Earnings release
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NEWS RELEASE DISCO Announces Third Quarter 2026 Financial Results 2026-11-04 Total Revenue of $45.3 Million, A Year over Year Increase of 11%, or 15% when Excluding the Contingent Matter in Q3 2025 AUSTIN, Texas--(BUSINESS WIRE)-- CS Disco, Inc. (“DISCO”) (NYSE: LAW) today announced nancial results for its third quarter ended September 30, 2026. "DISCO had another strong quarter building AI for Litigators, paced by our sixth consecutive quarter of double-digit software growth, rapid growth in our DISCO Platform, which has grown 10x since Q1 2026, and continued customer enthusiasm for our uni ed litigation solution which just added a second cohort to our pilot program,” said Eric Friedrichsen, CEO of DISCO. “Importantly, we also reached break-even Adjusted EBITDA in Q3 - a full quarter ahead of schedule." Third Quarter 2026 Financial Highlights: Software revenue was $38.6 million, up 10% compared to the third quarter of 2025 and up 13% when excluding the impact of the contingent matter in Q3 2025. The contingent matter in Q3 2025 related to a contract in which consideration payable was contingent upon the conclusion of the legal matter. The Company does not recognize revenue related to such contracts until the legal matter is resolved, which occurred in Q3 2025 and led to $1.2 million of software revenue recognized during the period. Total revenue was $45.3 million, up 11% compared to the third quarter of 2025 and up 15% when excluding the impact of the contingent matter in Q3 2025. The contingent matter resolved in Q3 2025 led to $1.3 million of total revenue recognized during the period. 1
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GAAP net loss was $5.0 million, compared to $13.7 million in the third quarter of 2025. Adjusted EBITDA was $0.1 million, compared to $(0.3) million in the third quarter of 2025. Recent Business Highlights: Positive Adjusted EBITDA: DISCO achieved positive Adjusted EBITDA in Q3 2026, one quarter ahead of expectations. Large Customers: As of September 30, 2026, DISCO grew to 374 customers with revenue in excess of $100,000 over the previous 12-month period, a 15% increase compared to September 30, 2025. Advanced Research: DISCO announced the general availability of Advanced Research, an agentic AI application that adds autonomous, multi-step reasoning and transparent decision-making logic to help litigators quickly evolve case strategy and gain deep insights from evidence. Fourth Quarter and Full Year 2026 Financial Outlook As of November 4, 2026, DISCO is issuing the following outlook for the fourth quarter of 2026 and scal year 2026: Fourth quarter of 2026: Software revenue in the range of $39.4 million - $40.4 million. Total revenue in the range of $45.8 million - $47.8 million. Adjusted EBITDA in the range of $0.0 million - $1.5 million. Fiscal year 2026: Software revenue in the range of $149.5 million - $150.5 million. Total revenue in the range of $176.1 million - $178.1 million. Adjusted EBITDA in the range of $(6.8) million - $(5.3) million. DISCO’s fourth quarter and scal year 2026 nancial 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 e orts due to the high variability and complexity and low visibility with respect to the charges excluded from this non-GAAP measure; in particular, the e ects of stock-based compensation expense speci c to equity compensation awards that are directly impacted by unpredictable uctuations in DISCO’s stock price and expenses associated with the stockholder litigation. DISCO expects the variability of the above charges to have a signi cant, and potentially unpredictable, impact on its future GAAP 2
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nancial results. Conference Call Information DISCO will host a conference call and webcast at 7:30 a.m. CT (8:30 a.m. ET) today, November 4, 2026, to discuss its third quarter nancial 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 812832646. The live webcast of the conference call and other materials related to DISCO’s nancial 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 rms 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 nancial measures: Adjusted EBITDA, Adjusted EBITDA margin; non-GAAP cost of revenue; non-GAAP gross pro t; 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 nancial 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 3
