CS Disco Announces Second Quarter 2021 Financial Results

Total Revenue of $29.5 Million, an Increase of 88% Versus Prior Year

AUSTIN, Texas–(BUSINESS WIRE)–CS Disco, Inc. (“DISCO”) (NYSE: LAW) today announced financial results for its second quarter ended June 30, 2021.

“We continue to be inspired by the market’s belief in our mission to use technology to strengthen the rule of law. In the second quarter, our first quarter reported as a public company, strong execution and continued adoption of DISCO solutions drove total revenue growth of 88% year over year,” said Kiwi Camara, CEO of DISCO. “Our clients are experiencing how our full-stack, cloud-native solution reduces legal costs, increases lawyer productivity and improves legal outcomes.”

Second Quarter Financial Highlights:

  • Total revenue was $29.5 million, up 88% compared to the second quarter of 2020.
  • GAAP net loss was $3.1 million, compared to $5.5 million in the second quarter of 2020.
  • Adjusted EBITDA was ($1.6) million, compared to ($4.4) million in the second quarter of 2020.

Recent Business Highlights:

  • Completed Initial Public Offering: DISCO completed its initial public offering on the New York Stock Exchange on July 21, 2021 resulting in net proceeds of approximately $223.2 million to DISCO after deducting underwriting discounts and commissions.
  • Forbes Cloud 100: For the second year in a row, DISCO was recognized as the only ediscovery company on the Forbes Cloud 100 – the definitive ranking of the top 100 private cloud companies in the world.

Third Quarter and Full Year 2021 Financial Outlook

As of September 2, 2021, DISCO is issuing the following outlook for the third quarter of 2021 and fiscal year 2021:

Third quarter of 2021:

  • Revenue in the range of $25.5 – $25.9 million, representing year-over-year growth between 43% and 45%.
  • Adjusted EBITDA in the range of ($11.1) – ($10.3) million.

Fiscal year 2021:

  • Revenue in the range of $103.5 – $104.3 million, representing year-over-year growth between 51% and 52%.
  • Adjusted EBITDA in the range of ($24.0) – ($22.9) million.

DISCO’s third quarter and 2021 financial outlook is based on a number of assumptions that are subject to change and many of which are outside of our control. If actual results vary from these assumptions, our expectations may change. There can be no assurance that we will achieve these results.

Reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to the charges excluded from this non-GAAP measure; in particular, the effects of stock-based compensation expense specific to equity compensation awards that are directly impacted by unpredictable fluctuations in our stock price. We expect the variability of the above charges to have a significant, and potentially unpredictable, impact on our future GAAP financial results.

Conference Call Information

DISCO will host a conference call and webcast at 4:00 p.m. CT (5:00 p.m. ET) today, September 2, 2021 to discuss its second quarter 2021 financial results and business highlights. The conference call can be accessed by dialing (844) 200-6205 from the United States or +44 20-8068-2558 internationally with access code 481150. The live webcast of the conference call and other materials related to DISCO’s financial performance can be accessed from DISCO’s investor relations website at ir.csdisco.com.

Following the completion of the call until 2:00 p.m. CT (3:00 p.m. ET) on Thursday, September 23, 2021, a telephone replay will be available by dialing (845) 709-8569 from the United States, 020-3936-3001 from the United Kingdom, or +44 20-3936-3001 in all other locations with access code 532376. A webcast replay will also be available at ir.csdisco.com for 12 months.

About DISCO

DISCO (NYSE: LAW) provides a cloud-native, artificial intelligence-powered legal solution that simplifies ediscovery, legal document review and case management for enterprises, law firms, legal services providers and governments. Our scalable, integrated solution enables legal departments to easily collect, process and review enterprise data that is relevant or potentially relevant to legal matters.

References to “DISCO”, the “Company,” “our,” or “we” in this press release refer to CS Disco, Inc. and its subsidiaries on a consolidated basis.

Use of Non-GAAP Financial Measures

DISCO uses the following non-GAAP financial measures: Adjusted EBITDA, non-GAAP cost of revenue; non-GAAP gross profit; non-GAAP gross margin; non-GAAP research and development expense; non-GAAP sales and marketing expense; non-GAAP general and administrative expense; non-GAAP loss from operations; non-GAAP net loss attributable to common stockholders; and non-GAAP net loss attributable to common stockholders per share (basic and diluted). Management believes that these non-GAAP financial measures are useful measures of operating performance because they exclude items that DISCO does not consider indicative of its core performance.

