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What changed in CS Disco, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of CS Disco, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+342 added−319 removedSource: 10-K (2025-02-20) vs 10-K (2024-02-22)

Top changes in CS Disco, Inc.'s 2024 10-K

342 paragraphs added · 319 removed · 276 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

31 edited+5 added−1 removed62 unchanged
Biggest changeSuch reports and other information filed by us with the SEC are available free of charge 10 Table of Contents on our website at ir.csdisco.com when such reports are available on the SEC’s website. The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov.
Biggest changeThe SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. The information contained on the websites referenced in this Annual Report on Form 10-K is not incorporated by reference into this filing.
These characteristics of our product offerings encourage and accelerate widespread adoption by lawyers and other legal professionals, which in turn accelerates the time to value for our customers. 6 Table of Contents • Increased Accuracy and Quality of Review.
These 6 Table of Contents characteristics of our product offerings encourage and accelerate widespread adoption by lawyers and other legal professionals, which in turn accelerates the time to value for our customers. • Increased Accuracy and Quality of Review.
Our comprehensive product offerings currently include: • DISCO Hold automates the manual work necessary to comply with preservation requirements, empowering legal teams to preserve data, notify custodians, track holds with a defensible audit trail, and collect data when ready. • DISCO Request automates response compliance for legal requests like service of process requests, subpoenas, and law enforcement requests, giving legal teams control and visibility from intake to resolution. • DISCO Ediscovery automates much of the ediscovery process, saving legal departments from costly and cumbersome manual tasks associated with collecting, processing, enriching, searching, reviewing, analyzing, producing and using enterprise data that is at issue in legal matters. • DISCO Review is an AI-powered document review that consistently delivers legal document reviews that are high quality, on time and on budget. • DISCO Case Builder allows legal professionals to collaborate across teams to effectively build a compelling case by offering a single place to search, organize and review witness testimony and other important legal data.
Our comprehensive product offerings currently include: • DISCO Hold automates the manual work necessary to comply with preservation requirements, empowering lawyers to preserve data, notify custodians, track holds with a defensible audit trail, and collect data when ready. • DISCO Request automates response compliance for legal requests like service of process requests, subpoenas, and law enforcement requests, giving legal teams control and visibility from intake to resolution. • DISCO Ediscovery automates much of the ediscovery process, saving legal departments from costly and cumbersome manual tasks associated with collecting, processing, enriching, searching, reviewing, analyzing, producing and using enterprise data that is at issue in legal matters. • DISCO Review is an AI-powered document review that consistently delivers legal document reviews that are high quality, on time and on budget. • DISCO Case Builder allows legal professionals to collaborate across teams to effectively build a compelling case by offering a single place to search, organize and review witness testimony and other important legal data.
See the section titled “Risk Factors - Risks related to Litigation, Regulatory Compliance and Governmental Matters - We operate in a highly regulated industry, and either are or may be subject to a wide range of federal, state and local, as well as foreign, laws, rules and regulations and our failure to comply with these laws and regulations may force us to change our operations or harm our business.” Corporate Information We were incorporated in Delaware in December 2013.
See the section titled “Risk Factors - Risks related to Litigation, Regulatory Compliance and Governmental Matters - We operate in a highly regulated industry, and either are or may be subject to a wide 10 Table of Contents range of federal, state and local, as well as foreign, laws, rules and regulations and our failure to comply with these laws and regulations may force us to change our operations or harm our business.” Corporate Information We were incorporated in Delaware in December 2013.
By automating the manual, time-consuming and error-prone parts of legal hold, legal request, ediscovery, legal document review and case management, we empower legal departments to focus on delivering better legal outcomes.
By automating the manual, time-consuming and error-prone parts of legal hold, legal request, ediscovery, legal document review and case management, we empower lawyers to focus on delivering better legal outcomes.
Legal departments that use our product offerings and use many law firms across their legal matters, as well as law firms and service providers that use our product offerings for multiple clients, are each treated as one customer.
