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 for the three and nine months ended September 30, 2024. 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 10% and 11% of our revenue for the three months ended March 31, 2025 and 2024, respectively. In addition, we generate revenue from a range of professional services aimed at accelerating the time-to-value for our customers.

Previous wording

As of September 30, 2024, we had $76.5 million of cash and cash equivalents and $50.2 million of short-term investments. We generated revenue of $36.3 million and $34.9 million in the three months ended September 30, 2024 and 2023, respectively, and $107.8 million and $102.3 million in the nine months ended September 30, 2024 and 2023, respectively, representing a period-over-period growth of 4% and 5%, respectively. Our net loss was $9.2 million and $1.0 million for the three months ended September 30, 2024 and 2023, respectively, and $30.6 million and $36.3 million for the nine months ended September 30, 2024 and 2023, respectively.

Current wording

As of March 31, 2025, we had $34.5 million of cash and cash equivalents and $84.3 million of short-term investments. We generated revenue of $36.7 million and $35.6 million in the three months ended March 31, 2025 and 2024, respectively, representing a period-over-period growth of 3%. Our net loss was $11.4 million and $10.6 million for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

We generated Adjusted EBITDA of $(4.5) million in each of the three months ended September 30, 2024 and 2023. We generated adjusted EBITDA of $(14.4) million and $(24.9) million in the nine months ended September 30, 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.

Current wording

We generated Adjusted EBITDA of $(5.1) million and $(5.2) million in the three months ended March 31, 2025 and 2024, 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 U.S. 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 U.S. 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 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

The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods. If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed. For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see the section titled “Risk Factors”.

Current wording

The effect of macroeconomic and legal industry conditions may not be fully reflected in our results of operations until future periods. If, however, economic uncertainty increases, the global economy worsens or unfavorable conditions in the legal industry persist or worsen, our business, financial condition and results of operations may be harmed. For further discussion of the potential impacts of macroeconomic events and legal industry conditions on our business, financial condition, and operating results, see the section titled “Risk Factors”.

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 in the third quarter of 2024 in Europe, and access to sources of primary law, which we acquired through our Fastcase license and intend to launch in 2025. 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 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.

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

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. 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. 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 intend to continue to enhance our sales force headcount in strategic locations across the U.S. and globally. Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training and retaining sufficient numbers of sales personnel to support our growth. We will need to spend significant resources to expand, retain and motivate our sales and marketing personnel.

Current wording

We intend to continue to enhance our sales force headcount in strategic locations across the United States and globally. Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training and retaining sufficient numbers of sales personnel to support our growth. We will need to spend significant resources to 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, was released in the fourth quarter of 2023 in the U.S. and the third quarter of 2024 in Europe. We also intend to offer our customers access to sources of primary law, which we acquired through our Fastcase license and intend to launch in 2025. 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 the three and nine months ended September 30, 2024, less than 10% of our revenue was generated by customers outside of the United States. We also 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 three months ended March 31, 2025, less than 10% of our revenue was generated by customers outside of the United States. Operationally, weexpect 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. In August 2023, the Company executed a licensing agreement with Fastcase, Inc. (“Fastcase”), whereby the Company received Fastcase’s library of U.S. case law, statutes, regulations and court rules (collectively “primary law”). The Company anticipates integrating primary law into its product offerings to automate drafting of legal documents and research memos and assist lawyers in identifying potential legal claims and defenses from new and historical case law, statutes, regulations and court rulings. 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

In the three months ended September 30, 2024 and 2023, usage-based revenue represented 89% of total revenue, and subscription revenue fees represented 11% of total revenue. In the nine months ended September 30, 2024 and 2023, usage-based revenue represented 89% and 88% of total revenue, respectively, and subscription revenue fees represented 11% and 12% of total revenue, respectively.

Current wording

In the three months ended March 31, 2025 and 2024, usage-based revenue represented 90% and 89% of total revenue, respectively, and subscription revenue fees represented 10% and 11% and of total revenue, respectively.

