CS Disco, Inc.

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 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.

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 and six months ended June 30, 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 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.

Current wording

As of June 30, 2025, we had $21.7 million of cash and cash equivalents and $92.8 million of short-term investments. We generated revenue of $38.1 million and $36.0 million in the three months ended June 30, 2025 and 2024, respectively, representing a period-over-period growth of 6%, and $74.8 million and $71.6 million in the six months ended June 30, 2025 and 2024, respectively, representing a period-over-period growth of 4%. Our net loss was $10.8 million for each of the three months ended June 30, 2025 and 2024, and $22.2 million and $21.4 million for the six months ended June 30, 2025 and 2024, respectively.

Previous 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.

Current wording

We generated Adjusted EBITDA of $(2.7) million and $(4.7) million in the three months ended June 30, 2025 and 2024, respectively, and $(7.8) million and $(9.9) million in the six months ended June 30, 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

Further, unfavorable conditions in the legal industry may negatively affect the growth of our business and our results of operations. For example, in March 2025, President Trump issued executive orders against certain law firms with whom we partner, which could have the effect of restricting the ability of such firms to practice law in matters involving the federal government or under the jurisdiction of the federal court system. While we have not to date observed any adverse impact to our revenue from these law firm partners as a result of the executive orders, we cannot be certain that there will be no future adverse impact on our law firm partners’ usage of our product offerings or that our law firm partners’ clients will continue to engage such firms for their legal services. Additionally, under President Trump, certain federal agencies have decreased their levels of enforcement under President Trump, which could have the effect of reducing the volume of major legal matters experienced and, therefore, the usage of our product offerings.

Current wording

Further, unfavorable conditions in the legal industry may negatively affect the growth of our business and our results of operations. For example, in March 2025, President Trump issued executive orders against certain law firms with whom we partner, which could have the effect of restricting the ability of such firms to practice law in matters involving the federal government or under the jurisdiction of the federal court system. While we have not to date observed any adverse impact to our revenue from these law firm partners as a result of the executive orders, the validity of certain of these executive orders continues to be litigated in the federal court system and we cannot be certain that there will be no future adverse impact on our law firm partners’ usage of our product offerings or that our law firm partners’ clients will continue to engage such firms for their legal services. Additionally, under President Trump, certain federal agencies have decreased their levels of enforcement under President Trump, which could have the effect of reducing the volume of major legal matters experienced and, therefore, the usage of our product offerings.

Previous 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.

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 and six months ended June 30, 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 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.

Current wording

In the three and six months ended June 30, 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

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.

Current wording

Total revenue increased by $2.1 million, or 6%, for the three months ended June 30, 2025 compared to the same period in 2024. Revenue related to new customers added since June 30, 2024 contributed $4.4 million, which was offset by a $2.3 million decrease in revenue from customers that existed as of June 30, 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 $1.0 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.

Current wording

Revenue generated from our software product offerings increased by $3.5 million, or 12%, for the three months ended June 30, 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 decreased by $1.4 million, or 20%, for the three months ended June 30, 2025 compared to the same period in 2024. This change was driven by decreases in usage of our services product offerings within managed review.

Previous 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.

Current wording

Total cost of revenue increased by $0.4 million, or 4%, for the three months ended June 30, 2025 compared to the same period in 2024. This change was primarily driven by a $0.6 million increase in costs for cloud hosting as a result of increased usage of our software product offerings and a $0.4 million increase in salary and benefits costs. These changes were partially offset by a $0.7 million decrease in outsourced staffing vendor fees due to a decrease in managed review activity.

Previous 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.

Current wording

Research and development expenses increased by $1.1 million, or 8%, for the three months ended June 30, 2025 compared to the same period in 2024. The change was primarily driven by an increase of $1.5 million in personnel costs, including stock-based compensation, as a result of increased headcount, partially offset by a $0.4 million increase in capitalized software development.

Previous 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.

Current wording

Sales and marketing expenses decreased by $1.5 million, or 5%, for the six months ended June 30, 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, marketing expenses decreased $0.7 million.

Previous wording

General and administrative expenses decreased by $0.2 million, or 2%, for the three months ended March 31, 2025 compared to the same period in 2024. This change was primarily attributable to a decrease of $0.4 million and $0.3 million in professional services and insurance costs, respectively. These decreases were partially offset by a $0.5 million increase in personnel costs, including stock-based compensation, as a result of increased headcount.

Current wording

General and administrative expenses increased by $0.1 million, or 1%, for the six months ended June 30, 2025 compared to the same period in 2024. This change was primarily attributable to an increase of $0.6 million in personnel costs, including stock-based compensation, as a result of increased headcount, partially offset by a $0.5 million decrease in insurance expense.