In the case of Adjusted EBITDA, DISCO adjusts net loss for such items as depreciation and amortization expense, provision for income taxes, interest and other, net, stock-based compensation expense and other one-time, non-recurring items, when applicable. In the case of non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses (research and development expense, sales and marketing, general and administrative), non-GAAP loss from operations, non-GAAP net loss attributable to common stockholders, and non-GAAP net loss attributable to common stockholders per share, DISCO adjusts the respective GAAP balances for stock-based compensation expense.

There are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies. Certain items that are excluded from these non-GAAP financial measures can have a material impact on operating loss and net loss. As a result, these non-GAAP financial measures have limitations and should be considered in addition to, not as a substitute for or superior to, the closest GAAP measures, or other financial measures prepared in accordance with GAAP.

DISCO’s management uses these non-GAAP measures as measures of operating performance; to prepare DISCO’s annual operating budget; to allocate resources to enhance the financial performance of DISCO’s business; to evaluate the effectiveness of DISCO’s business strategies; to provide consistency and comparability with past financial performance; to facilitate a comparison of DISCO’s results with those of other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and in communication with our board of directors concerning DISCO’s financial performance.

Forward-Looking Statements

This press release contains forward-looking statements, including, among other things, statements regarding DISCO’s future financial performance. Words such as “may,” “should,” “will,” “believe,” “expect,” “anticipate,” “target,” “project,” and similar phrases that denote future expectation or intent regarding DISCO’s financial results, operations, and other matters are intended to identify forward-looking statements. You should not rely upon forward-looking statements as predictions of future events.

The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties, and other factors that may cause DISCO’s actual results, performance, or achievements to differ materially, including (i) our history of operating losses, (ii) our limited operating history, (iii) our ability to maintain and advance our innovation and brand; (iv) our ability to effectively add new customers; (v) our ability to effectively increase usage and penetration with our existing customer base; (vi) our ability to expand our sales coverage and establish a digital sales channel; (vii) DISCO’s ability to expand internationally; (viii) our ability to extend and strengthen our channel partnerships and integrations; (ix) our ability to expand our offering portfolio to a wider range of legal processes outside of our current core offerings; (x) our ability to pursue strategic acquisitions and strategic investments to expand the functionality and value of our solution; (xi) our ability to comply or remain in compliance with laws and regulations that currently apply or become applicable to our business in the jurisdictions in which it operates; (xii) the potential that our computer or electronic systems, applications or services, or those of any third parties on whom we depend, fail or suffer security or data privacy breaches or other unauthorized or improper access to, use of, or destruction of our proprietary or confidential data, employee data, or personal data; (xiii) our ability to compete effectively with existing competitors and new market entrants; (xiv) general market, political, economic, and business conditions; and (xv) the impact that the ongoing COVID-19 pandemic and any related economic downturn could have on our or our customers’ businesses, financial condition and results of operations.

The forward-looking statements contained in this press release are also subject to additional risks, uncertainties, and factors, including those more fully described in our filings with the Securities and Exchange Commission (“SEC”), including our final prospectus filed with the SEC pursuant to Rule 424(b) of the Securities Act of 1933 on July 22, 2021. Further information on potential risks that could affect actual results will be included in the subsequent periodic and current reports and other filings that we make with the SEC from time to time, including our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021.

Forward-looking statements represent DISCO’s management’s beliefs and assumptions only as of the date such statements are made. We undertake no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law.

CS DISCO, INC.

Consolidated Balance Sheets

(in thousands)

(unaudited)

 

June 30,
2021

 

December31,

2020

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

47,026

 

 

$

58,569

 

Accounts receivable, net

21,195

 

 

12,912

 

Other current assets

4,329

 

 

1,364

 

Total current assets

72,550

 

 

72,845

 

Property and equipment, net

4,494

 

 

3,873

 

Operating lease right-of-use assets

1,364

 

 

1,850

 

Other assets

501

 

 

539

 

Total assets

$

78,909

 

 

$

79,107

 

Liabilities, redeemable convertible preferred stock, and stockholders’ deficit

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

6,144

 

 

$

3,588

 

Accrued expenses

2,800

 

 

641

 

Accrued salary and benefits

4,858

 

 

5,240

 

Deferred revenue

1,489

 

 

1,642

 

Operating leases

1,045

 

 

1,018

 

Finance lease

116

 

 

112

 

Total current liabilities

16,452

 

 

12,241

 

Operating lease, noncurrent

361

 

 

890

 

Finance lease, noncurrent

40

 

 

99

 

Total liabilities

16,853

 

 

13,230

 

Commitments and contingencies

 

 

 

Redeemable convertible preferred stock

160,851

 

 

160,800

 

Stockholders’ deficit

 

 

 

Common stock

71

 

 

68

 

Additional paid-in capital

10,265

 

 

8,129

 

Accumulated deficit

(109,131)

 

 

(103,120)

 

Total stockholders’ deficit

(98,795)

 

 

(94,923)

 

Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit

$

78,909

 

 

$

79,107

 

CS DISCO, INC.

 

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share amounts)

(unaudited)

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2021

 

2020

 

2021

 

2020

Revenue

$

29,547

 

 

$

15,727

 

 

$

50,678

 

 

$

31,395

 

Cost of revenue

8,695

 

 

4,509

 

 

14,483

 

 

9,580

 

Gross profit

20,852

 

 

11,218

 

 

36,195

 

 

21,815

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

7,861

 

 

6,215

 

 

14,123

 

 

14,418

 

Sales and marketing

10,832

 

 

7,170

 

 

18,708

 

 

16,492

 

General and administrative

5,128

 

 

3,143

 

 

9,182

 

 

7,403

 

Total operating expenses

23,821

 

 

16,528

 

 

42,013

 

 

38,313

 

Loss from operations

(2,969)

 

 

(5,310)

 

 

(5,818)

 

 

(16,498)

 

Other income (expense)

 

 

 

 

 

 

 

Interest and other income

21

 

 

15

 

 

34

 

 

79

 

Interest and other expense

(92)

 

 

(161)

 

 

(148)

 

 

(249)

 

Loss from operations before income taxes

(3,040)

 

 

(5,456)

 

 

(5,932)

 

 

(16,668)

 

Income tax provision

(43)

 

 

(20)

 

 

(79)

 

 

(45)

 

Net loss

$

(3,083)

 

 

$

(5,476)

 

 

$

(6,011)

 

 

$

(16,713)

 

Less accretion of redeemable convertible preferred stock

(25)

 

 

(22)

 

 

(51)

 

 

(45)

 

Net loss attributable to common stockholders

$

(3,108)

 

 

$

(5,498)

 

 

$

(6,062)

 

 

$

(16,758)

 

Net loss per share attributable to common stockholders, basic and diluted

$

(0.23)

 

 

$

(0.42)

 

 

$

(0.45)

 

 

$

(1.28)

 

Weighted-average shares used in computing net loss

per share attributable to common stockholders, basic and

diluted

13,636

 

 

13,121

 

 

13,513

 

 

13,110

 

CS DISCO, INC.

 

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

Six Months Ended
June 30,

 

2021

 

2020

Cash flow from operating activities:

 

 

 

Net loss

$

(6,011)

 

 

$

(16,713)

 

Adjustments to reconcile net loss to cash used in operations:

 

 

 

Depreciation and amortization

830

 

 

799

 

Stock-based compensation

1,454

 

 

992

 

Charge to allowance for credit losses

251

 

 

250

 

Non-cash operating lease costs

487

 

 

719

 

Non-cash interest

41

 

 

18

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

(8,534)

 

 

(1,521)

 

Other current assets

(819)

 

 

342

 

Other long-term assets

 

 

(5)

 

Accounts payable

1,513

 

 

893

 

Accrued expenses and other

1,268

 

 

(49)

 

Deferred revenue

(153)

 

 

(79)

 

Operating lease liabilities

(502)

 

 

(760)

 

Net cash used in operating activities

(10,175)

 

 

(15,114)

 

Cash flow from investing activities:

 

 

 

Purchases of property, equipment and capitalized internal-use software development costs

(1,447)

 

 

(994)

 

Net cash used in investing activities

(1,447)

 

 

(994)

 

Cash flow from financing activities:

 

 

 

Proceeds from debt

 

 

23,302

 

Repayment of debt

 

 

(6,302)

 

Payments for public offering costs

(594)

 

 

 

Proceeds from exercise of stock options

835

 

 

16

 

Repurchase of common stock related to net share settlement

(107)

 

 

(58)

 

Principal payments on finance lease obligations

(55)

 

 

(52)

 

Net cash provided by financing activities

79

 

 

16,906

 

Increase in cash:

(11,543)

 

 

798

 

Cash & cash equivalents at beginning of period

58,569

 

 

23,224

 

Cash & cash equivalents at end of period

$

47,026

 

 

$

24,022

 

Supplemental disclosure:

 

 

 

Cash paid for interest

$

39

 

 

$

148

 

Cash paid for taxes

57

 

 

34

 

Non-cash investing and financing activities:

 

 

 

Accretion of preferred stock to redemption value

$

51

 

 

$

45

 

Costs related to initial public offering included in accounts payable and accrued liabilities

1,550

 

 

 

CS DISCO, INC.

