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Image source: The Motley Fool. Wednesday, Aug. 5, 2026 at 8:30 a.m. ET Chief Executive Officer - Eric Friedrichsen Chief Financial Officer - Aaron Barfoot Chief Product Technology and Strategy Officer - Richard Crum Head of Investor Relations - Aleksey Lakchakov Operator: Ladies and gentlemen, thank you for standing by, and welcome to CS Disco's Second Quarter of Fiscal Year 2026 Conference Call. [Operator Instructions] I would now like to hand the conference over to your first speaker today, Head of Investor Relations, Aleksey Lakchakov. Please go ahead. Aleksey Lakchakov: Good morning, and thank you for joining us on today's conference call to discuss the financial results for DISCO's second quarter of fiscal year 2026. With me on today's call are Eric Friedrichsen, DISCO's Chief Executive Officer; Aaron Barfoot, DISCO's Chief Financial Officer; and Richard Crum, DISCO's Chief Product Technology and Strategy Officer. Today's call will include forward-looking statements within the meaning of the safe harbor 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 go-to-market strategies and growth opportunities and the benefits of our product offerings and developments in the legal technology industry. In addition to our prepared remarks, our earnings press release, SEC filings and a replay of today's call can be found in our Investor Relations website at ir.csdisco.com. 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 titled Risk Factors in the company's annual report on Form 10-K for the year ended December 31, 2025, and the company's quarterly report on Form 10-Q for the quarter ended June 30, 2026. 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. Reconciliations between GAAP and non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures versus their closest GAAP equivalent is available in our earnings release. And with that, I'd like to turn the call over to Eric. Eric Friedrichsen: Thanks, Aleksey. Good morning, everyone, and thank you for joining us. Disco delivered another strong performance in the second quarter as we continue to deepen our relationships with our largest customers, secure large and complex matters and extend our leadership in AI built specifically for litigators. We remain convinced that trust earned through deep litigation expertise, enterprise scale and security is what determines who wins as AI reshapes this industry and Q2 gave us further evidence that DISCO is earning that trust at scale. In Q2, total revenue was $43.1 million, up 13% year-over-year, and software revenue was $36.8 million, also up 13% year-over-year. Services revenue was $6.3 million, up 18% year-over-year. Adjusted EBITDA was negative $3.4 million. We remain on track to be adjusted EBITDA positive in Q4 of this year. It was a great quarter, and I'll come back to the highlights in a moment. But I want to start with something we announced today that represents an incredibly exciting new era for DISCO, the launch of our Unified Litigation Solution. This will take DISCO well beyond Ediscovery and into serving the complete and unique needs of litigators with purpose-built AI capabilities. In the near term, we're uniting the facts of a matter with the controlling law alongside proprietary litigation-specific workflows, all through a single pane of glass. We are ultimately building a full suite of integrated litigation solutions that span the life of a matter from filing to verdict, handling everything from legal facts to drafting to case strategy to trial preparation. While companies like Harvey and Legora have approached legal with broad general tools, we are laser-focused on litigators with a much deeper solution to meet the high bar set for scale, defensibility and security. We've talked before about how litigators need purpose-built capabilities. How they want them in a single centralized interface and how no one has successfully connected the facts and the law in a seamless way that unlocks real strategic advantage. DISCO will change that. I'll let Richard get into the specifics a little later, but I want to tell you why we're excited about it at the highest level. It takes a litigator a decade or more to really master their craft. And even then, what one case team learns rarely carries over to the next matter or to the next team. Moreover, the tools are generally only as good as the lawyer behind the keyboard. We believe a platform to understand the case and carries that context forward to put winning outcomes in reach for a lot more people and unlock a wealth of institutional knowledge and expertise that today sits siloed within individual lawyers and individual cases. This will mean greater ability to connect the dots, both within and across cases. It will give litigators greater control over the matters by assembling the tools and knowledge that they need to be successful in a single place. Litigators will be able to focus on the things their clients value most, strategic advice built on deep insight. While DISCO takes care of the surrounding chaos with an integrated and secure system tuned to the things that are most important for the success of the matter. For litigators, this is a significantly better and faster way to work. For firms and corporations, this is a force multiplier that makes case teams more effective and more efficient with better access to information and applications built specifically for them. Our customers are already excited as we're developing this solution, we're working closely with some of our largest and longest tenured customers, some of whom are participating in our pilot. One thing we hear time and time again during these pilots is that litigation is unique and the general purpose AI tools like Harvey and Legora provide only a fraction of the capabilities today's litigators need. This is particularly true when it comes to deep context, especially when it relates to facts and law. One leading national litigation boutique that is participating in our pilot program said combining our evidence directly with relevant case law is the missing piece for us. Integrating the two would be a total game changer. Customer validation even at this early stage, gives us confidence that the market is ready for this and that customers see the long-term vision of what we're developing, building a solution for litigation intelligence and strategy unlocks a much more significant opportunity beyond Ediscovery as we believe that any innovative law firm that is serious about tapping into the power of AI to enhance the litigation practice will want the most advanced capabilities in their arsenal. We've been building toward this for a decade, Ediscovery, Cecilia, Auto Review and Advanced Research have all been steps along the way, and our Unified Litigation Solution is the next and most ambitious one. As we're building for the future, the DISCO team continues to deliver today. In Q2, we saw strong performance across the 3 areas that matter most to our near- and medium-term growth strategy. First, continued growth in large matters. Second, continued growth in wallet share with large customers; and third, accelerating adoption of AI across our platform. Let's start with large matters because it's really the thread that connects everything else. We continue to see an increase in the size and complexity of the matters coming on to our platform. This quarter, we saw strong performance in both quantity of large matters and revenue generated from these matters. As we've discussed before, larger matters are simply worth more to us over their lifetime. They generate more revenue, they expand as the case develops, and they stay on our platform longer. They also drive more AI adoption and usage on our platform. Alongside large matters, we also saw significant progress with large customers. The largest, most sophisticated firms not only have more large matters, they have significant litigation and frequent spending. So we believe growing this customer segment gives us a more efficient approach to a predictable and durable revenue base. The number of customers generating more than $100,000 over the last 12 months grew to 354, representing $128 million or 77% of the last 12 months of total revenue. That equates to 15% year-on-year growth. We were also very pleased with customer adoption of our generative AI and agentic AI capabilities. This quarter, we saw continued growth in adoption such that revenue attributable to generative AI and agentic AI capabilities more than tripled year-on-year. Both Cecilia and Auto Review were drivers of growth in Q2 with Auto Review experiencing a material increase from Q1, driven by pipeline growth, larger matters, higher matter count and repeat usage. I'm excited for the traction that we're seeing and for what's ahead. We and our customers view our AI-native capabilities as increasingly integral to how litigators actually run their matters rather than just a feature they tried once. The repeat use of Auto Review by customers is central to our strategy. In Q2, we began to roll out a significant enhancement to Auto Review that simplifies and accelerates the process of creating the inputs required for effective AI review. As we discussed last quarter, our customers have varying degrees of AI readiness. This enhancement helps lessen the learning curve, making Auto Review an even better option for more customers and more matters. Advanced Research also continues to gain traction. The feedback from firms that have been piloting its capabilities has been unanimous in that it provides significantly deeper insights, reasoning and recommendations and is particularly suited to complex matters where its ability to autonomously reason across large intricate data sets adds another layer of intelligence to their workflows. We also saw very strong adoption of the DISCO platform, our new commercial model in the quarter, which continues to significantly outpace our internal goals. In fact, we hit our December 2026 year-end run rate by June. The demand has been higher and adoption has been faster than we anticipated. We are seeing both more matters and larger matters coming on to DISCO due to our more straightforward pricing and because Cecilia AI is included on every matter. The apples-to-apples pricing and reduced user friction for our adjacent products has resonated with customers and further driven our performance. All of this adds up to an incredibly exciting story for DISCO. We continue to gain traction in our core business with larger matters, larger customers and accelerating adoption of our AI capabilities. This gives us a strong foundation to rapidly scale our next-generation Unified Litigation Solution. Now I'm going to turn it over to Richard, who will provide a deeper dive on those capabilities and the incredible work underway to bring them to life for our customers. Richard? Richard Crum: Thank you, Eric. As Eric said, the new DISCO Unified Litigation Solution is not a new product. It is the most important investment we're making as a company. So let me build on that and get into the specifics what the solution actually does today and where we're taking it. Let's start with today. Litigation is fundamentally different from the transactional and advisory work most legal AI has focused on. It's adversarial and winning hinges on the litigation's team ability to master the facts and the law. The facts that decide a case are often buried across millions of documents and not just the so-called hot docs that surfaced through the initial Ediscovery processes. Winning strategy requires mastering the client's entire evidentiary record, leveraging all of the relevant governing law and reasoning across both together. And that is what this solution is built to do. The DISCO Unified Litigation Solution unites 2 things: your evidence and the law. It has native access to the Ediscovery database, not just the text of a document, but its metadata and the work product our customers have already built on top of it, and it's paired with DISCO's license to the full corpus of U.S. case law, court rules, statutes and regulations. Concretely, that means a case team can get a live view of where a matter stands today the claims at issue, the elements that still need to be proven, the evidence gaps and the key dates all in one place. Underneath that view, the system reasons the way a litigator does. It maps each claim to the legal elements required to prove it and evaluates whether the evidence in the matter actually satisfies each one rather than just surfacing documents that might mention the right words. That's the difference between a general AI legal tool and a system with the native contextual intelligence to tell you whether your case holds up. DISCO doesn't build technology for lawyers. We build solutions for litigators. The opportunity Eric described earlier putting better outcomes within reach for many more people really has 2 dimensions, and we're addressing both. Within a single case, it takes significant time for someone new joining a matter, a new associate, a partner stepping in to get up to speed because case knowledge tends to live in people's heads and scattered files rather than in a single system, anyone on the team can query. And the strategies and playbooks that were successful on prior matters mostly stayed with the people who worked it rather than compounding across the rest of the firm's docket. Ultimately, our solution is designed to close both gaps surfacing what a case team needs now on a given matter, and, over time, helping the patterns from one case inform the next. Specifically, customers will create custom workflows, agents and tools that ensure their own best practices drive how our solution supports their work, both within and across matters. We believe this