Legal departments that use our product offerings and use many law firms across their legal matters, as well as law firms and service providers that use our product offerings for multiple clients, are generally treated as one customer.
Competitors in this category include large dedicated legal services providers such as Consilio LLC, Epiq Systems, Inc. and KLDiscovery Inc., the legal services divisions of large professional services firms such as Deloitte & Touche LLP, Ernst and Young LLP, KPMG LLP and PricewaterhouseCoopers LLP and a large number of smaller regional and local legal services providers.
Competitors in this category include large dedicated legal services providers such as Consilio LLC, Epiq Systems, Inc. and KLDiscovery Inc., the legal services divisions of large professional 9 Table of Contents services firms such as Deloitte & Touche LLP, Ernst and Young LLP, KPMG LLP and PricewaterhouseCoopers LLP and a large number of smaller regional and local legal services providers.
Additionally, our product development process and roadmap are informed by the continuous feedback we receive from customers who use our software as well as our employees who use our software as part of our DISCO Review offering and in our support and professional services organization. As of December 31, 2023, we had 133 employees in our research and development organization.
Additionally, our product development process and roadmap are informed by the continuous feedback we receive from customers who use our software as well as our employees who use our software as part of our DISCO Review offering and in our support and professional services organization. As of December 31, 2024, we had 163 employees in our research and development organization.
The principal purposes of our equity and other incentive plans are to attract, retain and motivate selected employees, consultants and directors. As of December 31, 2023, we had 543 full-time employees. Sales and Marketing We sell our product offerings through a direct sales force which is organized based on the stages of our sales motion.
The principal purposes of our equity and other incentive plans are to attract, retain and motivate selected employees, consultants and directors. As of December 31, 2024, we had 561 full-time employees. 8 Table of Contents Sales and Marketing We sell our product offerings through a direct sales force which is organized based on the stages of our sales motion.
T he existence of a pending application is not an assurance that it will issue or lead to a registration.
The existence of a pending application is not an assurance that it will issue or lead to a registration.
Our Growth Strategies We are pursuing multiple levers for future growth: Fuel the DISCO Product-Led Growth Engine • Maintain and Advance Our Innovation and Brand.
Our Growth Strategies We are pursuing multiple levers for future growth: 7 Table of Contents Fuel the DISCO Product-Led Growth Engine • Maintain and Advance Our Innovation and Brand.
Our market is global and we have a significant opportunity to expand internationally. In 2023, less than 10% of our revenue was generated by customers outside of the United States. • Pursue Strategic Acquisitions and Strategic Investments.
Our market is global and we have a significant opportunity to expand internationally. In the year ended December 31, 2024, less than 10% of our revenue was generated by customers outside of the United States. • Pursue Strategic Acquisitions and Strategic Investments.
See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the definition of dollar-based net retention rate. Law affects everyone, from the largest multinational corporations to local mom-and-pop businesses, from the most powerful national governments to the smallest towns and from major civic organizations to individual citizens.
See the sections titled “Our Customers” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for definitions of a customer and dollar-based net retention rate, respectively. Law affects everyone, from the largest multinational corporations to local mom-and-pop businesses, from the most powerful national governments to the smallest towns and from major civic organizations to individual citizens.
In addition, we expect to expand our product offerings to address additional areas of the legal function and we will likely face further competition from existing companies in such areas. 9 Table of Contents We believe the principal competitive factors in our market include the following: • level of user satisfaction; • ease of deployment, implementation and use; • scalability, reliability, security and performance; • breadth of offering; • product offering features and capabilities; • accuracy, quality and speed of review; • ability to connect multiple stakeholders in cloud-based product offerings; • quality and use of AI; • comprehensiveness, quality and availability of support and professional services; • brand awareness and reputation; and • cost and predictability of costs.