 

Reconciliation from GAAP to Non-GAAP Results

(in thousands, except for percentages and per share amounts)

(unaudited)

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net loss

 

$

(3,083

)

 

$

(5,476

)

 

$

(6,011

)

 

$

(16,713

)

Depreciation and amortization expense

 

 

406

 

 

 

421

 

 

 

830

 

 

 

799

 

Provision for income taxes

 

 

43

 

 

 

20

 

 

 

79

 

 

 

45

 

Interest and other, net

 

 

71

 

 

 

146

 

 

 

114

 

 

 

170

 

Stock-based compensation expense

 

 

966

 

 

 

504

 

 

 

1,454

 

 

 

992

 

Adjusted EBITDA

 

$

(1,597

)

 

$

(4,385

)

 

$

(3,534

)

 

$

(14,707

)

Adjusted EBITDA margin

 

 

(5

)%

 

 

(28

)%

 

 

(7

)%

 

 

(47

)%

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Cost of revenue

 

$

8,695

 

 

$

4,509

 

 

$

14,483

 

 

$

9,580

 

Non-GAAP adjustments:

 

 

   

 

 

 

Stock-based compensation expense

 

 

(10

)

 

 

(7

)

 

 

(18

)

 

 

(13

)

Non-GAAP cost of revenue

 

$

8,685

 

 

$

4,502

 

 

$

14,465

 

 

$

9,567

 

Non-GAAP gross profit

 

$

20,862

 

 

$

11,225

 

 

$

36,213

 

 

$

21,828

 

Non-GAAP gross margin

 

 

71

%

 

 

71

%

 

 

71

%

 

 

70

%

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Research and development

 

$

7,861

 

 

$

6,215

 

 

$

14,123

 

 

$

14,418

 

Non-GAAP adjustments:

   

 

 

 

 

 

Stock-based compensation expense

 

(285

)

 

 

(217

)

 

 

(486

)

 

 

(439

)

Non-GAAP research and development

 

$

7,576

 

 

$

5,998

 

 

$

13,637

 

 

$

13,979

 

Non-GAAP research and development as a % of revenue

 

26

%

 

 

38

%

 

 

27

%

 

 

45

%

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Sales and marketing

 

$

10,832

 

 

$

7,170

 

 

$

18,708

 

 

$

16,492

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

(235

)

 

 

(88

)

 

 

(318

)

 

 

(158

)

Non-GAAP sales and marketing

 

$

10,597

 

 

$

7,082

 

 

$

18,390

 

 

$

16,334

 

Non-GAAP sales and marketing as a % of revenue

 

 

36

%

 

 

45

%

 

 

36

%

 

 

52

%

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

General and administrative

  $

5,128

 

  $

3,143

 

  $

9,182

 

 

$

7,403

 

Non-GAAP adjustments:

       

 

Stock-based compensation expense

 

(436

)

 

(192

)

 

(632

)

 

 

(382

)

Non-GAAP general and administrative

  $

4,692

 

  $

2,951

 

  $

8,550

 

 

$

7,021

 

Non-GAAP general and administrative as a % of revenue

 

16

%

 

19

%

 

17

%

 

 

22

%

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Loss from operations

  $

(2,969

)

  $

(5,310

)

  $

(5,818

)

 

$

(16,498

)

Operating margin

 

(10

)%

 

(34

)%

 

(11

) %

 

 

(53

)%

Non-GAAP adjustments:

     

 

 

 

Stock-based compensation expense

 

966

 

 

504

 

 

1,454

 

 

 

992

 

Non-GAAP loss from operations

  $

(2,003

)

  $

(4,806

)

  $

(4,364

)

 

$

(15,506

)

Non-GAAP operating margin

 

(7

)%

 

(31

)%

 

(9

)%

 

 

(49

)%

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net loss attributable to common stockholders

 

$

(3,108

)

 

$

(5,498

)

 

$

(6,062

)

 

$

(16,758

)

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

966

 

 

 

504

 

 

 

1,454

 

 

 

992

 

Non-GAAP net loss attributable to common stockholders

 

$

(2,142

)

 

$

(4,994

)

 

$

(4,608

)

 

$

(15,766

)

Non-GAAP net loss per share

 

$

(0.16

)

 

$

(0.38

)

 

$

(0.34

)

 

$

(1.20

)

Weighted average shares used to compute basic and diluted

net loss per share

 

 

13,636

 

 

 

13,121

 

 

 

13,513

 

 

 

13,110

 

Non-GAAP income attributable to common stockholders

as a % of revenue

 

 

(7

)%

 

 

(32

)%

 

 

(9

)%

 

 

(50

)%

 

Contacts

Investor Relations Contact

April Scee

ICR for DISCO

IR@csdisco.com
(646) 277-1219

CS Disco Announces Second Quarter 2021 Financial Results

Total Revenue of $29.5 Million, an Increase of 88% Versus Prior Year

AUSTIN, Texas–(BUSINESS WIRE)–CS Disco, Inc. (“DISCO”) (NYSE: LAW) today announced financial results for its second quarter ended June 30, 2021.