requires deep integration, not simple connectivity. And that's true for both the law and the evidence. General purpose AI tools and even other legal AI providers are largely reaching the law and the evidence through outside connections, an API call to a research service or a read-only link into someone else's Ediscovery platform. Or even suggesting that lawyers make a second copy of the documents in their platform and leave behind all of the rich context present in the source systems. These approaches can be useful for task productivity, but they stop short of the kind of litigation intelligence, substantive case work requires. Our solution is different because it holds both directly. The case law itself and the full Ediscovery record metadata and work product included and reasons across them. The same is true of how litigation teams work day to day. Legal research, the document record, work product and the docket typically sit in separate systems today. So any question that touches more than one of them becomes a manual exercise. Pull the law here, pull the documents there, stitch them together by hand and do it again each time. That's exactly why Eric described this as DISCO building a single pane of glass for the litigation team, bringing all of it into one place means that stitching happens once and the context built answering one question carries straight into the next instead of every person on the case team rebuilding the same connections over and over. The same logic is why persistent context matters so much. Litigation is not a single question-and-answer exchange. It's a matter that evolves over months or years through new productions, depositions and rulings. DISCO carries that context forward automatically so its understanding of a matter compounds as the case develops. And this memory is what makes our solution so valuable because it drives better outcomes, not a faster answer to one question, but an answer that reflects everything the case has taught the system so far. Right now, we're in a pilot learning phase. We're running the pilot with a small hand selected group of customers on live matters because what matters to us right now is depth of engagement, understanding usage patterns, how capabilities resonate and what to prioritize on our road map. Here's where we think it goes. Right out of the gate, our Unified Litigation Solution helps the case team answer important legal questions and develop case strategy, leveraging deep integration to both the facts and the law. This is backed by proprietary workflows that we've built specifically for litigators and we've filed 3 provisional patents that demonstrate the novel and innovative approach we've taken in building this solution. Based on our road map, we intend to iteratively add new capabilities such as the ability to maintain live case artifacts such as proof tables, witness materials, motion outlines and discovery plans that update automatically as the matter progresses. This supports the full case team working together, including outside counsel and in-house counsel in the same shared workspace. This will move quickly. Our vision is ambitious, and the customers and partners we have engaged are excited about what we are building, and that is why we are treating this as one of the most important long-term investments we can make as a company. We'll share more on timing and availability as our plans evolve. This same learn first scale fast approach is exactly how we approached Advanced Research, which will roll out to all customers in the next few weeks. Advanced Research is an agentic AI capability built deeply into our Ediscovery products that goes well beyond simple question and answer. It performs multistep reasoning across a matter's full evidentiary record to help litigators develop a deep understanding of their evidence. The customer response during testing has been powerful, as Eric noted, and we are excited to be ready to roll this out to customers. None of this happens without the work we've done for a decade on the Ediscovery platform itself. Just as important, our own engineering organization has been shifting to an AI-first way of building software over the past several quarters. And that shift in velocity is part of what has led us move as quickly as we have on the new Unified Litigation Solution, Advanced Research and Auto Review all at once. And underneath all of it, we keep investing in our ability to ingest and structure increasingly complex and modern data types because none of this works, including our new solution, if the data processing platform can't turn raw data into something a litigator or an AI system reasoning on their behalf can actually use. Taken together, we believe this is the clearest evidence yet that our AI native stack is compounding. The solutions we've built, the customers who trust us with their largest and most complex matters and the data that flows through DISCO every day are what gives us confidence in the future. With that, I'll hand it over to Aaron. Aaron Barfoot: Thank you, Richard. Q2 results reflected continued progress in the areas Eric and Richard just walked through. Total revenue was $43.1 million, up 13% year-over-year and software revenue was $36.8 million, up 13% year-over-year. Services revenue was $6.3 million, up 18% year-over-year, driven primarily by strength in professional services and Auto Review-related managed review work tied to our largest matters. I want to touch on some of what Eric mentioned in more detail. First, DISCO platform was our biggest driver of quarter-over-quarter software growth. Customer adoption is strong, matter count is growing rapidly, and our pricing is helping increase the lifetime value of each matter. Second, Auto Review had a strong quarter. In Q1, we mentioned that some customers evaluating Auto Review were choosing the traditional route instead based on their AI readiness and comfort level. In Q2, that trend reversed. Auto Review set a new revenue record, driven by both record number of auto reviews executed and a growth in the average size of Auto Review to date. We are delighted by this result, but we are still in the very early stages of adoption. Turning to profitability metrics. As a reminder, unless otherwise specified, references to gross margin, operating expenses and net loss are on a non-GAAP basis, and adjusted EBITDA is also a non-GAAP financial measure. Gross margin in Q2 was 76% compared to 76% in the prior year. Sales and marketing expense was $15.7 million or 36% of revenue compared to 36% of revenue in the prior year. Research and Development expense was $13.4 million or 31% of revenue compared to 31% in the prior year. The dollar increase reflects continued investment in our Unified Litigation Solution, Advanced Research and Auto Review to capitalize on the legal industry's AI transformation. General and administrative expense was $7.7 million or 18% of revenue compared to 19% in the prior year. Adjusted EBITDA was negative $3.4 million in Q2, representing an adjusted EBITDA margin of negative 8% compared to negative 7% in Q2 of the prior year. Net loss in Q2 was $3.6 million or 8% of revenue compared to a net loss of $2.8 million or 7% of revenue in Q2 of the prior year. Net loss per share was $0.06 compared to $0.04 in Q2 of the prior year. Turning to the balance sheet and cash flow statement. We ended Q2 with $101.4 million in cash and short-term investments and no debt, maintaining our strong financial position. Operating cash flow in Q2 was negative $1.1 million compared to negative $4.2 million in Q2 of the prior year. I also want to reiterate a dynamic that I mentioned last quarter. If DISCO platform continues to perform above our expectations, we may see some short-term revenue impacts from lower ingest fees. We expect it will be more than offset over time by the DISCO platform's ongoing fees and by larger and longer and more complex matters that come with it. We believe this will be a positive trade for the long-term revenue profile of our business. We have not seen a meaningful drag on our results related to this new dynamic to date, but we may in the future. Turning to guidance. For the third quarter of fiscal year 2026, we are providing total revenue guidance in the range of $43.75 million to $45.75 million and software revenue guidance in the range of $38.1 million to $39.1 million. We expect adjusted EBITDA to be in the range of negative $1.75 million to negative $0.25 million. For the fiscal year 2026, we are raising our total revenue guidance to a range of $172 million to $179 million and software revenue guidance to a range of $147.5 million to $152.5 million, reflecting an increased confidence in the second half of the year. We're updating full year adjusted EBITDA guidance to a range of negative $8 million to negative $5 million. We continue to expect to be adjusted EBITDA positive in Q4. Operator: [Operator Instructions] Your first question comes from the line of Scott Berg with Needham. Scott Berg: I guess I got a couple. Let's start on Unified Litigation Solution that you all are seemingly quite excited about. I guess what is the customer adoption cycle of this platform look like? Is this an add-on to maybe an already existing Ediscovery customer, can you sell this net new? Do you have to have Ediscovery maybe implemented first since it's kind of leveraging that data? And then how do you think about pricing for that solution? Because off the top of my head, it sounds like maybe a consumption-based pricing model, which is the primary mechanism for your Ediscovery solution might not be the right pricing model for this, but would love to hear if that's maybe accurate or not accurate. Aaron Barfoot: Yes. Let me get started on that question. I can tell you a little bit more about how we're thinking about the new solution commercially. As I mentioned in the prepared remarks, we are deliberately in a learning phase, right? And that's the way you should think about where we are today, right? We're running this pilot. We've got a small hand-selected group of customers. And they're deeply engaged on live matters, right? This isn't a proof of concept or something that people are just playing around with the demo. This is a real product. But we're intentionally right now not putting a firm pricing or monetization or timing plan in the market led because we want to learn, right? We want to see how -- what we've developed and that we are excited about really plays out like how the capabilities resonate, how the customers' commercial needs and their business models should shape the way we should think about the best way to engage them commercially before we lock anything in. This is an ambitious multiyear bet and you should definitely hear today's announcement as the first step of a large vision, not the complete answer ready today. As we get further into the pilot and subsequent calls, we'll have much more to share on packaging and timing and certainly update you. But I wouldn't build revenue from the solution into your models yet. Eric Friedrichsen: Yes, certainly not for 2026. But Scott, I think the other thing I would just say is that this isn't something we're building because we think it's cool. This is something that our customers want. We're in a situation where our law firm customers, corporate clients are demanding that they get more value from their outside counsel spend, and they want to understand how the outside counsel can differentiate themselves. And DISCO is in a unique position to truly change the legal industry like no other AI company can. There's all this interest right now in legal AI, but nobody else in the market has the combination of the facts, the case law, the deep litigation experience and then the agentic AI capabilities that we've got here at DISCO. Although other AI companies in the legal space are trying to help lawyers become more efficient. We're doing that, too. But in addition to that, we're helping litigators win. And we're incredibly excited about it. So we're being very thoughtful about the way we build out this capability with our customers and the way we're going to commercialize it. But we think this is an enormous opportunity for DISCO and it's really the evolution of the company moving forward. Scott Berg: Got it. Helpful. And then for my follow-up question on your fourth quarter guidance, or at least the implied fourth quarter guidance since we're now get to see the back half. It does assume that there's an acceleration in subscription revenues. You seem pretty confident around sales trends and some of the usage trends, especially upmarket with larger customers over the last quarter or 2. But I guess, where is the confidence coming into play about some reacceleration in those revenues in the fourth quarter? Aaron Barfoot: Yes. I think simply, Scott, thanks for the question on it, too. But when you look at our guide, you are correct. We're raising the guide for the year and the confidence in raising that guide really comes from 3 things. The first thing is execution. Year-to-date, our execution against the strategy around more large matters from our largest customers. We're seeing the success in that. We are expecting that to continue. The second piece is DISCO platform. We talk about how we're excited with the trends we've seen, the adoption we've seen at DISCO platform on not just it's exceeded our expectations, but it's exceeded our expectations from a pricing of volume. And so all the elements that we're expecting, we're seeing deposits come through there. And then on the third piece, is Auto Review. We talked about that as well. We're seeing positive traction there. It seems like AI readiness for our customers is improving, and we're also building new capabilities that make it easier for them do an Auto Review, and