We believe the principal competitive factors in our market include the following: • level of user satisfaction; • ease of deployment, implementation and use; • scalability, reliability, security and performance; • breadth of offering; • product offering features and capabilities; • accuracy, quality and speed of review; • ability to connect multiple stakeholders in cloud-based product offerings; • quality and use of AI; • comprehensiveness, quality and availability of support and professional services; • brand awareness and reputation; and • cost and predictability of costs.
As of December 31, 2023, we held nine U.S. granted patents and had 16 pending U.S. patent applications. As of December 31, 2023, we held one U.S. trademark, had three pending U.S. trademarks and held nine domain names in U.S. and foreign jurisdictions.
As of December 31, 2024, we held 12 granted U.S. patents and had 20 pending U.S. patent applications. As of December 31, 2024, we held one U.S. trademark, had two pending U.S. trademarks and held eight domain names in U.S. and foreign jurisdictions.
By contrast, our simple, all-in pricing model and flexible terms align with our customers’ needs, are easy to understand and guarantee costs for our customers, allowing legal departments to improve cost predictability and budget planning. Our Customers As of December 31, 2023, we had 1,441 customers, increasing from 1,327 as of December 31, 2022.
By contrast, our simple, all-in pricing model and flexible terms align with our customers’ needs, are easy to understand and guarantee costs for our customers, allowing legal departments to improve cost predictability and budget planning.
Cecilia Timelines allows attorneys to automatically create smart timelines at the start of a matter and produce comprehensive reviews with facts succinctly summarized. Our cloud-native, AI-powered software is augmented with deep expertise, consultative professional services and flexible customer support that enables us to be a single-source provider and meet the diverse needs of customers in every industry.
Our cloud-native, AI-powered software is augmented with deep expertise, consultative professional services and flexible customer support that enables us to be a single-source provider and meet the diverse needs of customers in every industry.
The customers of our customers who are legal services providers are generally legal departments and law firms. Some of our law firm customers additionally buy our product offerings for the purpose of reselling them to their clients, who are legal departments, often in combination with professional services and legal services.
Some of our law firm customers additionally buy our product offerings for the purpose of reselling them to their clients, who are legal departments, often in combination with professional services and legal services. One particular area of focus of our sales team is the conversion of users into customers.
We believe that we will be able to continue expanding customer relationships by increasing customers’ usage of product offerings that they 7 Table of Contents already buy from us, selling more of our existing product offerings to existing customers, and, in the future, introducing additional product offerings to sell to existing customers. • Add New Customers.
We believe that we will be able to continue expanding customer relationships, particularly those customers with significant annual ediscovery spend, large practice teams, and practices in legal areas with significant ediscovery needs, by increasing customers’ usage of product offerings that they already buy from us, selling more of our existing product offerings to existing customers, and, in the future, introducing additional product offerings to sell to existing customers. • Add New Customers.
One particular area of focus of our sales team is the conversion of users into customers. Our typical entry into an organization is through lawyers at corporate legal departments and law firms. These or other customers also use our product offerings to collaborate with other legal industry participants who may or may not be our customers.
Our typical entry into an organization is through lawyers at corporate legal departments and law firms. These or other customers also use our product offerings to collaborate with other legal industry participants who may or may not be our customers. For example, a legal department may add users who work at law firms that are not yet our customers.
Available Information Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendment to these reports are filed with the SEC.
Available Information Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendment to these reports are filed with the SEC. Such reports and other information filed by us with the SEC are available free of charge on our website at ir.csdisco.com when such reports are available on the SEC’s website.
Research and Development Our research and development organization is responsible for the design, development, testing and delivery of our cloud-native product offerings and platform.
As of December 31, 2024, we had 151 professionals in our sales and marketing organization. Research and Development Our research and development organization is responsible for the design, development, testing and delivery of our cloud-native product offerings and platform.
For example, our new Cecilia AI platform, which was released publicly in the fourth quarter of 2023 in the United States, is a comprehensive suite of features that includes Cecilia Q&A and Cecilia Timelines. Cecilia Q&A is a chatbot that allows lawyers to learn about facts and information in their private DISCO Ediscovery database more efficiently.