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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 pro t, 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 nancial measures. These non-GAAP nancial measures are not prepared in accordance with GAAP, do not re ect a comprehensive system of accounting and may not be completely comparable to similarly titled measures of other companies due to potential di erences in the exact method of calculation between companies. Certain items that are excluded from these non-GAAP nancial measures can have a material impact on operating loss and net loss. As a result, these non-GAAP nancial measures have limitations and should be considered in addition to, not as a substitute for or superior to, the closest GAAP measures, or other nancial 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 nancial performance of DISCO's business; to evaluate the e ectiveness of DISCO's business strategies; to provide consistency and comparability with past nancial performance; to facilitate a comparison of DISCO's results with those of other companies, many of which use similar non-GAAP nancial measures to supplement their GAAP results; and in communication with DISCO’s board of directors concerning nancial performance. Forward-Looking Statements This press release contains forward-looking statements, including, among other things, statements regarding DISCO’s future nancial performance and DISCO’s product o erings, including the capabilities of DISCO’s uni ed 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 nancial results, operations, and other matters are intended to identify forward-looking statements. You should not 4
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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 di er materially, including (i) our history of operating losses; (ii) our ability to maintain and advance our innovation and brand; (iii) our ability to e ectively add new customers; (iv) our ability to e ectively 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 rms, legal services providers and our other partners; (viii) our ability to expand our o ering portfolio to a wider range of legal processes outside of our current core o erings; (ix) our dependence on revenue from customer usage, which uctuates based on the timing of and activity driven by legal matters for which our product o erings 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 o erings; (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 su er security or data privacy breaches or other unauthorized or improper access to, use of, or destruction of our proprietary or con dential data, employee data, or personal data; (xiii) our ability to compete e ectively with existing competitors and new market entrants; (xiv) the impact of general macroeconomic conditions, such as uctuations in in ation and interest rates and the imposition of tari s 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 o erings; and (xvi) the impact that global events, such as the Russia-Ukraine war, the war in Iran and the broader con ict and escalating tensions in the Middle East, and any related economic downturn could have on our or our customers’ businesses, nancial 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 lings with the Securities and Exchange Commission (“SEC”), including our Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, led with the SEC on August 5, 2026. Further information on potential risks that could a ect actual results will be included in the subsequent periodic and current reports and other lings that we make with the SEC from time to time, including our Quarterly Report on Form 10-Q for the quarter ended September 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 re ect events or circumstances after the date of this press release or to re ect new information or the 5