we're going to continue to make those investments as well. But I think those -- the combination of the 3 things is what's driving our confidence in the guide. Operator: Your next question comes from the line of DJ Hynes with Canaccord Genuity. Ryan Shanahan: This is Ryan on for DJ. So I guess I understand the difference between the transaction and legal work that you see with some of these legal AI start-ups and the more privacy concerns with Ediscovery solutions. But a trend we've been seeing across software is this general openness with these platforms. Do you foresee as they expand their platform, you expand yours and customers adopt these platforms more, you will have to open up your platform to them? Richard Crum: Let me try to answer that for you. I think it's important I focus on why it's important, particularly for our customers that we go deep, right, and that we have comprehensive access to the information that matters to them because litigation is just fundamentally more complex than all of the other transactional advisory legal work that is often the focus of general legal AI tools, right? It's adversarial, right? And as I said in the prepared remarks, right? The facts could be buried across millions of documents, not just in a small subset of some hot documents that might have been identified, right? And so you need to be able to have the depth of the facts. You also need to have that deep access to the legal corpus we have, right? And the ability to build on it and train across it, not just access it one legal decision at a time, one statute at a time. And when you couple those 2 things, the real deep depth and the focus that we're putting on litigation and our ability and our proven leadership in developing AI over the last decade, that's what Eric was talking about. You have the formula that differentiates this 4 litigation teams, right? And litigation teams need something different, and it's going to be DISCO that delivers the thing that is most fit for their needs and why we're so excited about how impactful it will be for the litigation professionals that are going to use it. Eric Friedrichsen: Yes, let me just add into that too, real quick. Look, there's technology opportunities and limitations, but then there's also just business strategy opportunities and limitations. And the reality is the companies that own data aren't always extremely willing to give up that data. And one of the general AI companies in the legal space has a partnership with one of the big data providers for case law and the CEO for the case law company was interviewed last week and said that they've only got access to 1% of the data. I think that's what you have to think about. The reality here is we've got access to all of the data, and we've got control over how to use that data, which is a big, big differentiator for us. Ryan Shanahan: Okay. Got you. And then a quick follow-up. So you guys have spoken before about how law firms are a channel into corporate legal department customers. So obviously, large matters are growing, but can you maybe just describe what that expansion motion into those corporate legal departments looks like compared to maybe your more traditional analog customers. Eric Friedrichsen: Sure. Yes. I mean, look, I think as you know, we think there's tremendous upside opportunity within our customer base. And if you think about our law firm customers, we talked about -- well, overall, our large customers, we've now got 354 customers that spend over $100,000 with us over the last 12 months. That's up 15% in terms of the revenue, it's up to 77% of our total revenue. It's significant. We continue to improve in that customer base and yet we've got these very large customers where we might still only have 15% to 20% of their wallet share. And so what we've done is we've created an integrated go-to-market approach, where sales, marketing, sales development, customer success, really every piece of our go-to-market team is focused on helping enable our law firm customers to market DISCO internally to their case teams and then also ensures that those case teams can market both DISCO and their law firm services together to their corporate customers. And so honestly, we made great traction, but I think incredibly -- there's an incredible upside that we haven't even really seen flourish yet. We're making progress, but there's much, much more upside really through enabling these law firms to sell on our behalf. And the great news is, I was in London last week. I met with 7 different clients, and I had several of them talk about how they want DISCO to help them market to their customers because their corporate clients are asking how they're going to differentiate themselves. How are they going to leverage AI to be more efficient and deliver better outcomes. And like I've never seen before, law firms can tend to be really conservative, particularly from a marketing standpoint, but that's changing. They want us to help them market them because they need to differentiate themselves and show value to their corporate clients. Operator: Your next question comes from the line of Mark Schappel with Loop Capital Markets. Mark Schappel: Eric, you called out the strong adoption of the DISCO platform in your prepared remarks. I was wondering if you could just talk a little bit more about how much of that traction you're seeing is coming from new logo wins versus, say, expansion with existing customers? Eric Friedrichsen: Yes. I mean, look, we're seeing -- it's a combination with DISCO platform. Again, the performance has been incredible. We hit our internal goals by June so we're obviously really excited. As you know, when we put out the new platform and pricing approach, there were multiple goals behind it. So one of them was to improve our consideration. And that's both for new customers, but also for new large matters within our existing customer base. There were many times in the past where customers wouldn't even consider us because they found -- our pricing seemed so much more expensive than our competitors. Even if it wasn't, it's just that our model was one that they couldn't understand very well. So we're seeing improved consideration. And then another goal was more -- better close rates because customers are electing to go with DISCO because they understand that our pricing is competitive. And then the third thing is preserving our margins. There's been -- the theory was we were having to overdiscount because customers -- because they couldn't understand our pricing, we needed to discount more. And so we're very excited that all 3 of those goals so far for DISCO platform are coming through, and we're really excited about what we're seeing there. But it's actually for new customers and for existing customers. Mark Schappel: Okay. Great. And you may have just answered my -- at least part of my next question here. But in the prepared remarks, a lot of discussion around products. That's understandable given the aggressive rollout over the past year. But on the go-to-market front, maybe you could just give us an update on what you're seeing on sales productivity wise and whether you're seeing, for example, new sales reps kind of reaching productivity faster as your AI capabilities are just easier to demonstrate. Eric Friedrichsen: Sure. Yes. Look, it's been a great several quarters here in terms of seeing sales efficiency improve. And some of it is the dynamic that I spoke about earlier, that we're doing a much better job with integrated go-to-market in terms of enabling our law firm customers to sell on our behalf, which allows us to get much more efficient. But another thing that allows us to get more efficient is large matters. We've spoken about this in the past. But what's great about selling larger and strategic matters, not only is it more revenue, but they stay on our platform a lot longer, which creates a lot of downstream opportunity for us. And we've had a lot better success with selling large matters because of a few different dynamics. One is with you in every case. We've spoken about this before. But making sure that our customers for these very large matters, if they need services help, they understand that DISCO can help them from a services standpoint, whether it's ingesting data or managing a project that we're with them in every case, that has made a big difference. And another one is our ideal matter profile approach. So going after certain practice areas within law firms or certain industries within corporates, where we know DISCO delivers unique value and where the matters are bigger. So that's been a big boom for us. And the other one is just innovation around our AI capabilities our agentic AI with Cecilia Advanced Research and Cecilia and Auto Review, all of those together, our GenAI capabilities have allowed us to win larger matters within our existing large customers. And then the last one, as Aaron noted earlier, was the DISCO pricing approach, the new DISCO platform, we rolled this out in January and the uptake has been fantastic, which has allowed us to be much more efficient. So it's -- all of this combined has allowed our salespeople to be much more productive. Operator: There are no further questions at this time. I will now turn the call back to Eric Friedrichsen, CEO, for closing remarks. Eric Friedrichsen: Yes. Thank you very much. Look, I am extremely proud of the DISCO team for their excellent execution in Q2 and also for our customers for trusting us with their most important legal matters. I've said before that I think DISCO can be a 20% plus annual grower over time and Q2 reinforced that. We continue to make progress on the drivers that are going to help us get there, deepening our relationships with our largest customers, continuing to win the largest and most complex matters and driving broader adoption of our AI capabilities. The solid execution that we've seen over the last several quarters has put DISCO in a position of strength and we believe that, that strength along with a tremendous set of assets, an established and growing AI platform, access to a comprehensive body of U.S. case law and a decade of experience creating innovative tools for litigators positions DISCO to define AI for litigation. I can't possibly be more excited and proud of our team for both executing on our core strategy and for innovating around AI for litigation. So really, really excited. I appreciate everyone's time today and the great questions, and we look forward to seeing you all next quarter. Operator: This concludes today's call. Thank you for attending. You may now disconnect. Before you buy stock in Cs Disco, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Cs Disco wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $403,337!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,334,946!* Now, it’s worth noting Stock Advisor’s total average return is 958% — a market-crushing outperformance compared to 214% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 12, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. CS Disco (LAW) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Interested in CS Disco, Inc.? Here are five stocks we like better. Q2 fiscal 2026 revenue rose 13% to $43.1 million, driven by larger matters, stronger major-customer relationships and increased AI adoption. AI-related revenue more than tripled year over year, while trailing-12-month revenue from customers generating over $100,000 grew 15%. CS Disco launched its DISCO Unified Litigation Solution into a limited customer pilot, connecting case evidence with relevant legal authorities and litigation workflows. The company said the product will not contribute revenue in fiscal 2026 as it continues refining pricing and packaging. The company raised its full-year revenue outlook to $172 million–$179 million and maintained its expectation of adjusted EBITDA profitability in Q4 fiscal 2026. Q2 ended with $101.4 million in cash and short-term investments and no debt, despite a $3.4 million adjusted EBITDA loss. CS Disco (NYSE:LAW) reported second-quarter fiscal 2026 revenue growth of 13% as the legal technology company cited expanding large matters, deeper relationships with major customers and increased use of its artificial intelligence products. Total revenue for the quarter was $43.1 million, while software revenue reached $36.8 million, both up 13% from a year earlier. Services revenue increased 18% to $6.3 million, which Chief Financial Officer Aaron Barfoot said was primarily driven by professional services and managed-review work related to Cecilia AutoReview on the company’s largest matters. → Sandisk Just Delivered a Blowout Quarter—Here's Why the Stock Is Falling The company recorded adjusted EBITDA of negative $3.4 million and a net loss of $3.6 million, or $0.06 per share. CS Disco ended the quarter with $101.4 million in cash and short-term investments and no debt. Operating cash flow was negative $1.1 million, improving from negative $4.2 million in the prior-year period. Chief Executive Officer Eric Friedrichsen announced the launch of the DISCO Unified Litigation Solution, which the company described as a broader, long-term expansion beyond e-discovery. The platform is designed to connect a litigation team’s evidence with applicable case law, court rules, statutes and regulations through a unified interface. → 4 Oil and Gas ETF Plays as Prices Stay Sky-High Friedrichsen said the company ultimately intends to provide an integrated set of litigation tools spanning a matter from filing through trial preparation. In the near term, the offering is intended to help teams connect facts and controlling law, while incorporating litigation-specific workflows. “We are ultimately building a full suite of integrated litigation solutions that span the life