CS Disco Reports 4% Revenue Growth, Continued Net Losses in Q3 2024

CS Disco, Inc. reported its financial results for the third quarter and the nine months ended September 30, 2024, showing a revenue increase but continued net losses. For the three months ended September 30, 2024, the company generated revenue of $36.3 million, a 4% increase from $34.9 million in the same period of 2023. For the nine months, revenue reached $107.8 million, up 5% from $102.3 million year-over-year. The growth was primarily driven by new customer acquisitions, which contributed $4.5 million in the third quarter, although existing customer revenue declined by $3.1 million due to reduced usage.

Gross profit for the third quarter was $26.5 million, representing 73% of revenue, slightly down from 74% in the prior year. Total operating expenses surged to $37.4 million, up from $28.9 million, leading to a loss from operations of $10.9 million for the quarter, compared to a loss of $2.9 million in Q3 2023. The increase in operating expenses was largely attributed to a significant rise in general and administrative costs, which soared by 7,445% to $1.8 million, primarily due to increased personnel costs.

Net loss attributable to common stockholders for the third quarter was $9.2 million, compared to a loss of $1.0 million in the same quarter of 2023. For the nine-month period, the net loss was $30.6 million, an improvement from a loss of $36.3 million in the prior year. The net loss per share for the third quarter was $(0.15), compared to $(0.02) in Q3 2023.

The company’s total assets decreased to $194.4 million as of September 30, 2024, down from $231.5 million at the end of 2023. Cash and cash equivalents also fell significantly to $76.5 million from $159.6 million. The decrease in cash was attributed to increased cash used in investing activities, which rose to $52.2 million, primarily due to a $49.9 million purchase of short-term investments.

Strategically, CS Disco has focused on expanding its product offerings, including the launch of an ediscovery chatbot named Cecilia in late 2023 and plans to integrate primary law sources through a licensing agreement with Fastcase, expected to launch in 2025. The company has also been enhancing its sales force and channel partnerships to drive growth. Despite these efforts, the company continues to face challenges, including reliance on customer usage for revenue, competitive pressures, and ongoing litigation risks, including a class action lawsuit filed in September 2023 alleging misleading statements about revenue growth.