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occurrence of unanticipated events, except as required by law. CS DISCO, INC.Condensed Consolidated Balance Sheets(in thousands, except par value amounts)(unaudited)September 30, 2026December 31, 2025Assets Current assets:Cash and cash equivalents$ 12,533$ 19,655Short-term investments 84,248 94,942Accounts receivable, net 32,429 25,622Insurance recovery receivable related to legal loss8,191 8,039 Prepaid expenses and other current assets5,132 4,736 Total current assets 142,533152,994Property and equipment, net 9,415 7,583Operating lease right-of-use assets4,337 6,121Other intangible assets, net 70 206Goodwill 5,898 5,898 Other assets 1,148 837 Total assets $ 163,401$ 173,639 Liabilities and stockholders’ equity Current liabilities:Accounts payable $ 3,410$ 3,888Accrued expenses 6,575 6,533Accrued legal loss 11,500 11,500Accrued salary and bene ts 11,362 10,457Deferred revenue 4,613 5,382Operating leases 2,796 2,624 Finance leases 45 44 Total current liabilities 40,301 40,428Operating leases, non-current 2,112 4,231Finance leases, non-current 39 72 Other liabilities 987 801 Total liabilities 43,439 45,532Commitments and contingencies Stockholders’ equity Preferred stock $0.005 par value, 100,000 shares authorized and noshares issued and outstanding as of September 30, 2026 andDecember 31, 2025 — —Common stock $0.005 par value, 1,000,000 shares authorized as ofSeptember 30, 2026 and December 31, 2025; 65,676 and 63,264shares issued and outstanding as of September 30, 2026 andDecember 31, 2025, respectively329 317Additional paid-in capital 484,796469,560Accumulated other comprehensive (loss) income(58) 32 Accumulated de cit (365,105) (341,802) Total stockholders’ equity 119,962128,107 Total liabilities and stockholders’ equity$ 163,401$ 173,639 CS DISCO, INC.Condensed Consolidated Statements of Operations and Comprehensive Loss(in thousands, except per share amounts)(unaudited)Three Months EndedSeptember 30,Nine Months EndedSeptember 30, 2026202520262025 Revenue $ 45,340$ 40,919$ 130,368$ 115,678Cost of revenue 11,10610,00832,93729,194 6
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Gross pro t 34,23430,91197,43186,484Operating expenses:Research and development13,80713,42043,43941,645Sales and marketing16,31715,03249,27744,800General and administrative9,712 16,92129,62638,921 Total operating expenses39,83645,373122,342125,366 Loss from operations(5,602) (14,462) (24,911) (38,882)Interest and other income, net714 937 2,023 3,499 Loss from operations before income taxes(4,888) (13,525) (22,888) (35,383)Income tax provision(139) (140) (415) (487) Net loss attributable to commonstockholders $ (5,027)$ (13,665)$ (23,303)$ (35,870) Unrealized gain (loss) on investments(17) 18 (90) (31) Comprehensive loss$ (5,044)$ (13,647)$ (23,393)$ (35,901) Net loss per share attributable to commonstockholders, basic and diluted$ (0.08)$ (0.22)$ (0.36)$ (0.58) Weighted-average shares used in computingnet loss per share attributable to commonstockholders, basic and diluted65,25962,09464,21961,320 CS DISCO, INC.Condensed Consolidated Statements of Cash Flows(in thousands)(unaudited)Nine Months EndedSeptember 30, 2026 2025 Cash ow from operating activities:Net loss $ (23,303)$ (35,870)Adjustments to reconcile net loss to cash used in operations:Depreciation and amortization2,378 2,731Stock-based compensation 15,236 18,447Charge to allowance for credit losses1,165 1,674Non-cash operating lease costs1,784 1,688Amortization of premium on short-term investments(2,372) (2,568)Other 386 93Changes in operating assets and liabilities:Accounts receivable (7,972) (2,790)Insurance recovery receivable related to legal loss(152) (9,240)Prepaid expenses and other current assets(397) (1,413)Other long-term assets (83) —Accounts payable (889) (633)Accrued expenses and other 876 (1,488)Accrued legal loss — 15,500Deferred revenue (769) (24)Operating lease liabilities (1,947) (1,666)Other liabilities 258 (139) Net cash used in operating activities(15,801) (15,698)Cash ow from investing activities:Purchases of property, equipment and capitalized softwaredevelopment costs (4,204) (2,546)Purchases of short-term investments(114,359) (155,427)Maturities of short-term investments127,335149,639Proceeds from disposal of equipment20 6 Net cash provided by (used in) investing activities8,792 (8,328)Cash ow from nancing activities:Proceeds from exercise of stock options11 36Net proceeds from issuance of common stock under Employee StockPurchase Plan 408 421Repurchase of common stock related to net share settlement(499) (70)Cash paid for acquisitions — (296)Principal payments on nance lease obligations(33) (32) Net cash (used in) provided by nancing activities(113) 59Net decrease in cash and cash equivalents:(7,122) (23,967)Cash and cash equivalents at beginning of period19,655 52,771 Cash and cash equivalents at end of period$ 12,533$ 28,804 7