“We continue to be inspired by the market’s belief in our mission to use technology to strengthen the rule of law. In the second quarter, our first quarter reported as a public company, strong execution and continued adoption of DISCO solutions drove total revenue growth of 88% year over year,” said Kiwi Camara, CEO of DISCO. “Our clients are experiencing how our full-stack, cloud-native solution reduces legal costs, increases lawyer productivity and improves legal outcomes.”

Second Quarter Financial Highlights:

  • Total revenue was $29.5 million, up 88% compared to the second quarter of 2020.
  • GAAP net loss was $3.1 million, compared to $5.5 million in the second quarter of 2020.
  • Adjusted EBITDA was ($1.6) million, compared to ($4.4) million in the second quarter of 2020.

Recent Business Highlights:

  • Completed Initial Public Offering: DISCO completed its initial public offering on the New York Stock Exchange on July 21, 2021 resulting in net proceeds of approximately $223.2 million to DISCO after deducting underwriting discounts and commissions.
  • Forbes Cloud 100: For the second year in a row, DISCO was recognized as the only ediscovery company on the Forbes Cloud 100 – the definitive ranking of the top 100 private cloud companies in the world.

Third Quarter and Full Year 2021 Financial Outlook

As of September 2, 2021, DISCO is issuing the following outlook for the third quarter of 2021 and fiscal year 2021:

Third quarter of 2021:

  • Revenue in the range of $25.5 – $25.9 million, representing year-over-year growth between 43% and 45%.
  • Adjusted EBITDA in the range of ($11.1) – ($10.3) million.

Fiscal year 2021:

  • Revenue in the range of $103.5 – $104.3 million, representing year-over-year growth between 51% and 52%.
  • Adjusted EBITDA in the range of ($24.0) – ($22.9) million.

DISCO’s third quarter and 2021 financial outlook is based on a number of assumptions that are subject to change and many of which are outside of our control. If actual results vary from these assumptions, our expectations may change. There can be no assurance that we will achieve these results.

Reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to the charges excluded from this non-GAAP measure; in particular, the effects of stock-based compensation expense specific to equity compensation awards that are directly impacted by unpredictable fluctuations in our stock price. We expect the variability of the above charges to have a significant, and potentially unpredictable, impact on our future GAAP financial results.

Conference Call Information

DISCO will host a conference call and webcast at 4:00 p.m. CT (5:00 p.m. ET) today, September 2, 2021 to discuss its second quarter 2021 financial results and business highlights. The conference call can be accessed by dialing (844) 200-6205 from the United States or +44 20-8068-2558 internationally with access code 481150. The live webcast of the conference call and other materials related to DISCO’s financial performance can be accessed from DISCO’s investor relations website at ir.csdisco.com.

Following the completion of the call until 2:00 p.m. CT (3:00 p.m. ET) on Thursday, September 23, 2021, a telephone replay will be available by dialing (845) 709-8569 from the United States, 020-3936-3001 from the United Kingdom, or +44 20-3936-3001 in all other locations with access code 532376. A webcast replay will also be available at ir.csdisco.com for 12 months.

About DISCO

DISCO (NYSE: LAW) provides a cloud-native, artificial intelligence-powered legal solution that simplifies ediscovery, legal document review and case management for enterprises, law firms, legal services providers and governments. Our scalable, integrated solution enables legal departments to easily collect, process and review enterprise data that is relevant or potentially relevant to legal matters.

References to “DISCO”, the “Company,” “our,” or “we” in this press release refer to CS Disco, Inc. and its subsidiaries on a consolidated basis.

Use of Non-GAAP Financial Measures

DISCO uses the following non-GAAP financial measures: Adjusted EBITDA, non-GAAP cost of revenue; non-GAAP gross profit; non-GAAP gross margin; non-GAAP research and development expense; non-GAAP sales and marketing expense; non-GAAP general and administrative expense; non-GAAP loss from operations; non-GAAP net loss attributable to common stockholders; and non-GAAP net loss attributable to common stockholders per share (basic and diluted). Management believes that these non-GAAP financial measures are useful measures of operating performance because they exclude items that DISCO does not consider indicative of its core performance.