For example, our Cecilia AI platform, which was released publicly in the fourth quarter of 2023 in the United States and in the third quarter of 2024 in Europe, is a comprehensive suite of features that includes Cecilia Q&A and Cecilia Timelines.
We also incorporate lead generation directly into our product experience, with buttons that enable our customers to easily increase their usage, add new matters and engage our experts for additional support. As of December 31, 2023, we had 174 professionals in our sales and marketing organization.
We reach potential customers and generate leads for our sales team through a combination of customer prospecting, content marketing, social media, digital marketing, public relations, event marketing and sponsorships. We also incorporate lead generation directly into our product experience, with buttons that enable our customers to easily increase their usage, add new matters and engage our experts for additional support.
Once a customer is signed, our customer success team is responsible for onboarding our customers and driving user adoption in each customer organization.
Once a customer is signed, our customer success team is responsible for onboarding our customers and driving user adoption in each customer organization. Our customer success professionals maintain ongoing relationships with users at our customers and partner with our sales team to secure referrals, capture upsell opportunities and improve customer satisfaction.
Our customer success professionals maintain ongoing relationships with users at our customers and partner with our sales team to secure referrals, capture upsell opportunities and improve customer satisfaction. 8 Table of Contents In addition to our direct sales force, we also sell through legal services providers who buy our product offerings and resell them to their own customers, often in combination with professional services.
In addition to our direct sales force, we also sell through legal services providers who buy our product offerings and resell them to their own customers, often in combination with professional services. The customers of our customers who are legal services providers are generally legal departments and law firms.
We believe we have a significant opportunity to further grow our customer base and our market leadership. Differentiated product offerings will enable us to efficiently acquire new customers across all channels. Extend our Reach • Enhance Our Sales Coverage. We intend to continue to selectively expand our sales force headcount in strategic locations across the United States and globally.
Extend our Reach • Enhance Our Sales Coverage. We intend to continue to selectively expand our sales force headcount in strategic locations across the United States and globally.
As of December 31, 2023, we had 1,441 enterprises, law firms, legal services providers and government organizations as DISCO customers and a dollar-based net retention rate of 92%. We define a customer as an entity that we have a contract with and from whom we have recognized revenue during the preceding month.
As of December 31, 2024, we had 1,478 enterprises, law firms, legal services providers and government organizations as DISCO customers and a dollar-based net retention rate of 96%. As of December 31, 2024 we had 315 large customers, defined as customers with revenue in excess of $100,000 over the previous 12-month period.
Our marketing activities are focused on building our brand reputation, increasing awareness of our product offerings among potential customers, converting users into customers and otherwise driving customer demand. We reach potential customers and generate leads for our sales team through a combination of customer prospecting, content marketing, social media, digital marketing, public relations, event marketing and sponsorships.
We aim to proactively secure referrals to other prospective customers as well as converting users of our product offerings who are not yet customers. Our marketing activities are focused on building our brand reputation, increasing awareness of our product offerings among potential customers, converting users into customers and otherwise driving customer demand.
The information contained on the websites referenced in this Annual Report on Form 10-K is not incorporated by reference into this filing. Further, our references to website URLs are intended to be inactive textual references only.
Further, our references to website URLs are intended to be inactive textual references only.
Regardless of who we contract with, the ultimate payer is almost always the corporate legal department, with law firms and service providers passing on our bills to their clients for reimbursement. In 2023, no customer accounted for more than 10% of our revenue and less than 10% of our revenue was generated from customers outside of the United States.
We define a large customer as a customer with revenue in excess of $100,000 over the previous 12-month period. In the year ended December 31, 2024, no customer accounted for more than 10% of our revenue and less than 10% of our revenue was generated from customers outside of the United States.
Removed
For example, a legal department may add users who work at law firms that are not yet our customers. We aim to proactively secure referrals to other prospective customers as well as converting users of our product offerings who are not yet customers.