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CS DISCO, INC.Condensed Consolidated Statements of Cash Flows (continued)(in thousands)(unaudited)Nine Months EndedSeptember 30, 2026 2025 Supplemental disclosure:Cash paid for taxes $ 592$ 1,057 Non-cash investing and nancing activities:Property and equipment included in accounts payable and accruedliabilities $ 14$ 72 CS DISCO, INC.Reconciliation from GAAP to Non-GAAP Results(in thousands, except for percentages and per share amounts)(unaudited)Three Months EndedSeptember 30,Nine Months EndedSeptember 30, 2026202520262025 Net loss $ (5,027) $ (13,665) $ (23,303) $ (35,870)Depreciation and amortizationexpense 805 902 2,378 2,731Income tax provision139 140 415 487Interest and other, net(714) (937) (2,023) (3,499)Stock-based compensation expense4,738 6,090 15,23618,447Payroll tax expense on employeestock transactions138 150 492 461Expenses associated withstockholder litigation— 7,023 — 9,169 Adjusted EBITDA$ 79$ (297) $ (6,805) $ (8,074) Adjusted EBITDA margin—% (1)% (5)% (7)% Three Months EndedSeptember 30,Nine Months EndedSeptember 30, 2026202520262025 Cost of revenue$ 11,106$ 10,008$ 32,937$ 29,194Non-GAAP adjustments:Stock-based compensation expense(466) (561) (1,480) (1,622) Non-GAAP cost of revenue$ 10,640$ 9,447$ 31,457$ 27,572 Non-GAAP gross pro t$ 34,700$ 31,472$ 98,911$ 88,106 Non-GAAP gross margin77% 77% 76% 76% Three Months EndedSeptember 30,Nine Months EndedSeptember 30, 2026202520262025 Research and development$ 13,807$ 13,420$ 43,439$ 41,645Non-GAAP adjustments:Stock-based compensation expense(1,356) (1,959) (4,753) (6,246) Non-GAAP research and development$ 12,451$ 11,461$ 38,686$ 35,399 Non-GAAP research and development asa % of revenue 27% 28% 30% 31% Three Months EndedSeptember 30,Nine Months EndedSeptember 30, 2026202520262025 Sales and marketing$ 16,317$ 15,032$ 49,277$ 44,800Non-GAAP adjustments:Stock-based compensation expense(1,083) (1,420) (3,620) (4,242) Non-GAAP sales and marketing$ 15,234$ 13,612$ 45,657$ 40,558 Non-GAAP sales and marketing as a % of34% 33% 35% 35% 8
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revenue 34% 33% 35% 35% Three Months EndedSeptember 30,Nine Months EndedSeptember 30, 2026202520262025 General and administrative$ 9,712$ 16,921$ 29,626$ 38,921Non-GAAP adjustments:Stock-based compensation expense(1,833) (2,150) (5,383) (6,337)Expenses associated withstockholder litigation— (7,023) — (9,169) Non-GAAP general and administrative$ 7,879$ 7,748$ 24,243$ 23,415 Non-GAAP general and administrative asa % of revenue 17% 19% 19% 20% Three Months EndedSeptember 30,Nine Months EndedSeptember 30, 2026202520262025 Loss from operations$ (5,602) $ (14,462) $ (24,911) $ (38,882)Operating margin (12)% (35)% (19)% (34)%Non-GAAP adjustments:Stock-based compensation expense4,738 6,090 15,23618,447Expenses associated withstockholder litigation— 7,023 — 9,169 Non-GAAP loss from operations$ (864) $ (1,349) $ (9,675) $ (11,266) Non-GAAP operating margin(2)% (3)% (7)% (10)% Three Months EndedSeptember 30,Nine Months EndedSeptember 30, 2026202520262025 Net loss attributable tocommon stockholders$ (5,027) $ (13,665) $ (23,303) $ (35,870)Non-GAAP adjustments:Stock-based compensation expense4,738 6,090 15,23618,447Expenses associated withstockholder litigation— 7,023 — 9,169 Non-GAAP net loss attributable tocommon stockholders$ (289) $ (552) $ (8,067) $ (8,254) Non-GAAP net loss attributable tocommon stockholders per share, basicand diluted $ —$ (0.01) $ (0.13) $ (0.13) Weighted average shares used tocompute basic and diluted net loss pershare 65,25962,09464,21961,320 Non-GAAP net loss attributable tocommon stockholders as a % of revenue(1)% (1)% (6)% (7)% Investor Relations Contact IR@csdisco.com Source: DISCO 9