Previous wording

Research and development expenses consist primarily of personnel-related costs for our development team, including salaries, benefits, bonuses, stock-based compensation expenses and allocated overhead costs. Research and development expenses also include contractor or professional services fees and third-party cloud infrastructure expenses incurred in developing our product offerings. In the near term, we expect that our research and development expenses will increase in absolute dollars but may fluctuate as a percentage of our revenue over time. In addition, research and development expenses that qualify as capitalized software development costs are capitalized, the amount of which may fluctuate significantly from period to period.

Current wording

Research and development expenses consist primarily of personnel-related costs for our development team, including salaries, benefits, bonuses, stock-based compensation expenses and allocated overhead costs. Research and development expenses also include contractor or professional services fees and third-party cloud infrastructure expenses incurred in developing our product offerings. In the near term, we expect that our research and development expenses will remain relatively consistent in absolute dollars but may fluctuate as a percentage of our revenue over time. In addition, research and development expenses that qualify as capitalized software development costs are capitalized, the amount of which may fluctuate significantly from period to period.

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 increase 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 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.

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

Interest and other income, 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

Total revenue increased by $1.3 million, or 4%, for the three months ended September 30, 2024 compared to the same period in 2023. Revenue related to new customers added since September 30, 2023 contributed $4.5 million, which was offset by a $3.1 million decrease in revenue from customers that existed as of September 30, 2023. 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 $1.1 million, or 3%, for the three months ended March 31, 2025 compared to the same period in 2024. Revenue related to new customers added since March 31, 2024 contributed $4.5 million, which was offset by a $3.4 million decrease in revenue from customers that existed as of March 31, 2024. 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 $1.8 million, or 6%, for the three months ended September 30, 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 by $0.4 million, or 7%, for the three months ended September 30, 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.

Current wording

Revenue generated from our software product offerings increased by $1.0 million, or 3%, for the three months ended March 31, 2025 compared to the same period in 2024 due to increases in usage of our software product offerings. Revenue generated from our services product offerings increased by $0.1 million, or 2%, for the three months ended March 31, 2025 compared to the same period in 2024.

Previous wording

Total cost of revenue increased by $0.8 million, or 9%, for the three months ended September 30, 2024 compared to the same period in 2023. This change was primarily driven by a $0.4 million increase in costs for cloud hosting as a result of increased usage of our software product offerings and a $0.5 million increase in salary and benefits costs.

Current wording

Total cost of revenue increased by $0.7 million, or 7%, for the three months ended March 31, 2025 compared to the same period in 2024. This change was primarily driven by a $0.4 million increase in costs for cloud hosting as a result of increased usage of our software product offerings and a $0.2 million increase in salary and benefits costs.

Previous wording

Research and development expenses increased by $0.7 million, or 6%, for the three months ended September 30, 2024 compared to the same period in 2023. The change was primarily driven by an increase of $0.5 million in personnel costs, including stock-based compensation, as a result of increased headcount.

Current wording

Research and development expenses increased by $2.2 million, or 18%, for the three months ended March 31, 2025 compared to the same period in 2024. The change was primarily driven by an increase of $1.9 million in personnel costs, including stock-based compensation, as a result of increased headcount, and a $0.2 million decrease in capitalized software development.

Previous wording

Sales and marketing expenses decreased by $1.7 million, or 10%, for the three months ended September 30, 2024 compared to the same period in 2023. The change was primarily related to a decrease of $1.0 million in personnel costs, including stock-based compensation and variable compensation, for our sales personnel as a result of decreased headcount. In addition, $0.7 million of the decrease was due to a decrease in marketing and advertising spend.

Current wording

Sales and marketing expenses decreased by $1.3 million, or 8%, for the three months ended March 31, 2025 compared to the same period in 2024. The change was primarily related to a decrease of $0.8 million in personnel costs, including stock-based compensation and variable compensation, for our sales personnel as a result of decreased headcount. In addition, $0.5 million of the decrease was due to a decrease in marketing expenses.

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; restructuring charges; 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; expenses associated with stockholder litigation; and other one-time, non-recurring items, when applicable.

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 September 30, 2024, our principal sources of liquidity were cash and cash equivalents and short-term investments, totaling $76.5 million and $50.2 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. 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.