of a matter from filing to verdict,” Friedrichsen said. → No Hangover: Revisiting Microsoft One Week After Earnings Chief Product, Technology and Strategy Officer Richard Crum said the solution has native access to an e-discovery database, including document text, metadata and customer work product, along with DISCO’s licensed corpus of U.S. case law, court rules, statutes and regulations. He said the system is designed to map claims to the legal elements needed to prove them and evaluate whether a matter’s evidence supports those elements. The offering remains in a pilot stage with a small group of selected customers using it on live matters. Crum said the company is focused on learning from engagement patterns and customer needs before setting pricing, packaging or timing plans. He added that CS Disco has filed three provisional patents related to its approach. During the question-and-answer session, Crum said investors should not include revenue from the Unified Litigation Solution in their models yet, while Friedrichsen clarified that the company does not expect revenue from the new offering in 2026. CS Disco said revenue attributable to its generative AI and agentic AI capabilities more than tripled year over year in the second quarter. Cecilia and AutoReview were key contributors, with AutoReview posting a material sequential increase driven by pipeline growth, larger matters, a higher number of matters and repeat usage. Barfoot said AutoReview set a revenue record during the quarter, supported by a record number of reviews executed and growth in the average size of AutoReview engagements. He said some customers that had favored traditional review processes in the first quarter shifted toward AutoReview in the second quarter as their readiness and comfort with AI improved. The company also began rolling out an enhancement to AutoReview intended to simplify the creation of inputs required for AI review. CS Disco said the change is designed to reduce the learning curve for customers with differing levels of AI readiness. Advanced Research, an agentic AI feature built into the company’s e-discovery products, is expected to roll out to all customers in the coming weeks. Crum said the product performs multistep reasoning across a matter’s evidentiary record and had received positive feedback during testing with law firms. CS Disco also cited strong demand for DISCO Platform, its newer commercial model. Friedrichsen said the company achieved its December 2026 year-end run-rate goal for the platform by June, aided by faster-than-anticipated adoption and demand. The model includes Cecilia AI on every matter and uses simplified pricing, which the company said has helped bring more and larger matters to the platform. The company said it had 354 customers generating more than $100,000 in revenue over the trailing 12 months. Those customers represented $128 million, or 77%, of trailing-12-month revenue, and revenue from the group grew 15% year over year. Non-GAAP gross margin was 76%, unchanged from the prior-year quarter. Sales and marketing expense totaled $15.7 million, or 36% of revenue, while research and development expense was $13.4 million, or 31% of revenue. Barfoot said the company’s R&D spending reflected continued investment in the Unified Litigation Solution, Advanced Research and AutoReview. CS Disco maintained its expectation of reaching adjusted EBITDA profitability in the fourth quarter of fiscal 2026. For the third quarter, the company forecast total revenue of $43.75 million to $45.75 million, software revenue of $38.1 million to $39.1 million, and adjusted EBITDA between negative $1.75 million and negative $0.25 million. For the full year, CS Disco raised its total revenue outlook to $172 million to $179 million and its software revenue outlook to $147.5 million to $152.5 million. It updated its adjusted EBITDA guidance to a loss of $8 million to $5 million. Barfoot said the higher full-year outlook reflected confidence in continued execution with large matters and large customers, adoption of DISCO Platform and momentum in AutoReview. He noted that the platform’s lower ingest fees could create short-term revenue pressure if adoption continues to exceed expectations, though the company expects that effect to be offset over time by ongoing platform fees and larger, longer-lasting matters. CS Disco, Inc is a provider of cloud-native, artificial intelligence-driven legal applications designed to streamline e-discovery, document review and compliance processes for law firms and corporate legal departments. The Austin, Texas–based company offers a unified platform that automates labor-intensive tasks using machine learning and predictive analytics, enabling legal professionals to process, search and review large volumes of data with greater speed and accuracy. At the core of CS Disco's product suite is its flagship e-discovery application, which supports early case assessment, data processing, review analytics and production workflows. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "CS Disco Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Performance was driven by a strategic focus on large, complex matters which generate higher lifetime value, longer platform retention, and increased AI usage. The company is shifting from a point-solution provider to a comprehensive litigation partner through the launch of the Unified Litigation Solution, integrating evidence with case law. Management attributes growth in large customer segments to an integrated go-to-market approach that enables law firms to market DISCO's AI capabilities to their corporate clients. The 'DISCO platform' commercial model reached its 2026 year-end run rate goals by June 2026, driven by simplified pricing and the inclusion of Cecilia AI on every matter. Revenue from generative and agentic AI capabilities more than tripled year-over-year, signaling a shift from experimental usage to integral operational adoption by litigators. Operational efficiency improved as the engineering organization transitioned to an AI-first development cycle, accelerating the release of Auto Review and Advanced Research. Management expects to achieve positive adjusted EBITDA in Q4 2026, supported by continued execution in large-matter acquisition and AI upsells. The Unified Litigation Solution is currently in a 'learn first, scale fast' pilot phase with no revenue contribution expected until after fiscal year 2026. Guidance assumes that the transition to the new DISCO platform pricing may cause short-term revenue headwinds from lower ingest fees, though this is expected to be offset by higher ongoing fees. The rollout of Advanced Research to all customers is scheduled for the coming weeks, following positive feedback from initial testing phases. Future product development will focus on 'persistent context,' allowing the AI to maintain a compounding understanding of a matter throughout its multi-year lifecycle. Management highlighted a competitive advantage in data access, noting that unlike some competitors limited by API partnerships, DISCO owns or has full licenses to the necessary legal corpus. The company filed three provisional patents related to the Unified Litigation Solution, emphasizing the proprietary nature of their litigation-specific AI workflows. A potential risk exists in the varying degrees of 'AI readiness' among customers, which management is addressing by simplifying the inputs required for AI-driven reviews. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management is intentionally withholding firm pricing or monetization plans during the current pilot phase to learn from customer usage patterns on live matters. The solution is viewed as a multi-year strategic bet rather than an immediate revenue driver for the current fiscal year. Management argues that general tools like Harvey or Legora lack the deep integration between evidence metadata and case law required for adversarial litigation. DISCO's platform is designed as a 'single pane of glass' to prevent the manual 'stitching' of data from disparate research and discovery systems. Confidence is underpinned by three factors: strong execution in large-matter acquisition, faster-than-expected adoption of the new pricing platform, and record Auto Review volume. The company is seeing a reversal in customer hesitation toward AI, with more clients now opting for AI-driven review over traditional methods.

Total Revenue of $43.1 Million, A Year Over Year Increase of 13% AUSTIN, Texas, August 05, 2026--(BUSINESS WIRE)--CS Disco, Inc. ("DISCO") (NYSE: LAW) today announced financial results for its second quarter ended June 30, 2026. "This was another strong quarter for DISCO as we continue to deepen our relationships with our largest customers, secure large and complex matters and extend our lead in AI built specifically for litigators," said Eric Friedrichsen, CEO of DISCO. "We are also excited to announce our new unified litigation solution that will move DISCO well beyond traditional ediscovery and into delivering full-stack litigation capabilities unlike anything else on the market." Second Quarter 2026 Financial Highlights: Software revenue was $36.8 million, up 13% compared to the second quarter of 2025. Total revenue was $43.1 million, up 13% compared to the second quarter of 2025. GAAP net loss was $8.7 million, compared to $10.8 million in the second quarter of 2025. Adjusted EBITDA was $(3.4) million, compared to $(2.7) million in the second quarter of 2025. Recent Business Highlights: Director Appointment: DISCO welcomed longtime information security expert and former Meta senior executive, Andre Mintz, to the Board of Directors in July 2026. Large Customers: DISCO grew to 354 customers with revenue in excess of $100,000 over the previous 12-month period as of June 30, 2026, a 10% increase compared to June 30, 2025. Unified Litigation Solution: DISCO announced the launch of a new unified litigation solution that combines the facts of a matter with the relevant U.S. case law to give litigators instant access to their most critical information in a single, powerful AI-native application. Third Quarter and Full Year 2026 Financial Outlook As of August 5, 2026, DISCO is issuing the following outlook for the third quarter of 2026 and fiscal year 2026: Third quarter of 2026: Software revenue in the range of $38.1 million - $39.1 million. Total revenue in the range of $43.75 million - $45.75 million. Adjusted EBITDA in the range of $(1.75) million - $(0.25) million. Fiscal year 2026: Software revenue in the range of $147.5 million - $152.5 million. Total revenue in the range of $172.0 million - $179.0 million. Adjusted EBITDA in the range of $(8.0) million - $(5.0) million. DISCO’s third quarter and fiscal year 2026 financial outlook is based on assumptions that are subject to change, many of which are outside of its control. If actual results vary from these assumptions, these expectations may change. There can be no assurance that DISCO will achieve these results. A 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 DISCO’s stock price and expenses associated with the stockholder litigation. DISCO expects the variability of the above charges to have a significant, and potentially unpredictable, impact on its future GAAP financial results. Conference Call Information DISCO will host a conference call and webcast at 7:30 a.m. CT (8:30 a.m. ET) today, August 5, 2026, to discuss its second quarter financial results and business highlights. The conference call can be accessed by dialing (833) 461-5787 from the United States or +1 (585) 542-9983 internationally with conference ID 436-526-207. 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, a webcast replay will be available at ir.csdisco.com for 12 months. About DISCO DISCO (NYSE: LAW) provides comprehensive, innovative solutions for modern litigation. We create and service an intuitive, cloud-native platform at the forefront of litigation technology, backed by the partnership of expert professional services and support. Leveraging the latest in AI to help law firms and corporations achieve smarter outcomes faster, our scalable products and tools allow customers to simplify everyday tasks and tackle complex matters at every stage of litigation. 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, Adjusted EBITDA margin; non-GAAP cost of revenue; non-GAAP gross profit; non-GAAP gross margin; non-GAAP research and development expense; non-GAAP research and development expense as a percentage of revenue; non-GAAP sales and marketing expense; non-GAAP sales and marketing expense as a percentage of revenue; non-GAAP general and administrative expense; non-GAAP general and administrative expense as a percentage of revenue; non-GAAP loss from operations; non-GAAP operating margin; non-GAAP net loss attributable to common stockholders, non-GAAP net loss attributable to common stockholders per share (basic and diluted) and non-GAAP net loss attributable to common stockholders as a percentage of revenue. 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 and Adjusted EBITDA margin, DISCO adjusts net loss for such items as depreciation and amortization expense; income tax provision; interest and other, net; stock-based compensation expense; payroll tax expense on employee stock transactions; expenses associated with stockholder litigation; 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 research and development expense, non-GAAP research and development expense as a percentage of revenue, non-GAAP sales and marketing expense and non-GAAP sales and marketing expense as a percentage of revenue, DISCO adjusts the respective GAAP balances for stock-based compensation expense, and other one-time, non-recurring items, when applicable. In the case of non-GAAP general and administrative expense, non-GAAP general and administrative expense as a percentage of revenue, non-GAAP loss from operations, non-GAAP operating margin, non-GAAP net loss attributable to common stockholders, non-GAAP net loss attributable to common stockholders per share (basic and diluted) and non-GAAP net loss attributable to common stockholders as a percentage of revenue, DISCO adjusts the respective GAAP balances for stock-based compensation expense, expenses associated with stockholder litigation, and other one-time, non-recurring items, when applicable. 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 DISCO’s board of directors concerning financial performance. Forward-Looking Statements This press release contains forward-looking statements, including, among other things, statements regarding DISCO’s future financial performance and DISCO’s product offerings, including the capabilities of DISCO’s unified litigation solution, strategies and business initiatives. 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 ability to maintain and advance our innovation and brand; (iii) our ability to effectively add new customers; (iv) our ability to effectively increase usage and penetration with our existing customer base; (v) our ability to expand our sales coverage and establish a digital sales channel; (vi) our ability to expand internationally; (vii) our ability to grow our partner ecosystem and maintain existing strategic relationships with law firms, legal services providers and our other partners; (viii) our ability to expand our offering portfolio to a wider range of legal processes outside of our current core offerings; (ix) our dependence on revenue from customer usage, which fluctuates based on the timing of and activity driven by legal matters for which our product offerings are used, and any shortfall of large matters on our platform; (x) our ability to pursue strategic acquisitions and strategic investments to expand the functionality and value of our product offerings; (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 we operate; (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) the impact of general macroeconomic conditions, such as fluctuations in inflation and interest rates and the imposition of tariffs in the United States and abroad, on our or our customers’ businesses; (xv) the impact of unfavorable conditions in the legal industry, including as a result of decreased levels of regulatory enforcement and future shutdowns of the U.S. government, on the growth of our business and usage of our product offerings; and (xvi) the impact that global events, such as the Russia-Ukraine war, the war in Iran and the broader conflict and escalating tensions in the Middle East, 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, filed with the SEC on May 6, 2026. 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 quarter ended June 30, 2026. 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. View source version on businesswire.com: https://www.businesswire.com/news/home/20260805264045/en/ Contacts Investor Relations Contact [email protected]

This article first appeared on GuruFocus. Release Date: August 05, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Total revenue grew 13% year-over-year to $43.1 million, with software revenue also up 13% to $36.8 million. The number of customers generating over $100,000 in the last 12 months increased 15% year-over-year, now representing 77% of total revenue. Revenue from generative AI and agentic AI capabilities more than tripled year-over-year, driven by strong adoption of Cecilia and Auto Review. The new DISCO platform commercial model exceeded internal expectations, hitting its December 2026 run-rate goal by June, with strong customer adoption. The company is on track to achieve adjusted EBITDA positivity in Q4 2026, with full-year guidance raised to $172-$179 million in total revenue. The launch of the unified litigation solution, which integrates evidence and case law, has received positive early feedback from pilot customers, positioning the company as a leader in AI for litigators. Adjusted EBITDA remained negative at -$3.4 million in Q2, with a margin of -8%, slightly worse than the prior year's -7%. Net loss widened to $3.6 million in Q2, compared to $2.8 million in the same period last year. The company may experience short-term revenue impacts from lower ingest fees as the DISCO platform adoption grows, potentially affecting near-term results. The unified litigation solution is still in a pilot phase with no firm pricing or monetization plan, and revenue from it is not expected in 2026. Research and development expenses increased to 31% of revenue, reflecting continued heavy investment in new products, which could pressure profitability in the near term. The company faces intense competition from general-purpose legal AI tools like Harvey and Legora, which may limit market share gains despite DISCO's deeper focus on litigation. Warning! GuruFocus has detected 3 Warning Signs with LAW. Is LAW fairly valued? Test your thesis with our free DCF calculator. Q: What does the customer adoption cycle of the new Unified Litigation Solution look like, and how should we think about its pricing model?A: Richard Crum, Chief Product Technology and Strategy Officer, stated the company is deliberately in a "learning phase" with a small, hand-selected group of customers on live matters. They are not putting a firm pricing or monetization plan in the market yet, as they want to learn how capabilities resonate and how customers' commercial needs should shape engagement. He emphasized this is an ambitious multi-year bet and the first step of a larger vision, advising not to build revenue from the solution into models for 2026. CEO Erik Friedrichsen added that this is customer-driven, as clients are demanding more value from outside counsel, and DISCO is uniquely positioned to help litigators win, not just be more efficient. Q: Where does the confidence come from for the reacceleration in subscription revenues implied in the fourth quarter guidance?A: CFO Aaron Barfoot attributed the confidence to three key factors: 1) Execution against the strategy of winning more large matters from the largest customers, which is expected to continue; 2) The strong adoption of the DISCO platform, which has exceeded expectations in pricing and volume; and 3) Positive traction in Auto Review, driven by improving customer AI readiness and new capabilities that simplify the process. Q: As legal AI platforms expand, do you foresee having to open up your platform to general-purpose tools like Harvey or Legora?A: Richard Crum explained that litigation is fundamentally more complex and adversarial than transactional legal work. DISCO's differentiation lies in its deep access to both the full evidentiary record and the comprehensive corpus of US case law, allowing it to reason across both. Erik Friedrichsen added a strategic point: companies that own data are not always willing to give it up. He noted that a competitor's partnership with a case law provider only has access to 1% of the data, whereas DISCO has access to all of it, which is a significant differentiator. Q: How much of the strong DISCO platform adoption is coming from new logo wins versus expansion with existing customers?A: CEO Erik Friedrichsen stated it is a combination of both. The new platform and pricing approach were designed to improve consideration for new customers and new large matters within the existing base. The goals were to improve consideration (as past pricing seemed opaque), improve close rates, and preserve margins by reducing the need for over-discounting. All three goals are being achieved, benefiting both new and existing customer acquisition. Q: Can you provide an update on sales productivity and whether new sales reps are reaching productivity faster due to easier-to-demonstrate AI capabilities?A: Erik Friedrichsen highlighted several drivers of improved sales efficiency: 1) An integrated go-to-market approach that enables law firm customers to sell DISCO on their behalf; 2) A focus on winning larger, strategic matters that stay on the platform longer; 3) The "with you in every case" services approach; 4) An ideal matter profile approach targeting specific practice areas and industries; and 5) Innovation in AI capabilities (Cecilia, Advanced Research, Auto Review) that helps win larger matters. The new DISCO platform pricing has also made salespeople much more productive. Q: Can you elaborate on the expansion motion into corporate legal departments compared to traditional law firm customers?A: Erik Friedrichsen explained that while they have 354 customers spending over $100,000 annually (77% of total revenue), they still only have 15-20% wallet share with these large customers. They have created an integrated go-to-market approach where sales, marketing, and customer success teams enable law firm customers to market DISCO internally to their case teams and externally to their corporate clients. He noted that law firms are increasingly asking DISCO to help them market their services, as corporate clients are demanding differentiation and AI-driven efficiency. Q: What were the key financial drivers behind the strong Q2 results, particularly in services revenue and Auto Review?A: CFO Aaron Barfoot reported total revenue of $43.1 million (up 13% YoY) and software revenue of $36.8 million (up 13% YoY). Services revenue grew 18% to $6.3 million, driven by professional services and Auto Review-related managed review work tied to the largest matters. He noted that Auto Review set a new revenue record in Q2, driven by a record number of reviews executed and growth in average review size, reversing the Q1 trend where some customers chose traditional routes due to AI readiness concerns. Q: What is the company's financial guidance for Q3 and the full year 2026?A: CFO Aaron Barfoot provided Q3 guidance of total revenue between $43.75 million and $45.75 million, software revenue between $38.1 million and $39.1 million, and adjusted EBITDA between negative $1.75 million and negative $0.25 million. For the full year, the company raised total revenue guidance to $172 million to $179 million and software revenue guidance to $147.5 million to $152.5 million. Full-year adjusted EBITDA guidance was updated to negative $8 million to negative $5 million, with the company still expecting to be adjusted EBITDA positive in Q4. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Interested in CS Disco, Inc.? Here are five stocks we like better. CS Disco posted a solid Q1 fiscal 2026 beat, with revenue rising 14% year over year to $41.9 million and adjusted EBITDA improving to negative $3.5 million. Both revenue and adjusted EBITDA came in above the high end of management’s guidance. AI adoption is becoming a key growth driver as customers increasingly use DISCO’s litigation-focused tools, including Cecilia Q&A and Case Builder. Management said early demand was better than expected, with larger matters, multi-year deals and growing data volumes supporting platform momentum. The company raised full-year guidance and said it still expects to reach adjusted EBITDA profitability in Q4. CS Disco also ended the quarter with $103 million in cash and no debt, giving it a strong balance sheet as it invests in AI and platform development. CS Disco (NYSE:LAW) reported stronger first-quarter fiscal 2026 results, with management pointing to growing adoption of its AI products, larger litigation matters and expanded relationships with major customers as key drivers of the quarter. Chief Executive Officer Eric Friedrichsen said total revenue rose 14% year over year to $41.9 million, while software revenue increased 12% to $34.7 million. Services revenue rose 25% to $7.2 million, according to Chief Financial Officer Aaron Barfoot. The company said total revenue exceeded the high end of its guidance range, while software revenue came in above the midpoint of guidance. → Beyond NVIDIA: Picks-and-Shovels AI Plays with Strong Momentum Adjusted EBITDA was negative $3.5 million, improving from a negative 14% adjusted EBITDA margin in the prior-year period to negative 8% in the latest quarter. Barfoot said adjusted EBITDA also exceeded the high end of the company’s guidance. Friedrichsen said CS Disco saw strength in four areas during the quarter: increased wallet share among its largest customers, growth in large multi-terabyte matters, continued adoption of generative AI capabilities and accelerating data growth on its platform. → 3 Ways to Target the Resources Powering AI and Data Centers The company highlighted early demand for the DISCO Platform, which bundles AI tools such as Cecilia Q&A, auto timelines, document summaries, definitions and DISCO Case Builder with e-discovery capabilities. Friedrichsen said adoption was “much better than anticipated” in the first three months, with encouraging trends including larger matters, increased committed revenue, multi-year deals and growing AI adoption. Richard Crum, chief product, technology and strategy officer, said the company’s AI strategy is focused specifically on litigation rather than broader legal tasks. He said litigators need tools that help them build case intelligence and improve outcomes, not merely automate routine work. → Quantum Earnings Season Is Ramping Up—What to Watch From 2 Major Players Crum also discussed Cecilia Q&A: Advanced Research, which he described as an agentic AI toolset designed to perform multi-step analysis across large datasets. The company is testing the capability with select customers on live case data before a broader rollout to priority customers. CS Disco said the number of customers generating more than $100,000 in total revenue over the last 12 months increased to 347. Revenue