Added
Cecilia Q&A is a chatbot that allows lawyers to learn about facts and information in their private DISCO Ediscovery database more efficiently. Cecilia Timelines allows attorneys to automatically create smart timelines at the start of a matter and produce comprehensive reviews with facts succinctly summarized.
Added
Our Customers As of December 31, 2024, we had 1,478 customers, increasing from 1,463 as of December 31, 2023, and 315 large customers, increasing from 289 large customers as of December 31, 2023.
Added
However, effective December 31, 2024, we redefined a customer in which in some cases where legal departments, law firms and service providers that use our product offerings have separate billing terms, we may count those as multiple customers. We have applied this to our reporting for current and prior periods in the Annual Report on Form 10-K.
Added
We believe we have a significant opportunity to further grow our customer base and our market leadership, particularly through those customers with significant annual ediscovery spend, large practice teams, and practices in legal areas with significant ediscovery needs. We believe our differentiated product offerings will enable us to efficiently acquire new customers across all channels.
Added
In addition, we expect to expand our product offerings to address additional areas of the legal function and we will likely face further competition from existing companies in such areas.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

163 edited+41 added−20 removed353 unchanged
Biggest changeIf the assumptions that we use to plan our business are incorrect or change in reaction to changes in the markets in which we operate, or if we are unable to maintain consistent revenue or revenue growth, our stock price could be volatile, and it may be difficult to achieve and maintain profitability. 11 Table of Contents In addition, we expect to continue to expend substantial financial and other resources on: • our technology infrastructure, including systems architecture, scalability, availability, performance and security; • sales and marketing, including the future expansion of our sales organization to engage existing and prospective customers, increase brand awareness and drive adoption of our product offerings; • product development, including investments in our development team and the development of new functionality for our product offerings and in the protection of our intellectual property rights related to our product development; • services and support for the benefit and assistance of customers using our product offerings; • acquisitions or strategic investments; • international expansion; and • general administration, including the legal and accounting expenses associated with being a public company.
Biggest changeIn addition, we expect to continue to expend substantial financial and other resources on: • our technology infrastructure, including systems architecture, scalability, availability, performance and security; • sales and marketing, including any future expansion of our sales organization to engage existing and prospective customers, increase brand awareness and drive adoption of our product offerings; • product development, including investments in our development team and the development of new functionality for our product offerings and in the protection of our intellectual property rights related to our product development; • services and support for the benefit and assistance of customers using our product offerings; • acquisitions or strategic investments; • international expansion; and • general administration, including the legal and accounting expenses associated with being a public company.
We intend to continue to incur significant costs to support further growth and development of our product offerings, including expanding the functionality of our platform, technology infrastructure and business systems, expanding our partner ecosystem, increasing our marketing activities and growing our international operations. We will also face increased compliance costs associated with growth and expansion of our customer base.
We intend to continue to incur significant costs to support further growth and development of our product offerings, including expanding the functionality of our platform, technology infrastructure and business systems, expanding our partner ecosystem, increasing our marketing activities and growing our international operations. We will also face increased compliance costs associated with the growth and expansion of our customer base.
We evaluate financing opportunities from time to time and our ability to obtain financing will depend, among other things, on our development efforts, business plans, operating performance and condition of the capital markets at the time we seek financing. Additional financing may not be available on favorable terms, if at all.
We evaluate financing opportunities from time to time and our ability to obtain financing will depend, among other things, on our development efforts, business plans, and operating performance and the condition of the capital markets at the time we seek financing. Additional financing may not be available on favorable terms, if at all.
Because a significant majority of our revenue is directly correlated with our customers’ usage of our product offerings, which in turn is dependent on the timing of and activity driven by litigation, investigations and other legal matters for which our product offerings are used, our operating results have fluctuated significantly in the past in connection with the inception and conclusion of large legal matters, and we expect such fluctuations to continue for the foreseeable future.
