CS Disco, Inc.

the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. I would like to now like to hand the conference over to your first speaker today, Head of Investor Relations, Alexey Lakhtyakov. Please go ahead.

Good afternoon and thank you for joining us on today's conference call to discuss the financial results for DISCO's second quarter of fiscal year 2025. With me on today's call are Eric Friedrichsen, DISCO's Chief Executive Officer and Michael LaFaire, DISCO's Chief Financial Officer. Today's call will include forward-looking statements within the meaning of the safe Harper provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements regarding our financial outlook and future performance, our future capital expenditures, market opportunity, market position, product and -to-market strategies and growth opportunities, and the benefits of our product offerings and developments in the legal technology industry. In addition to our preparing marks, our earnings press release, SEC filings, and a replay of today's call can be found on our investor relations website at .CSDISCO.COM. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance, or achievements to be necessarily different from those expressed or implied by the forward-looking statements. Forward-looking statements represent our management's beliefs and assumptions only as of the date made. Information on factors that could affect the company's financial results is included in its filings with the SEC from time to time, including the section settled risk factors in the company's annual report on Form 10-K for the year ended December 31, 2024, filed the SEC on February 20, 2025, and the company's upcoming quarterly report on Form 10-Q for the quarter ended June 30, 2025. In addition, during today's call, we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Reconciliation between GAAP and non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures versus a close to the GAAP equivalent is available in our earnings release. And with that, I'd like to turn the call over to Eric.