In the case of Adjusted EBITDA, DISCO adjusts net loss for such items as depreciation and amortization expense, provision for income taxes, interest and other, net, stock-based compensation expense and other one-time, non-recurring items, when applicable. In the case of non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses (research and development expense, sales and marketing, general and administrative), non-GAAP loss from operations, non-GAAP net loss attributable to common stockholders, and non-GAAP net loss attributable to common stockholders per share, DISCO adjusts the respective GAAP balances for stock-based compensation expense.

There are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies. Certain items that are excluded from these non-GAAP financial measures can have a material impact on operating loss and net loss. As a result, these non-GAAP financial measures have limitations and should be considered in addition to, not as a substitute for or superior to, the closest GAAP measures, or other financial measures prepared in accordance with GAAP.

DISCO’s management uses these non-GAAP measures as measures of operating performance; to prepare DISCO’s annual operating budget; to allocate resources to enhance the financial performance of DISCO’s business; to evaluate the effectiveness of DISCO’s business strategies; to provide consistency and comparability with past financial performance; to facilitate a comparison of DISCO’s results with those of other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and in communication with our board of directors concerning DISCO’s financial performance.

Forward-Looking Statements

This press release contains forward-looking statements, including, among other things, statements regarding DISCO’s future financial performance. Words such as “may,” “should,” “will,” “believe,” “expect,” “anticipate,” “target,” “project,” and similar phrases that denote future expectation or intent regarding DISCO’s financial results, operations, and other matters are intended to identify forward-looking statements. You should not rely upon forward-looking statements as predictions of future events.

The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties, and other factors that may cause DISCO’s actual results, performance, or achievements to differ materially, including (i) our history of operating losses, (ii) our limited operating history, (iii) our ability to maintain and advance our innovation and brand; (iv) our ability to effectively add new customers; (v) our ability to effectively increase usage and penetration with our existing customer base; (vi) our ability to expand our sales coverage and establish a digital sales channel; (vii) DISCO’s ability to expand internationally; (viii) our ability to extend and strengthen our channel partnerships and integrations; (ix) our ability to expand our offering portfolio to a wider range of legal processes outside of our current core offerings; (x) our ability to pursue strategic acquisitions and strategic investments to expand the functionality and value of our solution; (xi) our ability to comply or remain in compliance with laws and regulations that currently apply or become applicable to our business in the jurisdictions in which it operates; (xii) the potential that our computer or electronic systems, applications or services, or those of any third parties on whom we depend, fail or suffer security or data privacy breaches or other unauthorized or improper access to, use of, or destruction of our proprietary or confidential data, employee data, or personal data; (xiii) our ability to compete effectively with existing competitors and new market entrants; (xiv) general market, political, economic, and business conditions; and (xv) the impact that the ongoing COVID-19 pandemic and any related economic downturn could have on our or our customers’ businesses, financial condition and results of operations.

The forward-looking statements contained in this press release are also subject to additional risks, uncertainties, and factors, including those more fully described in our filings with the Securities and Exchange Commission (“SEC”), including our final prospectus filed with the SEC pursuant to Rule 424(b) of the Securities Act of 1933 on July 22, 2021. Further information on potential risks that could affect actual results will be included in the subsequent periodic and current reports and other filings that we make with the SEC from time to time, including our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021.

Forward-looking statements represent DISCO’s management’s beliefs and assumptions only as of the date such statements are made. We undertake no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law.

CS DISCO, INC.

Consolidated Balance Sheets

(in thousands)

(unaudited)

 

June 30,
2021

 

December31,

2020

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

47,026

 

 

$

58,569

 

Accounts receivable, net

21,195

 

 

12,912

 

Other current assets

4,329

 

 

1,364

 

Total current assets

72,550

 

 

72,845

 

Property and equipment, net

4,494

 

 

3,873

 

Operating lease right-of-use assets

1,364

 

 

1,850

 

Other assets

501

 

 

539

 

Total assets

$

78,909

 

 

$

79,107

 

Liabilities, redeemable convertible preferred stock, and stockholders’ deficit

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

6,144

 

 

$

3,588

 

Accrued expenses

2,800

 

 

641

 

Accrued salary and benefits

4,858

 

 

5,240

 

Deferred revenue

1,489

 

 

1,642

 

Operating leases

1,045

 

 

1,018

 

Finance lease

116

 

 

112

 

Total current liabilities

16,452

 

 

12,241

 

Operating lease, noncurrent

361

 

 

890

 

Finance lease, noncurrent

40

 

 

99

 

Total liabilities

16,853

 

 

13,230

 

Commitments and contingencies

 

 

 

Redeemable convertible preferred stock

160,851

 

 

160,800

 

Stockholders’ deficit

 

 

 

Common stock

71

 

 

68

 

Additional paid-in capital

10,265

 

 

8,129

 

Accumulated deficit

(109,131)

 

 

(103,120)

 

Total stockholders’ deficit

(98,795)

 

 

(94,923)

 

Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit

$

78,909

 

 

$

79,107

 

CS DISCO, INC.