from those customers totaled $124 million over that period, representing 77% of total revenue and 13% year-over-year growth. Friedrichsen cited Mound Cotton and Reynolds Frizzell LLP as examples of firms expanding their use of CS Disco’s technology through multi-year enterprise agreements. Mound Cotton selected DISCO as its provider of choice for e-discovery technology across the firm after reviewing potential partners, while Reynolds Frizzell expanded a relationship that dates back to 2015. Management also pointed to AutoReview as a growing area of interest. Friedrichsen said the AI-powered review product allows law firms to bring more review work in-house rather than sending it to alternative legal service providers. Barfoot said AutoReview helped generate both software and services activity, noting that some customers initially choose traditional managed review while evaluating broader AI implementation. On a non-GAAP basis, gross margin was 75%, unchanged from the prior-year quarter. Sales and marketing expense was $14.8 million, or 35% of revenue, compared with 36% of revenue a year earlier. Research and development expense was $12.9 million, or 31% of revenue, compared with 33% a year earlier, as the company continued investing in AI and platform development. General and administrative expense was $8.6 million, or 21% of revenue, compared with 23% in the prior-year quarter. Non-GAAP net loss was $4.2 million, or 10% of revenue, compared with a net loss of $4.9 million, or 14% of revenue, a year earlier. Net loss per share was $0.07, compared with $0.08 in the year-ago period. The company ended the quarter with $103 million in cash and short-term investments and no debt. Operating cash flow was negative $11.7 million, compared with negative $10.5 million in the first quarter of the prior year. For the second quarter of fiscal 2026, CS Disco guided for total revenue of $41.5 million to $43.5 million and software revenue of $36.1 million to $37.1 million. The company expects adjusted EBITDA of negative $4.5 million to negative $2.5 million. For the full fiscal year, the company raised its total revenue outlook to a range of $169.25 million to $178.75 million. Software revenue is expected to be $146 million to $152.5 million, while adjusted EBITDA is forecast between negative $8 million and negative $4 million. Friedrichsen said the company remains focused on reaching adjusted EBITDA profitability in the fourth quarter of the year. He also reiterated his view that CS Disco could become a “20%+ grower over time,” citing progress in expanding wallet share, acquiring larger matters and accelerating AI adoption. During the question-and-answer portion of the call, Needham analyst Scott Berg asked whether new tools from frontier large language model providers had disrupted sales cycles or customer product usage. Crum said generative AI may commoditize some simple legal tasks, but said CS Disco’s litigation-focused intelligence layer remains differentiated. Friedrichsen added that the company has not seen a slowdown in sales cycles related to those tools. “If anything, it’s helped us drive AI adoption,” he said, because law firms are increasingly interested in how AI can affect their work. Asked by Canaccord analyst DJ Hynes about the broader industry implications of AI, Friedrichsen said law firms have an opportunity to bring more work in-house, particularly review work previously outsourced to alternative legal service providers. He said that shift could allow firms to generate more revenue while retaining more context for case strategy. CS Disco, Inc is a provider of cloud-native, artificial intelligence-driven legal applications designed to streamline e-discovery, document review and compliance processes for law firms and corporate legal departments. The Austin, Texas–based company offers a unified platform that automates labor-intensive tasks using machine learning and predictive analytics, enabling legal professionals to process, search and review large volumes of data with greater speed and accuracy. At the core of CS Disco's product suite is its flagship e-discovery application, which supports early case assessment, data processing, review analytics and production workflows. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "CS Disco Q1 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for May 2026.

Image source: The Motley Fool. Wednesday, May 6, 2026 at 8:30 a.m. ET Chief Executive Officer — Eric Friedrichsen Chief Financial Officer — Aaron Barfoot Chief Product Technology and Strategy Officer — Richard Crum Need a quote from a Motley Fool analyst? Email [email protected] Aleksey Lakchakov: Good morning and thank you for joining us on today's conference call to discuss the financial results for DISCO's first quarter of fiscal year 2026. With me on today's call are Eric Friedrichsen, DISCO's Chief Executive Officer; Aaron Barfoot, DISCO's Chief Financial Officer; and Richard Crum, DISCO's Chief Product Technology and Strategy Officer. Today's call will include forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 including, but not limited to, statements regarding our financial outlook and the future performance; our future capital expenditures; market opportunity, market position, product and go-to-market strategies and growth opportunities; and the benefits of our product offerings and developments in the legal technology industry. In addition to our prepared remarks, our earnings press release, SEC filings and a replay of today's call can be found on our Investor Relations website at ir.csdisco.com. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance or achievements to be materially 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 titled Risk Factors in the company's annual report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 25, 2026, and the company's quarterly report on Form 10-Q for the quarter ended March 31, 2026. 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. Reconciliations between GAAP and non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures versus the closest GAAP equivalent is available in our earnings release. And with that, I'd like to turn the call over to Eric. Eric Friedrichsen: Thank you, Aleksey. Good morning, everyone, and thank you for joining us. In the first quarter, DISCO delivered strong results across the board. With significant product momentum, continued traction with our largest customers in both software and services and strong underlying financial performance; we continue to drive accelerating and sustainable revenue growth. As AI permeates through the legal industry, law firms are looking for ways to boost their productivity, increase efficiency and deliver better outcomes in order to win more business as our corporate clients look to control litigation spend. The key to success in this environment is trust. The trust is earned through security, enterprise scale and litigation specific capabilities necessary to help lawyers win on the largest and most complex matters. This is where DISCO shines. We are in an excellent place with unique capabilities to continue to be a disruptor and leader in AI for litigation and our progress in Q1 has helped further differentiate DISCO from both general purpose legal AI tools and those in the traditional Ediscovery space. In Q1, total revenue grew 14% year-over-year to $41.9 million and software revenue grew 12% year-over-year to $34.7 million. This was the fourth consecutive quarter of accelerating growth in total revenue if you exclude the onetime contingent deal we recognized in Q3 of last year. We are very pleased to deliver strong software growth and to beat the high end of our total revenue guidance range. Adjusted EBITDA improved 32% to negative $3.5 million in Q1, also beating the high end of our guidance range. We saw strong Q1 performance in 4 key areas: first, increased wallet share among our biggest customers; second, growth of large multi-terabyte matters; third, continued adoption of our generative AI capabilities; and fourth, overall acceleration in the growth of data on our platform. Regarding improvement with our biggest customers: in Q1 we increased the number of customers that generated more than $100,000 in total revenue during the last 12 months to 347. The revenue attributable to these customers during the last 12 months totaled $124 million representing 77% of total revenue over this period and 13% year-over-year growth. We are continuing to add multi-terabyte matters as more complex litigation comes on to our platform. In Q1 we saw an acceleration in net new large matters added, which is a very promising sign given that these matters generate more revenue, expand over time and last longer on our platform. Continued adoption of our generative AI capabilities was driven by both Cecilia AI and Auto Review. DISCO is transforming high stakes litigation through an AI-native stack built on a decade of proprietary data innovation and purpose-built legal workflows. At its core, Cecilia's agentic intelligence allows legal teams to speak directly to their data, uncovering complex evidence in seconds rather than weeks. Cecilia Advanced Research is our new platform-native agentic AI capability, which is a breakthrough for Ediscovery and investigations. It is capable of much more sophisticated autonomous reasoning that extracts deeper context, makes next level connections and delivers significantly more detailed and thorough results across even the largest data sets. We're currently in testing with select customers on live case data in preparation for a broader rollout to wait-listed customers next month. The feedback is fantastic. Customers instantly grasp how much more they can accomplish and see it as a real example of what other AI providers have only been promising. Increased adoption has also extended through to our AI-powered managed services, which deliver expert-level results at software scale economics. The result is a secure enterprise-grade ecosystem that fundamentally redefines the speed and efficiency of modern discovery. DISCO Auto Review is a more accurate and leaner alternative to traditional review and an excellent example of our AI capabilities in action. As more law firms look for new revenue streams, Auto Review allows them to bring more of that work in-house rather than sending it to alternative legal service providers, moving review from a cost center to a profit center. This is a win-win-win for the client, for the law firm and for DISCO because it provides a clear ROI and better outcomes for the client while providing more differentiated revenue streams for the law firm and for DISCO. Our Auto Review capabilities continue to lead the market in terms of speed and efficacy and we believe that as more and more firms consider AI for their review needs that we are very well positioned to capture that demand. Interest in Auto Review continues to grow. We are seeing more customers engage with us to evaluate how Auto Review can help with their larger matters and it has proven to be a strong driver for our Managed Review offering, which also enjoyed a strong Q1. That's a great example of how our AI capabilities combined with our customer value proposition of With You in Every Case are bringing more customers, more matters and more revenue to DISCO. As far as overall acceleration of usage, we had a significantly better-than-expected launch of the DISCO platform in Q1. For context, the DISCO platform is our powerful industry-leading set of AI capabilities including Cecilia Q&A, auto timelines, document summaries, definitions and case builder bundled together in 1 solution with our Ediscovery capabilities on every matter. The DISCO platform gives customers everything they need to manage and win their matters for 1 competitive price. In the first 3 months, we've seen strong demand from customers with early adoption that has been much better than anticipated and we're equally pleased from a financial perspective. While it's still in the early days, we're seeing some very encouraging trends from DISCO platform adoption, including larger matters, increased committed revenue, multiyear deals and growing AI adoption. These results demonstrate how much easier we've made it to do business with DISCO, something further proven by the strong customer demand. Continuing to grow the DISCO platform is a key driver behind expanding wallet share among our existing base of large customers with large matters. I always like to highlight a couple of real-world examples to illustrate the value that DISCO is delivering to customers. These are examples of customers who have moved from important transactional relationships to strategic relationships that benefit us both. The first is Mound Cotton, a leading litigation boutique focused on insurance matters with a nearly 90-year history. Following the launch of our DISCO platform in the first quarter, Mound Cotton signed a 3-year enterprise agreement making DISCO the provider of choice for Ediscovery technology across their firm. The reasoning was simple. They wanted a strategic partner that combines secure cutting-edge AI technology with professional services and support that they need for their largest and most sensitive matters. Mound Cotton conducted a broad review of potential partners in search of a comprehensive integrated solution before selecting DISCO and noted that it quickly became clear that DISCO was the better product for their clients and better experience for their attorneys. As a firm that closely works with large global financial institutions, Mound Cotton was drawn to DISCO's reputation for security, privacy and reliability. They said we have the luxury of being able to select the best-in-class solution and the unanimous verdict was that DISCO is a dramatically better