Good afternoon, everyone. I'm very happy to report DISCO's second quarter of fiscal year 2025 results. Over the past few quarters, we have discussed the changes that we're making to accelerate growth and achieve sustainable profitability for DISCO, and we are now starting to see some of the benefits from those changes. Software revenue in Q2 was $32.7 million up 12% year over year, and total revenue in Q2 was $38.1 million up 6% year over year. Adjusted EBITDA for Q2 was negative $2.7 million, representing an adjusted EBITDA margin of negative 7%, which is a $2 million improvement over Q2 of 2024. We finished the quarter with $114.5 million of cash and short-term investments and no debt. We are pleased with the acceleration of growth this quarter. As we have mentioned previously, we are focused on targeting customers with larger e-discovery wallets and larger matters, and that focus is starting to pay off. We saw strong growth stemming from increased usage on our platform and expansion of multi-terabyte matters. We ended Q2 with 323 customers who each contributed more than $100,000 in total revenue over the last 12 months, up 6% year over year. The story this quarter continues to be the execution of our strategy. Based on the changes that we made to the business, we are pleased to see the type of results that we are reporting today, notably the growth of multi-terabyte matters. However, this is only the start of what I believe is a much broader improvement. I believe that the value proposition that we are bringing to the market in with you in every case is a chief reason for our improved results. To remind you, with you in every case captures the essence of how disco is shaping the future of litigation. Our industry-leading platform equips legal teams with tools not previously available to the legal world. And when paired with our expert services team, we are enabling customers to tackle the most complex, high-stakes matters with confidence. This value proposition is embedded in our marketing, sales, products, and operations, ensuring that our customers understand the full value of what disco can offer them. To that end, we believe with you in every case is enabling faster revenue growth of our e-discovery in adjacent products, growth of large customers, and increasing the number of multi-terabyte matters on our platform. Also, it's enabling improved operations, allowing us to be faster, more adaptable, and business friendly with few organizational silos. All of this ultimately allows us to provide a better product to our customers and drive revenue in a more efficient manner. Let me touch on that with a bit more detail. This quarter, we saw strong growth in both the quantity of multi-terabyte matters as well as software revenue generated from these matters. These are some of the most complex litigation matters in the world and require exceptional enterprise-grade performance from our product and complete trust in our services and customer support teams. One example I want to highlight is the work we did for a Chambers recognized national full-service law firm. This customer approached us with a complex and urgent issue. One of their matters involved a large volume of data from their client's corrupted email environment. There was no readily available software that could recover the data and the original software vendor had been long out of business. To add to that issue, the data was in a non-standard format. The customer approached other providers who told them that the data was not salvageable, but Disco took this on as a challenge. Our engineering, forensics, and data operations teams worked together to recover the data, establish the solution capable of supporting the data set, identified a method to access this data for them, including supporting decades-old software, and migrated it into a fully searchable and modern functional environment within Disco. The result was a client that found a solution to a seemingly insurmountable problem in a 10 terabyte, 43 million document matter added to Disco. Another example is our success with an AmLaw 100 firm. Historically, this firm leaned on one of our competitors for eDiscovery. While we had a limited relationship with them going back to 2022 and 2023, that changed this year. Our sales and project management teams engaged closely with multiple groups within the firm, demonstrating the power of our platform, particularly in large, complex matters, and showcasing the differentiated value of our generative AI offerings, including Cecilia and AutoReview, along with our broader services capabilities. As a result, they expanded adoption of Disco, launching several new matters that leverage our AI capabilities. Given the volume of high-stakes litigation involved, we see this as the beginning of a strategic partnership with a meaningful long-term potential. Each of these is an example of our team collaborating across multiple departments in unison to deliver an amazing outcome for our customer, showcasing that Disco is truly with you in every case. Supporting our customers in this matter is key to achieving our goals. We have continued to tighten operations across all areas. Within sales and marketing, we continue to enhance our talent pool and allocate resources to customers with the highest wallet share opportunity and within our ideal customer profile. I am very pleased by the talent that we have attracted to Disco in the past few months, particularly reps with a history of selling successfully to enterprise-grade customers. We further continue to invest in our customer success team, including bringing on a new, highly experienced leader for that organization, as well as experienced talent. And finally, we've made changes to our lead generation team, shifting from a focus on account qualification to a more strategically aligned, territory-based account orchestration model. This quarter, we saw very concrete progress in our strategic approach, but it's only the start. I am optimistic that the steps we are taking operationally will continue to accelerate our revenue growth. Within the product side, we remain focused on releasing AI and core capabilities that help customers with their complex matters. We are starting to see some nice uplift and growth in these products. This quarter, we are proud to have brought Disco auto review capabilities to the EU and UK markets, where we are already seeing strong interest. With auto review, clients are now capable of reviewing up to 32,000 documents per hour. At that rate, auto review can tag as many documents in a single day as what would take a 20-person review team over three months to accomplish. And it's not only fast, it's accurate. Auto review has been delivering precision and recall metrics exceeding 90 percent in many cases, much better than the industry standard of 75 percent for recall. We have seen several clients experience the power of this technology in practice and are excited for the future growth of this capability. We launched Cecilia in 2023 as the -to-market solution capable of answering lawyer questions in real time based on the data in the proprietary databases. In the first half of the year, we saw 150 percent growth in multi-terabyte matters leveraging Cecilia from where we ended 2024. We have observed that the largest matters are also finding the most use of this product and for good reason. The largest matters often have the largest legal teams and the most sensitive and complex topics, where a solution like Cecilia can make a lawyer's job much easier and more effective. While we are seeing lawyers use Cecilia to find key documents and receive fast case-related answers, we are also seeing them use Cecilia in more unique situations, like during a live trial to help question a witness, preparing for depositions, or helping understand unfamiliar terms and concepts. I also want to highlight a core eDiscovery capability we launched into Crawl called Searchable AV Transcriptions. This capability allows customers to automatically convert audio and video files into searchable, reviewable text. This streamlines the review process, reduces manual error, and empowers attorneys to quickly identify relevant facts. Reviewers can view transcribed content -by-side with original media, integrate it with Cecilia Docs summaries and Q&A, and ask targeted questions to drive faster, more accurate analysis. We continue to release capabilities like this and others every quarter, allowing our customers to find key evidence quickly and efficiently and to make Disco the ideal platform for managing large, complex matters. Finally, being a customer-focused organization means breaking down silos to create efficiency across our operations. In our legal department, we assessed our contracting approach and slimmed our standard contract by more than 50% while maintaining standard risk and other terms for Disco. While this may not sound revolutionary, simplifying legal contracts has significantly reduced bottlenecks in the sales process and helped minimize friction points for customers. These kinds of changes make us a more approachable, efficient company to do business with. In human resources, we made meaningful progress in several areas, including automating HR processes related to the year-end compensation and performance reviews. Many of these legacy processes were time-consuming and distracting to our teams. By making administrative tasks faster and the overall year-end process more transparent, we are reducing distractions from the business. In summary, this quarter was about execution of our strategy. We saw meaningful acceleration in our software business. We are seeing continued adoption of Cecilia, and we are excited about traction of auto reviews. The strategic changes that we made in recent quarters across nearly every area of the business, from how we go to market, to how we support our customers, to how we operate internally, are starting to bear fruit. We are confident in the strategy that we have set and the alignment that we've achieved across our teams. While there's more work ahead, we are confident in our ability to execute and that the foundation that we're playing today will drive sustainable growth and increase efficiency going forward. Before I turn it over to Michael to go over the financials, I'd like to take a moment to address the news that we shared in our earnings press release that Michael will be stepping down from his role as CFO at the end of this year. We have initiated a search for our next CFO, and Michael will remain at the helm until the end of the year unless a successor is appointed sooner. Since joining the company in 2018, Michael has played a critical role in transforming Disco from an early stage startup to a successful public company, leading Disco through multiple private funding rounds, our IPO, and our secondary offering. I cannot thank Michael enough for all he has done so far for Disco, and I am looking forward to continuing to work with him over the next several months as we complete the search and transition process. With that, I'll now turn it over to Michael. Michael?