 

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share amounts)

(unaudited)

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2021

 

2020

 

2021

 

2020

Revenue

$

29,547

 

 

$

15,727

 

 

$

50,678

 

 

$

31,395

 

Cost of revenue

8,695

 

 

4,509

 

 

14,483

 

 

9,580

 

Gross profit

20,852

 

 

11,218

 

 

36,195

 

 

21,815

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

7,861

 

 

6,215

 

 

14,123

 

 

14,418

 

Sales and marketing

10,832

 

 

7,170

 

 

18,708

 

 

16,492

 

General and administrative

5,128

 

 

3,143

 

 

9,182

 

 

7,403

 

Total operating expenses

23,821

 

 

16,528

 

 

42,013

 

 

38,313

 

Loss from operations

(2,969)

 

 

(5,310)

 

 

(5,818)

 

 

(16,498)

 

Other income (expense)

 

 

 

 

 

 

 

Interest and other income

21

 

 

15

 

 

34

 

 

79

 

Interest and other expense

(92)

 

 

(161)

 

 

(148)

 

 

(249)

 

Loss from operations before income taxes

(3,040)

 

 

(5,456)

 

 

(5,932)

 

 

(16,668)

 

Income tax provision

(43)

 

 

(20)

 

 

(79)

 

 

(45)

 

Net loss

$

(3,083)

 

 

$

(5,476)

 

 

$

(6,011)

 

 

$

(16,713)

 

Less accretion of redeemable convertible preferred stock

(25)

 

 

(22)

 

 

(51)

 

 

(45)

 

Net loss attributable to common stockholders

$

(3,108)

 

 

$

(5,498)

 

 

$

(6,062)

 

 

$

(16,758)

 

Net loss per share attributable to common stockholders, basic and diluted

$

(0.23)

 

 

$

(0.42)

 

 

$

(0.45)

 

 

$

(1.28)

 

Weighted-average shares used in computing net loss

per share attributable to common stockholders, basic and

diluted

13,636

 

 

13,121

 

 

13,513

 

 

13,110

 

CS DISCO, INC.

 

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

Six Months Ended
June 30,

 

2021

 

2020

Cash flow from operating activities:

 

 

 

Net loss

$

(6,011)

 

 

$

(16,713)

 

Adjustments to reconcile net loss to cash used in operations:

 

 

 

Depreciation and amortization

830

 

 

799

 

Stock-based compensation

1,454

 

 

992

 

Charge to allowance for credit losses

251

 

 

250

 

Non-cash operating lease costs

487

 

 

719

 

Non-cash interest

41

 

 

18

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

(8,534)

 

 

(1,521)

 

Other current assets

(819)

 

 

342

 

Other long-term assets

 

 

(5)

 

Accounts payable

1,513

 

 

893

 

Accrued expenses and other

1,268

 

 

(49)

 

Deferred revenue

(153)

 

 

(79)

 

Operating lease liabilities

(502)

 

 

(760)

 

Net cash used in operating activities

(10,175)

 

 

(15,114)

 

Cash flow from investing activities:

 

 

 

Purchases of property, equipment and capitalized internal-use software development costs

(1,447)

 

 

(994)

 

Net cash used in investing activities

(1,447)

 

 

(994)

 

Cash flow from financing activities:

 

 

 

Proceeds from debt

 

 

23,302

 

Repayment of debt

 

 

(6,302)

 

Payments for public offering costs

(594)

 

 

 

Proceeds from exercise of stock options

835

 

 

16

 

Repurchase of common stock related to net share settlement

(107)

 

 

(58)

 

Principal payments on finance lease obligations

(55)

 

 

(52)

 

Net cash provided by financing activities

79

 

 

16,906

 

Increase in cash:

(11,543)

 

 

798

 

Cash & cash equivalents at beginning of period

58,569

 

 

23,224

 

Cash & cash equivalents at end of period

$

47,026

 

 

$

24,022

 

Supplemental disclosure:

 

 

 

Cash paid for interest

$

39

 

 

$

148

 

Cash paid for taxes

57

 

 

34

 

Non-cash investing and financing activities:

 

 

 

Accretion of preferred stock to redemption value

$

51

 

 

$

45

 

Costs related to initial public offering included in accounts payable and accrued liabilities

1,550

 

 

 

CS DISCO, INC.