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 March 31, 2025, our principal sources of liquidity were cash and cash equivalents and short-term investments, totaling $34.5 million and $84.3 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 and corporate debt 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

Our principal cash requirements consist of obligations under our operating leases and purchase commitments to our cloud hosting providers and other vendors. There were no changes in our material cash requirements during the nine months ended September 30, 2024 from the material cash requirements disclosed in our Annual Report on Form 10-K.

Current wording

Our principal cash requirements consist of obligations under our operating leases and purchase commitments to our cloud hosting providers and other vendors. There were no changes in our material cash requirements during the three months ended March 31, 2025 from the material cash requirements disclosed in our Annual Report on Form 10-K.

Previous 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, such as the current inflationary environment, rising interest rates and the Russia-Ukraine and Israel-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 imposition of tariffs in the United States and abroad, the Russia-Ukraine war and conflict in the Middle East, and the executive orders issued by President Trump, 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 operating activities for the nine months ended September 30, 2024 was $10.8 million, a decrease of $17.9 million from net cash used in operating activities of $28.7 million for the nine months ended September 30, 2023. The change in cash flow used in operations was primarily due to a decrease in net loss of $5.7 million. Fluctuations in net loss are further explained in the Comparison of the Nine Months Ended September 30, 2024 and 2023 section included elsewhere in Management’s Discussion and Analysis. The decrease in cash used in operating activities was also due to a $7.1 million decrease in accounts receivable related to increased collections from customers, and an increase in stock-based compensation of $5.7 million primarily related to the cancellation of the CEO Performance Award in 2023. Additionally, there was a decrease in accounts payable and accrued expenses of $0.9 million, and an increase in other current assets of $0.3 million related to various prepaid expenses.

Current wording

Net cash used in operating activities for the three months ended March 31, 2025 was $10.5 million, an increase of $3.2 million from net cash used in operating activities of $7.3 million for the three months ended March 31, 2024. The change in cash flow used in operations was partially due to an increase in net loss of $0.8 million. Fluctuations in net loss are further explained in the Comparison of the Three Months Ended March 31, 2025 and 2024 section included elsewhere in Management’s Discussion and Analysis. The change in cash flow used in operations was also caused by a decrease of $1.7 million in the change in accounts receivable due to the timing of payments received from customers and a decrease of $0.8 million related to accretion income of short-term investments. These changes were partially offset by an increase of $0.4 million related to deferred revenue due to the timing of billings and deposits received from customers prior to the recognition of revenue from those related payments.

Previous wording

Net cash used in investing activities for the nine months ended September 30, 2024 was $52.2 million, an increase of $33.4 million from net cash used in investing activities of $18.8 million for the nine months ended September 30, 2023. The change in cash used in investing activities was primarily related a $49.9 million purchase of short-term investments. This was partially offset by a decrease in the cash paid for the purchase of the primary law intangible asset of $14.0 million. Additionally, there was a $1.2 million decrease in cash paid for the acquisition of legal workflow products from Congruity and a $1.4 million decrease of purchases of property, equipment and capitalized software development costs.

Current wording

Net cash used in investing activities for the three months ended March 31, 2025 was $7.7 million, an increase of $7.0 million from net cash used in investing activities of $0.7 million for the three months ended March 31, 2024. The change in cash used in investing activities was primarily related to $45.4 million in purchases of short-term investments during the three months ended March 31, 2025. This was partially offset by an increase in maturities of investments of $38.3 million during the three months ended March 31, 2025.

Previous wording

Net cash used in financing activities for the nine months ended September 30, 2024 was $20.0 million, a change of $21.9 million from net cash provided by financing activities of $1.9 million for the nine months September 30, 2023. The change in cash flows was primarily related to an increase in cash paid for the 2024 share repurchase program of $20.1 million, as well as a $0.5 million increase in cash paid 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.

Current wording

Net cash used in financing activities for the three months ended March 31, 2025 was $0.1 million, a decrease of $2.8 million from net cash used in financing activities of $2.9 million for the three months March 31, 2024. This decrease was primarily related to cash paid for the 2024 share repurchase program of $2.7 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 condensed 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 condensed 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.