CS Disco, Inc. (LAW) | Investment Case

1. Company Snapshot

1.a. Company Description

CS Disco, Inc., a legal technology company, provides cloud-native and artificial intelligence-powered legal solutions for ediscovery, legal document review, and case management for enterprises, law firms, legal services providers, and governments.The company offers DISCO Ediscovery, a solution that automates ediscovery process and saves legal departments from manual tasks associated with collecting, processing, enriching, searching, reviewing, analyzing, producing, and using enterprise data that is at issue in legal matters.It also provides DISCO Review, an AI-powered document review solution, which consistently delivers legal document reviews; and DISCO Case Builder, a solution that allows legal professionals to collaborate with teams to build a compelling case by offering a single place to search, organize, and review witness testimony and other legal data.

The company's tools are used in various legal matters comprising litigation, investigation, compliance, and diligence.CS Disco, Inc.was founded in 2012 and is headquartered in Austin, Texas.

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1.b. Last Insights on LAW

CS Disco's recent performance has been positively driven by its Q3 2025 earnings call, which highlighted the company's strong financials. The company's innovative AI Positioning Program, launched by its subsidiary LAW90, provides a competitive advantage in case preparation and litigation outcomes. Additionally, CS Disco's comparison to Karooooo (NASDAQ:KARO) showcases its strength in valuation, institutional ownership, and profitability. The company's growth prospects are also being evaluated against its peers in the computer and technology sector.

1.c. Company Highlights

Last Price	8.9
Change Percentage	1.31%
Open	8.82
Previous Close	8.79
Market Cap ( Millions)	556
Volume	172215
Year High	9.11
Year Low	3.31
M A 50	6.72
M A 200	5.03

FCF Yield	-3.31%
Dividend Yield	0.00%
ROE	-38.04%
Debt / Equity	5.96%
Net Debt / EBIDTA	24.19%
Price To Book	3.96
Price Earnings Ratio	-9.64
Price To FCF	-30.22
Price To sales	3.76
EV / EBITDA	-9.76

2. CS Disco's Q3 FY2025 Earnings: Accelerated Growth and Improved Operational Execution

CS Disco reported a strong Q3 FY2025 with total revenue of $40.9 million, up 13% year-over-year, and software revenue of $35.2 million, up 17% year-over-year. The company's gross margin improved to 77% from 74% in the prior year. Adjusted EBITDA was negative $297,000, a $4.2 million improvement over Q3 2024. Net loss was $0.6 million or negative 1% of revenue. Actual EPS came out at -$0.01, beating estimates of -$0.06. The company's cash and short-term investments stood at $113.5 million with no debt.

Publication Date: Nov -26

                                    📋 Highlights
                                    Revenue Growth Acceleration:
                                                Total revenue reached $40.9 million (+13% YoY), driven by $35.2 million in software revenue (+17% YoY), excluding a $1.3 million one-time contingent case.
Adjusted EBITDA Improvement:
                                                Adjusted EBITDA improved by $4.2 million to -$297,000, reflecting better cost management and operational efficiency.
Strong Customer Concentration:
                                                326 customers contributed over $100,000 in 12-month revenue, generating 76% of total revenue, highlighting customer retention and value.
AI-Driven Adoption Growth:
                                                Cecilia AI customers increased over 3x YoY, with one Am Law 50 client growing usage 7x and revenue over 12x since 2024.
Financial Position & Guidance:
                                                Closed Q3 with $113.5 million in cash and no debt; FY 2025 total revenue guidance is $154.4–$156.4 million, with adjusted EBITDA breakeven targeted by Q4 2026.

                                

Revenue Growth Drivers

The growth acceleration is attributed to a larger strategy focusing on large multi-terabyte matters, with positive trends continuing in this area. The company saw growth in revenue from both large and small matters, with acceleration in revenue from multi-terabyte matters. Adoption of generative AI capabilities, including Cecilia AI and AI-driven Auto Review, is increasing, with Cecilia AI customers more than tripling year-over-year. A great example is an Am Law 50 customer that adopted Cecilia AI, growing its usage 7x from Q3 2024 to Q3 2025, corresponding to a more than 12x growth in revenue.

Operational Highlights

DISCO was named a leader in the 2025 IDC MarketScape for worldwide end-to-end eDiscovery software, noted for handling large data volumes effectively and supporting core workflows. The company refined its approach to target customers that are a good fit for DISCO based on scale, industry, and complexity. A new initiative focuses on intellectual property litigation, highlighting DISCO's strength in this area. The company's AI capabilities make its products effective, with dynamic topic clustering technology and predictive analytics that observe attorney work and direct them to relevant documents.

Valuation and Outlook

With a P/S Ratio of 3.05 and EV/EBITDA of -7.87, the market is pricing in significant growth expectations. Analysts estimate next year's revenue growth at 8.4%. For Q4 2025, total revenue guidance is $38.75 million to $40.75 million, and software revenue guidance is $33.75 million to $34.75 million. Adjusted EBITDA is expected to be negative $3.5 million to negative $1.5 million. For fiscal year 2025, total revenue guidance is $154.4 million to $156.4 million, and software revenue guidance is $132.6 million to $133.6 million, with adjusted EBITDA expected to be negative $11.5 million to negative $9.5 million.