Previous wording

Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Some of these limitations include that: (i) it does not properly reflect capital commitments to be paid in the future; (ii) although depreciation and amortization expense is a non-cash charge, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures; (iii) it does not consider the impact of stock-based compensation expense and payroll tax expense on employee stock transactions; (iv) it does not reflect other non-operating expenses, including interest expense; (v) it does not consider the impact of any contingent consideration liability valuation adjustments; and (vi) it does not reflect tax payments that may represent a reduction in cash available to us. In addition, our use of Adjusted EBITDA may not be comparable to similarly titled measures of other companies because they may not calculate Adjusted EBITDA in the same manner, limiting its usefulness as a comparative measure. Because of these limitations, when evaluating our performance, you should consider Adjusted EBITDA alongside other financial measures, including our net loss and other results stated in accordance with GAAP. We expect Adjusted EBITDA to improve over the long term as we achieve greater scale in our business and efficiencies in our operating expenses.

Current wording

Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Some of these limitations include that: (i) it does not properly reflect capital commitments to be paid in the future; (ii) although depreciation and amortization expense is a non-cash charge, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures; (iii) it does not consider the impact of stock-based compensation expense and payroll tax expense on employee stock transactions; (iv) it does not reflect other non-operating expenses, including interest expense; (v) it does not consider the impact of expenses associated with the stockholder litigation; and (vi) it does not reflect tax payments that may represent a reduction in cash available to us. In addition, our use of Adjusted EBITDA may not be comparable to similarly titled measures of other companies because they may not calculate Adjusted EBITDA in the same manner, limiting its usefulness as a comparative measure. Because of these limitations, when evaluating our performance, you should consider Adjusted EBITDA alongside other financial measures, including our net loss and other results stated in accordance with GAAP. We expect Adjusted EBITDA to improve over the long term as we achieve greater scale in our business and efficiencies in our operating expenses.

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 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.

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 June 30, 2025, our principal sources of liquidity were cash and cash equivalents and short-term investments, totaling $21.7 million and $92.8 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 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.

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 and industry 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 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.

Current wording

Net cash used in operating activities for the six months ended June 30, 2025 was $14.7 million, an increase of $6.7 million from net cash used in operating activities of $8.0 million for the six months ended June 30, 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 Six Months Ended June 30, 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 $2.4 million in the change in accounts receivable due to the timing of payments received from customers and a decrease of $1.7 million related to accretion income of short-term investments. In addition, there was a decrease of $1.3 million in the change in accounts payable and accrued expenses due to the timing of vendor payments and a $0.9 million decrease related to various prepaid expenses.

Previous 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.

Current wording

Net cash used in investing activities for the six months ended June 30, 2025 was $16.3 million, an increase of $14.9 million from net cash used in investing activities of $1.3 million for the six months ended June 30, 2024. The change in cash used in investing activities was primarily related to $91.9 million in purchases of short-term investments during the six months ended June 30, 2025. This was partially offset by an increase in maturities of short-term investments of $77.1 million during the six months ended June 30, 2025.

Previous 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.

Current wording

Net cash used in financing activities for the six months ended June 30, 2025 was $0.1 million, a decrease of $20.1 million from net cash used in financing activities of $20.2 million for the six months ended June 30, 2024. This decrease was primarily related to cash paid for the 2024 share repurchase program of $20.1 million.

Previous wording

Our condensed consolidated financial statements have been prepared in accordance with GAAP. The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors and adjust those estimates and assumptions when facts and circumstances dictate. Actual results could differ materially from those estimates and assumptions.

Current wording

Our unaudited condensed consolidated financial statements have been prepared in accordance with GAAP. The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors and adjust those estimates and assumptions when facts and circumstances dictate. Actual results could differ materially from those estimates and assumptions.

Previous wording

While our significant accounting policies are more fully described in Note 2, “Summary of Significant Accounting Policies,” in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the accounting policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

Current wording

While our significant accounting policies are more fully described in Note 2, “Summary of Significant Accounting Policies,” in the notes to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the accounting policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

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 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.

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 unaudited 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.

Previous wording

When we acquire a business, the purchase consideration is allocated to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated respective fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require us to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired technology, useful lives and discount rates. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to operating expense in the condensed consolidated statements of operations and comprehensive loss.

Current wording

When we acquire a business, the purchase consideration is allocated to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated respective fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require us to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired technology, useful lives and discount rates. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to operating expense in the unaudited condensed consolidated statements of operations and comprehensive loss.

Previous wording

See Recently Adopted Accounting Pronouncements in Note 2, “Summary of Significant Accounting Policies,” in our condensed consolidated financial statements of this Quarterly Report on Form 10-Q for more information.

Current wording

See Note 2, “Summary of Significant Accounting Policies - Accounting Pronouncements Not Yet Adopted,” in our unaudited condensed consolidated financial statements of this Quarterly Report on Form 10-Q for more information.