product today and that the gap will only widen in the future. As a firm with sophisticated clients that demand the best tools, DISCO is the right choice. We hear similar things from many of the top firms we work with. They need advanced secure technology paired with the expertise to help them get the most out of it to deliver results for their clients. The DISCO platform is making that easier than ever. A second example that demonstrates how we're building multiyear relationships because customers see our technology's potential is Reynolds Frizzell LLP, a generalist commercial litigation firm in Houston with a prominent energy litigation practice. Reynolds Frizzell is one of our longest relationships. They've been using DISCO since 2015 and they also recently signed a multiyear enterprise agreement to expand their use of our technology across their firm. Reynolds Frizzell has taken a considered approach to new technology in the legal tech space thoughtfully vetting AI applications and focusing on technology specifically designed for legal use cases. As they looked into legal AI applications, DISCO was a natural place to start based on a decade-long relationship built on trust and collaboration. Our Reynolds Frizzell partner said that they've used and evaluated a number of different AI legal tools and were especially impressed by DISCO Cecilia capabilities. We're excited to have it available for our cases, the partner said. This illustrates the power of our With You in Every Case value proposition. Our combination of advanced technology and expert professional services has made DISCO into an essential resource for Reynolds Frizzell and we're continuing to serve and grow this long-standing relationship into the future. The stories about Mound Cotton and Reynolds Frizzell are just 2 examples of our strategy in action and there are dozens more every quarter demonstrating our ability to develop these relationships and dramatically expand them over time. All told, Q1 was a strong quarter for DISCO with continued growth in our core business, a better-than-expected launch of the DISCO platform and great progress with AI adoption. We believe this creates significant momentum for us throughout 2026 and beyond. With that, I'll next turn it over to Richard to discuss how our recent product advancements and our product road map are shaping our longer-term view of the broader opportunity to provide powerful AI solutions for litigation. Richard? Richard Crum: Thank you, Eric. As Eric noted, we are incredibly excited about the customer response we're seeing to the DISCO platform and Cecilia Advanced Research. Both are important steps for us, but are really only the beginning of what we know is possible in litigation technology with our AI capabilities. The legal industry as a whole is in a period of significant change. Law firms face pressure to leverage new technology and consider changes to their business models. Corporate legal departments are expected to control spend while workloads are growing. And everyone is grappling with the growing volume of new complex data leading to very real data management and fact-finding challenges. The general legal AI companies and even tools from foundational model providers are offering legal workflow solutions that address a wide range of transactional legal work such as redlining contracts, drafting memos and extracting information from a set of documents. Legal tasks for efficiency and automation to speed up work is truly valuable. Litigation is an entirely different game. It is significantly more complex. Litigators are not asking for ways to work faster. They want solutions that shift the odds in their favor by delivering the crucial case intelligence that leads to victory. They need to win. And the expertise and precision required to deliver that requires scaled technology like we have developed at DISCO. Put another way, litigators need solutions that are purpose-built for the unique demands of the practice. It needs AI built for litigation. That's what we're building. At DISCO, we are continuing to extend our AI applications for our customers beyond traditional Ediscovery compliance to unlock both new strategic advantages and drive value across the litigation life cycle. Let me explain that with some more detail. There are 2 high level outputs from Ediscovery, production compliance and a detailed understanding of the facts and evidence in context. Ediscovery has traditionally focused on production compliance because it is an important court mandated step in the litigation process with real consequences if you get it wrong. But it is also a necessary tick-the-box exercise with limited strategic value on its own. Most Ediscovery tools have made production more accurate, automated and efficient; but they have not made it more strategic or independently valuable. This is where DISCO is different. Our ability to surface not just the facts, but the complete picture of context, intent and relationships between documents and data. DISCO goes beyond the required production to deliver a comprehensive set of facts and evidence organized, tagged, connected and understood in relation to the claims of the matter. The real value for litigators is in the mastery of those facts. The second piece is in the law itself and it's worth reminding everyone that DISCO holds a license for the full corporate of U.S. case law, statutes, regulations and court rules. The facts of the case and the law of the jurisdiction together in 1 platform will be a powerful combination. We will share more about our vision and how it will come together soon, but let me turn back to what we're delivering right now. Three years ago DISCO first dramatically disrupted traditional Ediscovery with Cecilia AI. Our new Cecilia Advanced Research is an agentic AI toolset that leapfrogs the capability of those many copycat Q&A tools that have followed us by helping attorneys develop winning case theories during discovery and all along the litigation life cycle as the matter advances to settlement or trial. Unlike simple Q&A tools, Cecilia Advanced Research functions as an intelligence agent performing multistep analysis across massive amounts of data to deliver defensible court-ready insights that litigators use to build winning case theory from day 1. Cecilia Advanced Research can generate work product for litigators as a case advances, build tighter and more compelling narratives with our integrated timelines functionality, streamline deposition and witness preparation and interrogate the record at trial and they do this all in 1 powerful integrated and secure platform from DISCO. We're currently in testing with select customers on live case data in preparation for this broader rollout to priority customers on our wait list later this month and the feedback is fantastic. Customers instantly grasp how much more they can accomplish and see it as a very real example of what other AI providers have only been promising. The new era of AI, both generative and agentic, opens up a treasure trove of opportunity. You don't have to know how to use complicated technology. You just have to know how to articulate the outcome you're looking for, something that lawyers are already incredibly good at. DISCO AI lets litigators focus on the output of the process, winning for their clients who hire them to deliver. We believe this means lower barriers to adoption, greater usage of our platform across the life of a matter and most importantly, better results for our customers and their clients. In the simplest of terms, at DISCO we are directly investing in our customers' competitive edge to help them win cases and grow their business. DISCO is the AI solution for litigators. With that, I'll hand it over to Aaron. Aaron Barfoot: Thank you, Richard. Q1 results were strong across all our revenue lines. We exceeded the top end of total revenue guidance in the quarter and came in above the midpoint of our guidance range in software. In Q1 2026, total revenue was $41.9 million, up 14% year-over-year while software revenue was $34.7 million, up 12% year-over-year. This was the fourth straight quarter of accelerating total revenue growth excluding the impact of onetime contingent software revenue recognized in Q3 of last year. Services revenue was $7.2 million, up 25% year-over-year. To start, I want to touch on some of the dynamics we are seeing in our software business. As Eric mentioned, we saw strong traction in Q1 with DISCO platform. We are seeing more cases start on DISCO platform with more matters and gigabytes than we had expected through Q1 as customers see the obvious benefits of bundled products and all-in-one pricing. We expect these new larger matters will be a tailwind for our business in the coming quarters, but we could see variability as customers move from sets of individual products and ingest fees to the DISCO platform. I also want to touch on our performance in services, which exceeded expectations in Q1 and was driven by growth of both professional services and our review business. We've discussed in the past the tremendous impact we believe Auto Review will have on the litigation workflow as more customers embrace AI adoption. While we have customers all along the spectrum of AI readiness, both new and existing customers are curious about Auto Review's capabilities. A further dynamic we are seeing is that as customers learn about both our traditional review and Auto Review, some choose to use traditional review as they consider broader AI implementation. That dynamic helped fuel our strong services result in Q1. Turning to profitability metrics. In discussing the remainder of the income statement, please note that unless otherwise specified, all references to our gross margin, operating expenses and net loss are on a non-GAAP basis. Adjusted EBITDA is also a non-GAAP financial measure. Our gross margin in Q1 was 75%, consistent with 75% the prior year. As we mentioned before, our gross margins fluctuate from period to period based on the nature of our customers' usage, for example the amount and types of data ingested and managed on our platform. Sales and marketing expense for Q1 was $14.8 million or 35% of revenue compared to 36% of revenue the prior year. The year-over-year dollar increase was driven by personnel costs as we invest in our go-to-market capabilities. Research and development expense for Q1 was $12.9 million or 31% of revenue compared to 33% of revenue the prior year. Research and development increased year-over-year primarily driven by higher personnel costs as our team continues to focus on AI and platform development. General and administrative expense in Q1 was $8.6 million or 21% of revenue compared to 23% of revenue in Q1 of the prior year. General and administrative expense were relatively flat year-over-year. Adjusted EBITDA was negative $3.5 million in Q1 representing an adjusted EBITDA margin of negative 8% compared to an adjusted EBITDA margin of negative 14% in Q1 of the prior year, also a 600 basis point improvement. We are pleased with this progress and the fact that adjusted EBITDA exceeded the high end of our guidance. Net loss in Q1 was $4.2 million or negative 10% of revenue compared with a net loss of $4.9 million or 14% of revenue in Q1 of the prior year. Net loss per share for Q1 was $0.07 compared to $0.08 per share for Q1 of the prior year. Turning to the balance sheet and cash flow statement. We ended Q1 with $103 million in cash and short-term investments and no debt, maintaining our strong financial position. Operating cash flow in Q1 was negative $11.7 million compared to negative $10.5 million in Q1 of the prior year. Turning to our guidance. For Q2 2026, we're providing total revenue guidance in the range of $41.5 million to $43.5 million and software revenue guidance in the range of $36.1 million to $37.1 million. We expect adjusted EBITDA to be in the range of negative $4.5 million to negative $2.5 million. For fiscal year 2026, we are increasing our total revenue guide to the range of $169.25 million to $178.75 million and software revenue guidance to the range of $146 million to $152.5 million. We expect adjusted EBITDA to be in the range of negative $8 million to negative $4 million. Now I'd like to turn the call over to the operator for Q&A. Operator? Operator: [Operator Instructions] Your first question comes from the line of Scott Berg with Needham. Scott Berg: Probably a question for Eric or Richard, I wanted to start off with I think the A topic in the space in the quarter. There's been a lot of questions we feel it from investors on the ability for customers within the litigation space to use some of the tools that have been released on the frontier large language models out there and you all addressed that a little bit in your prescripted remarks. But I think the question in all of that is does it actually disrupt sales cycles or maybe how your customers are using the product during the quarter as they maybe "tried" or wanted to evaluate those technologies or do you really see it maybe more as a nonevent in your operational activities? Richard Crum: Scott, this is Richard. Thanks for that question and I think it's an important dynamic to unpack a little bit. It's certainly written about a lot that generative AI has the ability to commoditize some of the simple steps that lawyers do, right, whether it's summarizing documents or running a search or drafting. But I think it also in some ways elevates the intelligence layer where DISCO, right, that's where we've invested, that's where we shine because the context that comes from the power of how DISCO's platform powers litigation brings evidence and facts to life for our customers, right? It's so much more powerful than what any large language model or a tool that's simply