3. NewsRoom

ROSEN, A RANKED AND LEADING LAW FIRM, Encourages CarMax, Inc. Investors to Secure Counsel Before Important Deadline in Securities Class Action First Filed by the Firm - KMX

Dec -07

Source: newsfilecorp.com

ROSEN, A TRUSTED AND LEADING LAW FIRM, Encourages Jayud Global Logistics Ltd. Investors to Secure Counsel Before Important Deadline in Securities Class Action - JYD

Dec -07

Source: newsfilecorp.com

ROSEN, A HIGHLY RECOGNIZED LAW FIRM, Encourages Tandem Diabetes Care, Inc. Investors to Inquire About Securities Class Action Investigation - TNDM

Dec -07

Source: newsfilecorp.com

ROSEN, A RANKED AND LEADING LAW FIRM, Encourages Alvotech Investors to Inquire About Securities Class Action Investigation - ALVO

Dec -07

Source: newsfilecorp.com

ROSEN, A LEADING INVESTOR RIGHTS LAW FIRM, Encourages Stride, Inc. Investors to Secure Counsel Before Important Deadline in Securities Class Action – LRN

Dec -07

Source: globenewswire.com

ROSEN, A LEADING LAW FIRM, Encourages Perrigo Company plc Investors to Secure Counsel Before Important Deadline in Securities Class Action - PRGO

Dec -06

Source: newsfilecorp.com

ROSEN, A LEADING INVESTOR RIGHTS LAW FIRM, Encourages Synopsys, Inc. Investors to Secure Counsel Before Important Deadline in Securities Class Action - SNPS

Dec -06

Source: newsfilecorp.com

ROSEN, A TRUSTED AND LEADING LAW FIRM, Encourages StubHub Holdings, Inc. Investors to Secure Counsel Before Important Deadline in Securities Class Action – STUB

Dec -06

Source: globenewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (15.38%)

6. Segments

DISCO Hold, DISCO Request, DISCO Ediscovery, and DISCO Case Builder

Expected Growth: 15.4%

Growing demand for cloud-based ediscovery solutions, increasing adoption of legal technology, and expansion of CS Disco's product portfolio with DISCO Hold, DISCO Request, DISCO Ediscovery, and DISCO Case Builder are driving growth in the market.

DISCO Review Business and Professional Services

Expected Growth: 15.3%

Growing demand for e-discovery solutions, increasing adoption of cloud-based platforms, and rising need for efficient legal document review and case management drive the growth of DISCO Review's market.

7. Detailed Products

CS Disco Ediscovery

A cloud-based ediscovery platform that helps legal teams to manage and analyze large volumes of data for litigation, investigations, and compliance.

CS Disco Review

A cloud-based document review platform that enables legal teams to review and analyze large volumes of documents quickly and accurately.

CS Disco Collect

A cloud-based data collection platform that enables legal teams to collect and preserve data from various sources, including email, files, and databases.

CS Disco Analytics

A cloud-based analytics platform that enables legal teams to analyze and visualize large volumes of data to identify patterns, trends, and insights.

CS Disco AI

A cloud-based artificial intelligence platform that enables legal teams to automate tasks, such as document review and data analysis, using machine learning and natural language processing.

8. CS Disco, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

CS Disco, Inc. operates in a niche market with limited substitutes, reducing the threat of substitutes.

Bargaining Power Of Customers

CS Disco, Inc. has a diverse customer base, but some large customers may have bargaining power due to their size and volume of business.

Bargaining Power Of Suppliers

CS Disco, Inc. has a diversified supplier base, reducing the bargaining power of individual suppliers.

Threat Of New Entrants

The legal technology industry is rapidly evolving, and new entrants may disrupt the market with innovative solutions.

Intensity Of Rivalry

CS Disco, Inc. operates in a competitive market, but its strong brand and customer loyalty help to mitigate the intensity of rivalry.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	4.37%
Debt Cost	3.95%
Equity Weight	95.63%
Equity Cost	15.15%
WACC	14.66%
Leverage	4.57%

11. Quality Control: CS Disco, Inc. passed 4 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

WM Technology

A-Score: 4.5/10

Value: 7.5

Growth: 3.0

Quality: 7.0

Yield: 0.0

Momentum: 8.0

Volatility: 1.3

1-Year Total Return ->

CS Disco

A-Score: 4.5/10

Value: 7.4

Growth: 4.9

Quality: 5.4

Yield: 0.0

Momentum: 5.5

Volatility: 3.7

1-Year Total Return ->

Enfusion

A-Score: 4.5/10

Value: 0.7

Growth: 7.0

Quality: 5.7

Yield: 0.0

Momentum: 8.0

Volatility: 5.3

1-Year Total Return ->

ShotSpotter

A-Score: 4.1/10

Value: 5.3

Growth: 5.8

Quality: 4.4

Yield: 0.0

Momentum: 6.0

Volatility: 3.0

1-Year Total Return ->

Compass

A-Score: 3.8/10

Value: 4.4

Growth: 5.7

Quality: 2.8

Yield: 0.0

Momentum: 7.5

Volatility: 2.7

1-Year Total Return ->

Jamf

A-Score: 3.3/10

Value: 4.2

Growth: 5.8

Quality: 4.8

Yield: 0.0

Momentum: 0.5

Volatility: 4.7

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

51.95%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

14.66%

CS Disco, Inc. - US1263271058

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on LAW

1.c. Company Highlights

Fairly Valued

Medium Volatility

Average Yield

Earnings Beats

Cheaper

Stable Momentum

Weak Momentum

Revenues Beats

Average Growth

2. CS Disco's Q3 FY2025 Earnings: Accelerated Growth and Improved Operational Execution

Revenue Growth Drivers

Operational Highlights

Valuation and Outlook

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (15.38%)

6. Segments

DISCO Hold, DISCO Request, DISCO Ediscovery, and DISCO Case Builder

Expected Growth: 15.4%

DISCO Review Business and Professional Services

Expected Growth: 15.3%

7. Detailed Products

CS Disco Ediscovery

CS Disco Review

CS Disco Collect

CS Disco Analytics

CS Disco AI

8. CS Disco, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: CS Disco, Inc. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

8.9$

Current Price

8.9$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA