Summary
DISCO reported fourth-quarter fiscal 2024 total revenue of $37.0 million, up 3.5% from the prior-year quarter. Gross profit was $27.5 million, up 1.5%. Gross margin slipped to 74.2%, down 1.4 percentage points. The operating loss widened to $26.1 million. Net loss widened to $25.2 million. The fourth-quarter loss included a non-cash impairment charge tied to the primary law intangible asset and related capitalized development, which pushed operating expenses higher. For the full fiscal year, revenue was $144.8 million, up 4.9%. Gross profit was $107.4 million, up 4.2%. The full-year operating loss was $61.7 million. The full-year net loss was $55.8 million. Full-year diluted EPS was -$0.93, down from the prior year. Full-year gross margin was 74.2%, down 0.5 percentage points. Full-year operating margin was -42.6%, down 6.5 percentage points.
Operational metrics showed some progress. DISCO ended 2024 with 315 large customers, up from 289 at the end of 2023. Total customers rose to 1,478 from 1,463. The dollar-based net retention rate was 96%, up from 92%. The company introduced Reproductions, which lets users re-run a production with updated settings, redactions, and document contents. It also added document-level Bates numbering. CEO Eric Friedrichsen said the customer-focused strategy and improving operational rigor are beginning to show results. Adjusted EBITDA was $(18.7) million for fiscal 2024, compared with $(25.9) million for fiscal 2023. Fourth-quarter Adjusted EBITDA was $(4.3) million, compared with $(1.0) million in the prior-year quarter.
Cash flow and backlog metrics were mixed. Operating cash flow was $2.1 million in the fourth quarter, down 34.2% from the prior-year quarter. For the full year, operating cash flow was -$8.7 million, an improvement of 65.7% from the prior year. Capital expenditures were $0.6 million in the fourth quarter, down 56.1% from the prior-year quarter. Full-year capital expenditures were $2.8 million, down 42.8% from the prior year. Deferred revenue was $4.3 million, flat versus the prior-year quarter. Remaining performance obligations were $27.3 million, up 12.3% from the prior-year quarter. The company used cash for a share repurchase program and an intangible asset purchase during the year.
DISCO issued guidance for the first quarter of 2025 and for the full fiscal year 2025. For the first quarter of 2025, Adjusted EBITDA is guided to $(8.0) million to $(6.0) million. For the full fiscal year 2025, Adjusted EBITDA is guided to $(19.0) million to $(15.0) million. The outlook also covers software revenue and total revenue for both periods. Management states that a forward-looking reconciliation of Adjusted EBITDA to net loss is not available without unreasonable efforts because of the variability of stock-based compensation and other charges.
Risks remain significant. DISCO has a history of operating losses and a limited operating history. Revenue depends on customer usage, which fluctuates with the timing and scope of legal matters. The company must add new customers, expand usage among existing customers, grow sales coverage, and extend channel partnerships. Competition, pricing pressure, and macroeconomic conditions, including inflation, interest rates, potential tariffs, the Russia-Ukraine war, and conflict in the Middle East, could affect customer spending. Data security and privacy breaches, international expansion, and acquisition integration are additional risks. The dollar-based net retention rate could decline as the customer base matures. The fourth-quarter impairment charge highlights the risk of capitalized development and acquired intangible assets.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2024 | Q3 FY2024 | QoQ | Q4 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $37.0M | $36.3M | +2.0% | $35.7M | +3.5% |
| Gross profit | $27.5M | $26.5M | +3.5% | $27.0M | +1.5% |
| Gross margin | 74.2% | 73.1% | +1.1 pp | 75.7% | -1.5 pp |
| Research & development | $13.8M | $12.8M | +8.1% | $10.5M | +31.0% |
| Sales & marketing | $15.1M | $15.0M | +0.6% | $14.3M | +5.4% |
| General & administrative | $9.5M | $9.7M | -1.5% | $9.9M | -3.8% |
| Total operating expenses | $53.6M | $37.4M | +43.3% | $34.7M | +54.3% |
| Operating income (loss) | -$26.1M | -$10.9M | -140.2% | -$7.7M | -240.4% |
| Operating margin | -70.6% | -30.0% | -40.6 pp | -21.5% | -49.1 pp |
| Net income (loss) | -$25.2M | -$9.2M | -175.2% | -$5.8M | -331.5% |
| Net margin | -68.1% | -25.3% | -42.9 pp | -16.3% | -51.8 pp |
| Diluted EPS | -$0.42 | -$0.15 | -$0.27 | -$0.70 | +$0.28 |
| Customers | 1,478 | — | — | 1,441 | +2.6% |
| Net retention rate | 96.0% | — | — | 92.0% | +4.0 pp |
Risks
The company has incorporated generative AI into its product offerings and internal operations, including its ediscovery chatbot Cecilia, and faces risks of flawed or inaccurate AI outputs, leakage of sensitive data, and additional compliance costs under laws such as the EU AI Act. If it cannot use AI/ML or that use is restricted, its business may be less efficient or at a competitive disadvantage.
