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Background Note: The following announcement shares the 2Q2022 financial results for eDiscovery provider DISCO and may be of interest to legal, business, and information technology professionals operating or investing in the eDiscovery ecosystem. Additionally, a recent post by Tomasz Tunguz, a venture capitalist with Redpoint, provides an interesting consideration that may be of relevance regarding the value of public software companies. The post, titled Growth is No Longer the Best Predictor of a Software Company’s Value, notes that profitability has surged as the most significant correlate and predictor of a public software company’s value. This beyond revenue consideration may also be of interest to individuals considering valuations in light of quarterly earnings results.
Press Announcement Extract (August 11, 2022)
DISCO Announces Second Quarter 2022 Financial Results
Total Revenue of $33.7 Million, a Year over Year Increase of 14%
AUSTIN, Texas–(BUSINESS WIRE)– CS Disco, Inc. (“DISCO”) (NYSE: LAW) today announced financial results for its second quarter ended June 30, 2022.
“This quarter marked another excellent period of accomplishments at DISCO,” said Kiwi Camara, Co-Founder and Chief Executive Officer. “We are excited to see a growing number of customers transitioning to our cloud-native solution as we increased our customer count to 1,255, an increase of 27% year over year. With the launch of topic clustering with automatic indexing – a highly anticipated innovation in our software – we continue to improve our full-stack solution to give our customers the necessary tools to transform the practice of law.”
Second Quarter 2022 Financial Highlights:
- Total revenue was $33.7 million, up 14% compared to the second quarter of 2021.
- GAAP net loss was $20.2 million, compared to $3.1 million in the second quarter of 2021.
- Adjusted EBITDA was ($12.4) million, compared to ($1.6) million in the second quarter of 2021.
Recent Business Highlights:
- New Offices: DISCO officially opened the doors of its new headquarters in downtown Austin, Texas and a new office in New York, New York.
- EY Entrepreneur Of The Year: Kiwi Camara, Co-Founder and CEO of DISCO, was named an Entrepreneur of the Year® 2022 Central South Award finalist.
- TrustRadius Top Rated Award: DISCO received a 2022 Top Rated Award from TrustRadius with a trScore of 8.8 out of 10.
Third Quarter and Full Year 2022 Financial Outlook
As of August 11, 2022, DISCO is issuing the following outlook for the third quarter of 2022 and fiscal year 2022:
Third quarter of 2022:
- Revenue in the range of $32.0 – $34.0 million, representing year-over-year growth between 7% and 14%.
- Adjusted EBITDA in the range of ($19.5) – ($17.5) million.
Fiscal year 2022:
- Revenue in the range of $132.0 – $136.0 million, representing year-over-year growth between 15% and 19%.
- Adjusted EBITDA in the range of ($60.0) – ($56.0) million.
DISCO’s third quarter and fiscal year 2022 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 on a forward-looking basis to net loss, the most directly comparable GAAP measure is not available without unreasonable efforts due to the high variability and 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, August 11, 2022, to discuss its second quarter 2022 financial results and business highlights. The conference call can be accessed by dialing (888) 550-5431 from the United States or +1 (646) 960-0807 internationally with conference ID 8394292. 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 10:59 p.m. CT (11:59 p.m. ET) on Thursday, September 1, 2022, a telephone replay will be available by dialing (800) 770-2030 from the United States, +1 (647) 362-9199 internationally with conference ID 8394292. A webcast replay will also be available at ir.csdisco.com for 12 months.
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.
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