Summary
DISCO reported first quarter 2025 total revenue of $36.65 million, up 3.0% from $35.57 million in the first quarter of 2024. Gross profit rose 1.6% to $27.15 million from $26.72 million. Gross margin slipped to 74.1% from 75.1%. The company remained unprofitable. Operating loss widened to $12.61 million from $12.33 million. Net loss widened to $11.39 million from $10.58 million. Diluted EPS loss widened to negative $0.19 from negative $0.17. Operating margin was negative 34.4%, compared with negative 34.7%.
Cash generation weakened. Operating cash flow was negative $10.50 million, down 43.2% from negative $7.33 million. Capital expenditures were $0.52 million, down 23.7% from $0.69 million. Deferred revenue, current portion, rose 11.5% to $3.90 million from $3.50 million. Remaining performance obligations rose 31.6% to $27.90 million from $21.20 million. Adjusted EBITDA was negative $5.1 million, compared with negative $5.2 million in the first quarter of 2024. The company ended the quarter with $34.5 million of cash and cash equivalents and $84.3 million of short-term investments.
Operating expenses moved in different directions. Research and development increased on higher personnel costs and lower capitalized software development. Sales and marketing fell on lower personnel costs and marketing spend. General and administrative fell on lower professional services and insurance costs, partly offset by higher personnel costs. Cost of revenue rose on higher cloud hosting and salary and benefits costs. Management said revenue growth came from new customers added since March 31, 2024, partly offset by lower usage from customers that existed as of March 31, 2024. Usage-based revenue represented 90% of total revenue in the quarter, and subscription fees represented 10%. DISCO was named a G2 2025 award winner in the Best Legal Software Products category. Tom Bogan joined the Board of Directors in March 2025. The company introduced Cecilia Definitions, a feature that generates on-demand definitions for selected text to speed comprehension and analysis.
For the second quarter of 2025, management issued an outlook for total revenue and software revenue and guided Adjusted EBITDA to negative $5.5 million to negative $3.5 million. For fiscal year 2025, management increased its outlook and guided Adjusted EBITDA to negative $18.0 million to negative $15.0 million. The company said the outlook rests on assumptions subject to change, many outside its control. It also said a reconciliation of forward-looking Adjusted EBITDA to net loss is not available without unreasonable efforts because of high variability and low visibility into charges such as stock-based compensation.
The filing lists several risks. DISCO has a history of operating losses and a limited operating history. Revenue depends on customer usage, which fluctuates with the timing and activity of legal matters. Fewer large matters on the platform could hurt results. Competition, the ability to add customers, expand sales coverage, grow the partner ecosystem, and expand internationally are named risks. Macroeconomic conditions include inflation, interest rates, tariffs, the Russia-Ukraine war, and conflict in the Middle East. In March 2025, President Trump issued executive orders against certain law firms with whom DISCO partners, which could restrict those firms' ability to practice law in matters involving the federal government or federal courts. Federal agencies have also decreased enforcement, which could reduce major legal matters and usage. The company said it has not observed adverse revenue impact from these orders to date, but cannot be certain about future impact. Security and data privacy breaches are also cited. The company believes its existing cash and cash equivalents and short-term investments will be sufficient to fund anticipated cash requirements for the next 12 months.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2025 | Q4 FY2024 | QoQ | Q1 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $36.7M | $37.0M | -0.9% | $35.6M | +3.0% |
| Gross profit | $27.1M | $27.5M | -1.1% | $26.7M | +1.6% |
| Gross margin | 74.1% | 74.2% | -0.2 pp | 75.1% | -1.0 pp |
| Research & development | $14.3M | $13.8M | +3.4% | $12.1M | +18.0% |
| Sales & marketing | $14.5M | $15.1M | -3.7% | $15.8M | -8.1% |
| General & administrative | $11.0M | $9.5M | +15.4% | $11.2M | -1.7% |
| Total operating expenses | $39.8M | $53.6M | -25.8% | $39.1M | +1.8% |
| Operating income (loss) | -$12.6M | -$26.1M | +51.7% | -$12.3M | -2.3% |
| Operating margin | -34.4% | -70.6% | +36.2 pp | -34.7% | +0.3 pp |
| Net income (loss) | -$11.4M | -$25.2M | +54.8% | -$10.6M | -7.7% |
| Net margin | -31.1% | -68.1% | +37.0 pp | -29.8% | -1.3 pp |
| Diluted EPS | -$0.19 | -$0.42 | +$0.23 | -$0.17 | -$0.02 |
Risks
In March 2025, President Trump issued executive orders against certain law firms with whom we partner, and certain federal agencies have decreased enforcement, which could reduce the volume of major legal matters and usage of our product offerings. We have not observed an adverse revenue impact to date, but future impact is uncertain.
Substantially all revenue comes from customer usage, and most customers have no long-term contractual commitments and can reduce or cancel usage at any time. In Q1 2025, revenue rose 3.0% to $36.65 million as $4.5 million from new customers was offset by a $3.4 million decrease from existing customers due to lower usage.
We have a history of operating losses and an accumulated deficit of $308.8 million as of March 31, 2025. Net loss widened 7.7% to $11.39 million in Q1 2025, and operating cash flow used $10.50 million, down 43.2% from the prior-year quarter.
Our revenue growth rate has declined from prior periods and may continue to decline. Q1 2025 revenue increased 3.0% year over year to $36.65 million, and quarterly revenue within individual product offerings has fluctuated.
We have incorporated generative AI into our products and operations, which may lead to operational challenges, legal liability, reputational harm and competitive risks, including leakage of sensitive data, flawed outputs, and compliance with evolving laws such as the EU AI Act.
We process highly sensitive legal documentation for law firm and non-law firm customers, and a security incident could lead to government enforcement, litigation, loss of customers, and contractual liability, with some customer agreements not limiting remediation costs.
A purported stockholder class action filed in September 2023 remains pending, and we may face additional securities litigation, which could result in substantial costs and divert management attention.
We rely on AWS to host our platform, and any disruption, capacity limitation, or material change to our arrangement with AWS could interrupt our product offerings and harm our business. Cost of revenue increased 7% in Q1 2025, driven in part by a $0.4 million increase in cloud hosting costs.
Sales and marketing expenses decreased 8% in Q1 2025 due to lower sales headcount, while our ability to attract new customers depends on expanding, retaining and motivating sales personnel.
We are subject to stringent and evolving privacy and data protection laws, including GDPR and CCPA, with potential fines up to 4% of annual global revenue under GDPR and cross-border transfer restrictions that could disrupt operations.
SaaS KPIs
All quarters →Adjusted EBITDA
Non-GAAP gross margin
Non-GAAP operating margin
Adjusted EBITDA margin
Summary, forecast, risks and KPIs are extracted from CS Disco, Inc.'s SEC filings for Q1 FY2025 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.