A significant majority of revenue is usage-based and directly correlated with customers' usage of product offerings, which depends on the timing and activity of litigation, investigations and other legal matters. Operating results have fluctuated significantly with the inception and conclusion of large legal matters, and DISCO Review usage can materially impact quarter-to-quarter revenue fluctuations.
Revenue increased 4.9% year over year to $144.8 million for the year ended December 31, 2024, but the rate of revenue growth has declined from prior periods and may continue to decline due to maturation, competition, and other factors.
The company incurred net losses of $55.8 million and $42.2 million for the years ended December 31, 2024 and 2023, respectively, and had an accumulated deficit of $297.4 million as of December 31, 2024. It expects to continue incurring significant costs to support growth, making it harder to achieve or sustain profitability.
In the fourth quarter of 2024, the company recorded a $15.2 million non-cash impairment charge on its primary law intangible asset and related capitalized software development costs because integration was no longer probable of being completed. The fourth quarter operating loss widened to $26.1 million from $7.7 million in the prior-year quarter, and no such impairment charges were recorded in 2023.
The company processes highly sensitive and confidential legal documentation for law firm and non-law firm customers, and has been the target of unsuccessful phishing attempts in the past with such attempts expected to continue. A security incident could lead to government enforcement actions, litigation, loss of customers, and reputational harm.
The company hosts its platform and supports most operations using AWS, and AWS has no obligation to renew its agreements on commercially reasonable terms or at all. A transition to another cloud provider would be technically difficult, expensive, and time-consuming, and any disruption could cause customers to stop using the product offerings.
Unfavorable economic conditions, including fluctuations in inflation and interest rates, potential tariffs, and the Russia-Ukraine war and conflict in the Middle East, have led to global economic uncertainty. During periods of economic uncertainty, businesses may slow spending on information technology, which may impact the company and its customers.
The company is subject to stringent and evolving privacy and data protection laws, including the EU GDPR, UK GDPR, and CCPA, with potential fines of up to 20 million euros or 4% of annual global revenue under the GDPR. Cross-border data transfer restrictions could interrupt or degrade operations and require relocating data processing at significant expense.
Large customers, defined as customers with revenue in excess of $100,000 over the previous 12-month period, accounted for approximately 76% of revenue for the year ended December 31, 2024, up from 75% for 2023. The loss of one or more large customers could materially harm results.
The dollar-based net retention rate was 96% as of December 31, 2024, up from 92% as of December 31, 2023, but most customers do not have long-term contractual financial commitments and may reduce or cease use at any time. Revenue from existing customers decreased $4.6 million for the year ended December 31, 2024 due to decreases in usage by several existing customers.
A purported stockholder class action filed in September 2023 remains pending, and the company may be the target of additional securities litigation. Securities litigation could result in substantial costs and divert management's attention and resources from the business.
SaaS KPIs
All quarters →Adjusted EBITDA
Non-GAAP gross margin
Non-GAAP operating margin
Total Customers
Dollar-Based Net Retention Rate
Summary, forecast, risks and KPIs are extracted from CS Disco, Inc.'s SEC filings for Q4 FY2024 (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.