient to fund anticipated cash requirements for the next 12 months. We believe we will meet our longer-term expected future cash requirements primarily from a combination of cash flow from operating activities and available cash and cash equivalents. We may also engage in equity or debt financings to secure additional funds.

Current wording

We have financed operations primarily through customer payments and net proceeds from sales of equity securities, including our IPO in July 2021. As of December 31, 2024, our principal sources of liquidity were cash and cash equivalents and short-term investments, totaling $52.8 million and $76.4 million, respectively. Cash equivalents include highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less. Short-term investments consist of highly-rated U.S. Treasury securities with maturities of more than three months but less than one year at the date of purchase. We believe our existing cash and cash equivalents and short-term investments will be sufficient to fund anticipated cash requirements for the next 12 months. We believe we will meet our longer-term expected future cash requirements primarily from a combination of cash flow from operating activities and available cash and cash equivalents and short-term investments. We may also engage in equity or debt financings to secure additional funds.

Previous wording

c. Cloud platform purchase commitments encompass non-cancellable agreements to support our software. These expenses are incurred as services are performed and are in the normal course of business.

Current wording

We have contractual commitments consisting of operating and finance lease obligations of $10.2 million due over the next four years, as disclosed in Note 7, “Commitments and Contingencies,”in our consolidated financial statements of this Annual Report on Form 10-K. We also have $18.0 million of non-cancellable cloud platform purchase commitments due in less than one year to support our software. Other purchase commitments include non-cancellable software agreements to support our internal functions. Other purchase commitments are not material. Cloud platform and other purchase commitments are expensed as incurred as services are performed and are in the normal course of business.

Previous wording

Hamas wars, have not materially impacted our liquidity to date, we plan to continue to evaluate aspects of our spending, including capital expenditures, discretionary spending, and strategic investments throughout 2024. We have considered the impacts of these factors on our liquidity and capital resources to date, and we do not currently expect them to impact our ability to meet future liquidity needs.

Current wording

Our future capital requirements will depend on many factors, including our revenue growth rate, usage of our product offerings, billing frequency, the timing and extent of spending to support further sales and marketing and research and development efforts, and the continuing market acceptance of our product offerings. Although fluctuations in general macroeconomic conditions, including conditions resulting from fluctuations in inflation and interest rates, the potential imposition of tariffs in the United States and abroad, and the Russia-Ukraine war and conflict in the Middle East, have not materially impacted our liquidity to date, we plan to continue to evaluate aspects of our spending, including capital expenditures, discretionary spending, and strategic investments throughout 2025. We have considered the impacts of these factors on our liquidity and capital resources to date, and we do not currently expect them to impact our ability to meet future liquidity needs.

Previous wording

Net cash used in investing activities for the year ended December 31, 2023 was $20.0 million, an increase of $10.3 million from net cash used in investing activities of $9.7 million for the year ended December 31, 2022. The increase in cash used in investing activities was primarily related to the purchase of the primary law intangible asset from Fastcase, Inc. of $14.0 million to support new features in our product offerings. This increase was partially offset by a $4.1 million decrease in cash paid for the acquisition of legal workflow products from Congruity.

Current wording

Net cash used in investing activities for the year ended December 31, 2024 was $78.0 million, an increase of $58.0 million from net cash used in investing activities of $20.0 million for the year ended December 31, 2023. The change in cash used in investing activities was primarily related to purchases of short-term investments of $87.9 million. This increase in cash used was partially offset by maturities of short-term investments of $12.7 million and a reduction of purchases in property, equipment, and capitalized development costs of $2.1 million. This was further offset by cash paid in 2023 for the primary law intangible asset of $14.0 million and $1.2 million for the acquisition of legal workflow products from Congruity360, LLC (“Congruity”).

Previous wording

Net cash provided by financing activities for the year ended December 31, 2023 was $1.9 million, a decrease of $1.6 million from net cash provided by financing activities of $3.5 million for the year ended December 31, 2022. The change in cash flows was primarily related to a decrease in proceeds from exercises of stock options of $3.5 million due to an decrease in option exercise activity. This decrease was partially offset by net proceeds received from the issuance of common stock under the ESPP of $1.5 million.

Current wording

Net cash used in financing activities for the year ended December 31, 2024 was $20.0 million, a change of $21.9 million from net cash provided by financing activities of $1.9 million for the year ended December 31, 2023. The change in cash flows was primarily related to cash paid for the 2024 share repurchase program of $20.1 million, as well as $0.5 million in cash paid in 2024 for the acquisition of legal workflow products from Congruity. Additionally, there was a decrease in proceeds from exercises of stock options of $0.5 million due to a decrease in option exercise activity, and a decrease in net proceeds received from the issuance of common stock under the ESPP of $0.9 million.