 

Reconciliation from GAAP to Non-GAAP Results

(in thousands, except for percentages and per share amounts)

(unaudited)

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net loss

 

$

(3,083

)

 

$

(5,476

)

 

$

(6,011

)

 

$

(16,713

)

Depreciation and amortization expense

 

 

406

 

 

 

421

 

 

 

830

 

 

 

799

 

Provision for income taxes

 

 

43

 

 

 

20

 

 

 

79

 

 

 

45

 

Interest and other, net

 

 

71

 

 

 

146

 

 

 

114

 

 

 

170

 

Stock-based compensation expense

 

 

966

 

 

 

504

 

 

 

1,454

 

 

 

992

 

Adjusted EBITDA

 

$

(1,597

)

 

$

(4,385

)

 

$

(3,534

)

 

$

(14,707

)

Adjusted EBITDA margin

 

 

(5

)%

 

 

(28

)%

 

 

(7

)%

 

 

(47

)%

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Cost of revenue

 

$

8,695

 

 

$

4,509

 

 

$

14,483

 

 

$

9,580

 

Non-GAAP adjustments:

 

 

   

 

 

 

Stock-based compensation expense

 

 

(10

)

 

 

(7

)

 

 

(18

)

 

 

(13

)

Non-GAAP cost of revenue

 

$

8,685

 

 

$

4,502

 

 

$

14,465

 

 

$

9,567

 

Non-GAAP gross profit

 

$

20,862

 

 

$

11,225

 

 

$

36,213

 

 

$

21,828

 

Non-GAAP gross margin

 

 

71

%

 

 

71

%

 

 

71

%

 

 

70

%

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Research and development

 

$

7,861

 

 

$

6,215

 

 

$

14,123

 

 

$

14,418

 

Non-GAAP adjustments:

   

 

 

 

 

 

Stock-based compensation expense

 

(285

)

 

 

(217

)

 

 

(486

)

 

 

(439

)

Non-GAAP research and development

 

$

7,576

 

 

$

5,998

 

 

$

13,637

 

 

$

13,979

 

Non-GAAP research and development as a % of revenue

 

26

%

 

 

38

%

 

 

27

%

 

 

45

%

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Sales and marketing

 

$

10,832

 

 

$

7,170

 

 

$

18,708

 

 

$

16,492

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

(235

)

 

 

(88

)

 

 

(318

)

 

 

(158

)

Non-GAAP sales and marketing

 

$

10,597

 

 

$

7,082

 

 

$

18,390

 

 

$

16,334

 

Non-GAAP sales and marketing as a % of revenue

 

 

36

%

 

 

45

%

 

 

36

%

 

 

52

%

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

General and administrative

  $

5,128

 

  $

3,143

 

  $

9,182

 

 

$

7,403

 

Non-GAAP adjustments:

       

 

Stock-based compensation expense

 

(436

)

 

(192

)

 

(632

)

 

 

(382

)

Non-GAAP general and administrative

  $

4,692

 

  $

2,951

 

  $

8,550

 

 

$

7,021

 

Non-GAAP general and administrative as a % of revenue

 

16

%

 

19

%

 

17

%

 

 

22

%

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Loss from operations

  $

(2,969

)

  $

(5,310

)

  $

(5,818

)

 

$

(16,498

)

Operating margin

 

(10

)%

 

(34

)%

 

(11

) %

 

 

(53

)%

Non-GAAP adjustments:

     

 

 

 

Stock-based compensation expense

 

966

 

 

504

 

 

1,454

 

 

 

992

 

Non-GAAP loss from operations

  $

(2,003

)

  $

(4,806

)

  $

(4,364

)

 

$

(15,506

)

Non-GAAP operating margin

 

(7

)%

 

(31

)%

 

(9

)%

 

 

(49

)%

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net loss attributable to common stockholders

 

$

(3,108

)

 

$

(5,498

)

 

$

(6,062

)

 

$

(16,758

)

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

966

 

 

 

504

 

 

 

1,454

 

 

 

992

 

Non-GAAP net loss attributable to common stockholders

 

$

(2,142

)

 

$

(4,994

)

 

$

(4,608

)

 

$

(15,766

)

Non-GAAP net loss per share

 

$

(0.16

)

 

$

(0.38

)

 

$

(0.34

)

 

$

(1.20

)

Weighted average shares used to compute basic and diluted

net loss per share

 

 

13,636

 

 

 

13,121

 

 

 

13,513

 

 

 

13,110

 

Non-GAAP income attributable to common stockholders

as a % of revenue

 

 

(7

)%

 

 

(32

)%

 

 

(9

)%

 

 

(50

)%

 

Contacts

Investor Relations Contact

April Scee

ICR for DISCO

IR@csdisco.com
(646) 277-1219

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