built on top of that large language model could ever do even with the same data. And so I think what we're seeing is our customers realizing that Ediscovery actually presents a real shift from just a simple tool to perform a job into something that with DISCO can give them a strategic advantage. Eric Friedrichsen: Yes. Scott, I'll add on to that. This is Eric. No, we haven't seen any slowdown at all in sales cycles related to these new tools that have come out. In fact if anything, it's helped us drive AI adoption because lawyers, overall law firms are much more interested to see how AI can impact them. And we've got AI that can drive incredible ROI and help provide better outcomes ultimately for customers' clients. So the short answer is no, we haven't seen any negatives at all. It's been very positive for us. Scott Berg: Excellent. And then from a follow-up perspective, you all commented that the DISCO platform I think saw better interest and adoption in Q1 than maybe what you had initially anticipated there. But in your conversations with customers so far, I guess what have you found in terms of pricing and use relative to, I don't know, a customer that was just using Ediscovery before. If you can help us understand maybe what that opportunity or journey is like to take a customer from what's historically been a single solution on the DISCO platform to the all-in opportunity there. I think that would be really helpful. Eric Friedrichsen: Really demand for AI is what drove far better-than-expected results with the DISCO platform adoption. Certainly, there was some pent-up demand from both our customers and our sales teams. They were excited for the opportunity to have Cecilia AI, Case Builder and all of our core Ediscovery capabilities integrated across all of their matters. So that's the main driver. But also as you remember, our old pricing model was hard to understand and it made some customers feel that we were much more expensive than the competition especially for larger matters when we were actually pretty similar. And so a shift to more of an apples-to-apples pricing model has really increased our consideration for new matters and for new customers and it's made a big impact already. I mean we've seen some very big and complex matters starting the DISCO platform right here out of the bat in Q1. We've seen increased revenue commitments. We've seen longer-term agreements from some of these customers. So DISCO platform is off to a great start and I'm really optimistic about the future. Operator: Our next question comes from David Hynes with Canaccord. David Hynes: Eric, I wanted to ask a big picture kind of industry implications question related to the AI-driven advancements we've seen in legal tech. Do you think it makes it so that the largest firms are able to take on more so that they own kind of more of the space or does it level the playing field so that smaller firms are able to be more competitive? And I guess what are the implications of all this perspective change for DISCO? Eric Friedrichsen: Yes, I'll get started and others can feel free to chime in. But look, I think this is an opportunity for law firms to generate more revenue. The whole legal industry right now is rethinking their business models. And what AI can do is give the opportunity for these law firms to be able to take more business in-house that they were previously sending out to alternative legal service providers. If you think about particularly when it comes to the review process, this low level, low dollar work that was fairly mundane tasks that law firms didn't really feel like fit their model for the most part in how they wanted to provide value to their customers. They were sending it out to these alternative legal service providers doing that human work and part of that was they were missing out on the revenue. The other part of it was they were losing the context of all that great work. And so now the fact that they have the opportunity to leverage much, much better technology with generative AI and products like Auto Review to be able to bring that business back in-house, add extreme value on top of it in terms of legal judgment and generative AI consulting services and keep the context in-house to really help their lawyers go drive case strategy. It's a real game changer. Ultimately, the law firm can generate more revenue. That's good for DISCO. But also the end client can save money and get better outcomes. So ultimately, I think this is a big shift and a big opportunity for each of us. David Hynes: Yes. Makes sense. Aaron, a follow-up for you. So the $100,000-plus net add number was particularly strong this quarter, but software revenue has held more or less flat the last few quarters. Can you just help me understand that dynamic? Are the customer adds a leading indicator and software revenue should follow or is the uptick in folks moving over that spend threshold just services driven? Like how should we think about this? Aaron Barfoot: I think when you look at the quarter and you look at the movement of the $100,000 customers, we're certainly happy that sequentially it grew 5% quarter-over-quarter and I would definitely characterize that as a leading indicator. And the reason for that is obviously the matter comes in, it ingests and then it expands and moves on to the platform. So that's the dynamic that happens and that's why it's a leading indicator. I'd also add though with that when you think about it as a leading indicator, there's going to be -- there's movements both ways, right? You have matters coming in, you have matters going off. And so you're always in a usage model looking at the triangulation of both. And so it is obviously having a strong quarter usually is a good leading indicator of those matters coming in, but it also depends on what's coming out and that's what goes into our models. I think when you look at the quarter, relatively speaking, one of the other elements you asked about kind of with the growth is, and I touched on this in my prepared remarks, with Auto Review. We're super happy with the traction we've seen. It's actually brought us new customers' matters. It's brought us matters from existing customers. And in bringing those in, what happens is those customers come in at varying states of AI readiness. And so as it comes in through the pipeline, we've seen a handful of those go and convert and become Managed Reviews. And so that helps drive -- so Auto Review actually helps drive part of the fee on the services line for the quarter, which is why we're very proud to come at the upper end of the range there. At the same time, we're happy that some of those came in, became Managed Reviews; but subsequently, those customers have come back to us with other matters and chosen Auto Review. So I think what you're watching, and Eric kind of alluded to this too, is law firms are becoming more and more comfortable with AI and how it plays and so we're watching that closely. Eric Friedrichsen: Yes. I think it also just speaks to in every case, customer value proposition, right? So we're with our customers in every case. And if they choose at a certain point because we're not quite ready to use Auto Review, we can leverage our AI managed services and our Managed Review to really help them in the short term. So overall, I'm incredibly pleased about the revenue, 14% revenue growth for the business this quarter. David Hynes: Yes, yes. And just so we're all perfectly clear. Auto Review falls into the software line and Managed services obviously falls in the services line. Is that correct? Richard Crum: Correct. And Auto Review actually has 2 components today. It actually has -- part of it sits in software and part of it sits in services. And the reason for that is that actually goes to some of the familiarization part of it as well. What happens is today, a customer, we might actually help engineer the prompts for them. So that's still manual work that we do as we set them up. But I think as customers become more familiar over time, that prompting will not be required and so it will become fully -- it will be truly software revenue. But today, it sits partially in software and partially in services. Operator: There are no further questions at this time. I will now turn the call back to Eric Friedrichsen, CEO, for closing remarks. Eric Friedrichsen: Yes. Thanks, everyone. Thanks for the questions. Q1 was a strong quarter for DISCO. The demand for our AI capabilities drove better-than-expected results for the launch of the DISCO platform. We're already seeing benefits from our new pricing model, which was designed to increase consideration, to improve win rates, to reduce discounts, to improve stickiness and ultimately to provide more value to our customers. I've said before and I'll say it again that I believe that DISCO can be a 20%-plus grower over time. In the first quarter, we made continued progress on the key drivers that are going to make that happen; things like increasing our share of wallet with our large customers, acquiring larger matters and accelerating AI adoption. So all 3 of those demonstrate that our strategy is working. And along with our product road map and where we're going next, DISCO is really poised to be the leader in AI for litigators. We've increasingly transformed high stake litigation through our purpose-built legal workflows. We are very much focused on litigation not general legal. And when you combine our strategy with our path to reach adjusted EBITDA profitability in Q4 of this year, we believe DISCO is on an excellent trajectory today and we're positioned for the future as our solutions become increasingly the standard to help litigators win. So thanks for your time today. We'll see you next quarter. Operator: This concludes today's call. Thank you for attending. You may now disconnect. Before you buy stock in Cs Disco, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Cs Disco wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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Achieved 14% year-over-year total revenue growth, marking the fourth consecutive quarter of acceleration when excluding prior one-time items. Performance was driven by increased wallet share among large customers, with those generating over $100,000 in revenue now accounting for 77% of the total. The launch of the DISCO platform exceeded expectations by bundling AI capabilities with Ediscovery, simplifying pricing to improve win rates and reduce discounting. Management attributes growth in large, multi-terabyte matters to the platform's ability to handle complex litigation that requires high-security and enterprise scale. Strategic focus remains on 'AI for litigators' rather than general legal AI, prioritizing case intelligence and winning outcomes over simple task automation. The 'With You in Every Case' value proposition is converting transactional relationships into multi-year enterprise agreements with prominent law firms. Operational efficiency improved significantly, with adjusted EBITDA margin expanding by 600 basis points year-over-year to negative 8%. Management reiterated the goal of reaching adjusted EBITDA profitability by Q4 2026 while targeting 20%-plus revenue growth over the long term. The broader rollout of Cecilia Advanced Research is scheduled for next month, targeting wait-listed customers following positive feedback from live case testing. Guidance assumes continued tailwinds from larger matters and increased committed revenue, though management noted potential variability as customers transition to the new platform pricing. Future product strategy involves integrating the full corpus of U.S. case law and statutes with case facts to provide a comprehensive litigation intelligence platform. The company expects Auto Review to increasingly shift from a service-supported model to pure software revenue as customer familiarity with AI prompting grows. Auto Review is currently categorized as both software and services revenue due to the manual prompt engineering support required during the initial adoption phase. Services revenue grew 25% year-over-year, partially fueled by customers who evaluate AI but opt for traditional managed review during their transition period. Increased personnel costs in R&D and sales reflect intentional investments in go-to-market capabilities and AI platform development. The company maintains a strong liquidity position with $103 million in cash and no debt to fund its growth initiatives. Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Management stated they have seen no slowdown in sales cycles due to general-purpose AI tools; instead, these tools have increased overall market interest in AI adoption. They distinguished DISCO's 'intelligence layer' from general LLMs, noting that litigators require purpose-built context and evidence management that general tools cannot provide. The shift to the DISCO platform was driven by demand for integrated AI (Cecilia) and a move away from complex, hard-to-understand legacy pricing models. The new 'apples-to-apples' pricing model has increased consideration for large matters and led to longer-term revenue commitments. AI allows law firms to bring high-volume review work back in-house from alternative providers, turning a previous cost center into a profit center. This shift benefits DISCO by increasing platform usage while helping law firms retain case context and generate more revenue. Management characterized the 5% sequential growth in $100,000-plus customers as a leading indicator, as matters typically ingest and then expand over time. Revenue growth is a balance of new matters coming on and legacy matters finishing, which management factors into their usage-based financial models. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here.