Previous wording

We capitalize certain costs related to the development of our product offerings and other software applications for internal use. In accordance with authoritative guidance, we begin to capitalize our costs to develop software during the application development stage. Capitalization of costs begins when two criteria are met: (i) the preliminary development efforts are successfully completed, and (ii) it is probable that the project will be completed and the software will be used as intended. We stop capitalizing these costs when the software is substantially complete and ready for its intended use, including the completion of all significant testing. These costs are amortized on a straight-line basis over the estimated useful life of the related asset, generally estimated to be four years. We also capitalize costs related to specific upgrades and enhancements when it is probable the expenditure will result in additional functionality and expense costs incurred for maintenance and minor upgrades and enhancements. Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred and recorded within product development expenses in our consolidated statements of operations and comprehensive loss. The capitalization of software development contains uncertainties because it requires management to exercise judgment in determining the point at which various projects may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized. To the extent that we change the manner in which we develop and test new features and functionalities related to our product offerings, assess the ongoing value of capitalized assets or determine the estimated useful lives over which the costs are amortized, the amount of software development costs we capitalize and amortize could change in future periods.

Current wording

We capitalize certain costs related to the development of our product offerings and other software applications for internal use. In accordance with authoritative guidance, we begin to capitalize our costs to develop software during the application development stage. Capitalization of costs begins when two criteria are met: (i) the preliminary development efforts are successfully completed, and (ii) it is probable that the project will be completed and the software will be used as intended. We stop capitalizing these costs when the software is substantially complete and ready for its intended use, including the completion of all significant testing. These costs are amortized on a straight-line basis over the estimated useful life of the related asset, generally estimated to be four years. We also capitalize costs related to specific upgrades and enhancements when it is probable the expenditure will result in additional functionality and expense costs incurred for maintenance and minor upgrades and enhancements. Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred and recorded within research and development expenses in our consolidated statements of operations and comprehensive loss. The capitalization of software development contains uncertainties because it requires management to exercise judgment in determining the point at which various projects may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized. To the extent that we change the manner in which we develop and test new features and functionalities related to our product offerings, assess the ongoing value of capitalized assets or determine the estimated useful lives over which the costs are amortized, the amount of software development costs we capitalize and amortize could change in future periods.

Previous wording

On May 20, 2022, the Compensation Committee approved the CEO Performance Award to Kiwi Camara, the Company’s Co-Founder and who was then serving as the Chief Executive Officer, subject to approval of our stockholders at the 2022 Annual Meeting of Stockholders. The CEO Performance Award is a 10-year nonstatutory stock option, the vesting of which is tied solely to achieving stock price milestones. The milestone price requirement is considered a market condition under ASC Topic 718 Compensation - Stock Compensation. The grant date fair value of the CEO Performance Award was estimated using Monte Carlo simulations based on the following key assumptions:

Current wording

On May 20, 2022, the Compensation Committee approved the CEO Performance Award to Kiwi Camara, our Co-Founder who was then serving as the Chief Executive Officer, subject to approval of our stockholders at the 2022 Annual Meeting of Stockholders. The CEO Performance Award was a 10-year nonstatutory stock option, the vesting of which was tied solely to achieving stock price milestones. The milestone price requirement was considered a market condition under ASC Topic 718 Compensation - Stock Compensation. The grant date fair value of the CEO Performance Award was estimated using Monte Carlo simulations based on the following key assumptions:

Previous wording

•Fair value of the common stock. The fair value of our underlying common stock is determined by the closing price of our common stock on the date of grant, as reported by the NYSE.

Current wording

•Fair value of the common stock. The fair value of our underlying common stock was determined by the closing price of our common stock on the date of grant, as reported by the NYSE.

Previous wording

•Expected volatility. The expected volatility is derived from a weighted average of DISCO’s volatility and the historical volatilities of the common stock of several entities with characteristics similar to ours, such as the size and operational and economic similarities to our principle business operations.

Current wording

•Expected volatility. The expected volatility was derived from a weighted average of DISCO’s volatility and the historical volatilities of the common stock of several entities with characteristics similar to ours, such as the size and operational and economic similarities to our principle business operations.

Previous wording

•Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the expected term of the CEO Performance Award.

Current wording

•Risk-free interest rate. The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the expected term of the CEO Performance Award.

Previous wording

•Expected dividend. The expected dividend is assumed to be zero as we have never paid dividends and have no current plans to pay any dividends on our common stock.

Current wording

•Expected dividend. The expected dividend was assumed to be zero as we have never paid dividends and had no plans to pay any dividends on our common stock.

Previous wording

•Exercise behavior. The exercise behavior is assumed to be the midpoint of (i) the later of the time-based vest date and performance hurdle achievement date, and (ii) the expiration date.

Current wording

•Exercise behavior. The exercise behavior was assumed to be the midpoint of (i) the later of the time-based vest date and performance hurdle achievement date, and (ii) the expiration date.