Because a significant majority of our revenue is directly correlated with our customers’ usage of our product offerings, which in turn is dependent on the timing of and activity driven by litigation, investigations and other legal matters for which our product offerings are used, our operating results have fluctuated significantly in the past in connection with the inception and conclusion of large legal matters, and we expect such fluctuations to continue for the foreseeable future.
Negative conditions in the general economy both in the United States and abroad, including conditions resulting from a global or domestic recession or the fear thereof, inflation, fluctuations in interest rates, changes in gross domestic product growth, financial and credit market fluctuations, political turmoil, natural catastrophes, lower corporate earnings, reduction in business confidence and activity, warfare and terrorist attacks on the United States, Europe, the Asia-Pacific region, or elsewhere, could cause a decrease in business investments, including spending on information technology, which would harm our business.
Negative conditions in the general economy both in the United States and abroad, including conditions resulting from a global or domestic recession or the fear thereof, fluctuations in inflation and interest rates, changes in gross domestic product growth, financial and credit market fluctuations, political turmoil, natural catastrophes, lower corporate earnings, reduction in business confidence and activity, warfare and terrorist attacks on the United States, Europe, the Asia-Pacific region, or elsewhere, could cause a decrease in business investments, including spending on information technology, which would harm our business.
Although there are currently various mechanisms that may be used to transfer personal information from the EEA and UK to the United States in compliance with law, such as the EEA and UK’s standard contractual clauses, the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S.
Although there are currently various mechanisms that may be used to transfer personal information from the EEA and UK to the United States in compliance with law, such as the EEA standard contractual clauses, the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S.
Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities, bugs, errors and vulnerabilities.
Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities, bugs, and errors.
For example, in September 2023 and November 2023, purported stockholder class action lawsuits were filed against us and certain of our current and former officers alleging violation of the federal securities laws for allegedly making materially false or misleading statements.
For example, in September 2023 and November 2023, purported stockholder class action lawsuits were filed against us and certain of our current and former officers alleging violation of the federal securities laws for allegedly making materially false or misleading statements.
For example, in September 2023 and November 2023, purported stockholder class action lawsuits were filed against us and certain of our current and former officers alleging violation of the federal securities laws for allegedly making materially false or misleading statements.
For example, in September 2023 and November 2023, purported stockholder class action lawsuits were filed against us and certain of our current and former officers alleging violation of the federal securities laws for allegedly making materially false or misleading statements.
While the class action lawsuit filed in November 2023 was dismissed in January 2024, the September 2023 matter remains pending, and we may be the target of additional litigation of this type in the future.
While the class action lawsuit filed in November 2023 was dismissed in January 2024, the September 2023 matter remains pending, and we may be the target of additional litigation of this type in the future.
Our financial results may fluctuate due to a variety of factors, many of which are outside of our control and may be difficult to predict, including, but not limited to: • the timing of our customers’ usage of our product offerings, which is impacted by the inception and completion of litigation, investigations and other legal matters, particularly in the case of usage of our DISCO Review offering; • the level of demand for or pricing of our product offerings; • our ability to grow or maintain usage by our existing customers and acquire new customers; • the timing and success of new functionality, features, integrations, capabilities and enhancements by us to our product offerings, or by our competitors to their products, or any other changes in the competitive landscape of our market; • the timing and amount of our investments to expand the capacity of our third-party cloud infrastructure providers; 17 Table of Contents • changes in our customers’ budgets and in the timing of their budget cycles and purchasing decisions; • changes in regulatory or legal environments that may cause us to incur, among other elements, expenses associated with compliance; • negative media or industry or financial analyst commentary regarding us or our product offerings; • changes in personnel; • general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers participate; • the cyclical nature of the e-discovery industry; • changes in the volume of acquisitions, reorganizations, bankruptcies and other organizational changes affecting our customer base and resulting in litigation; • the effects of potential acquisitions and their integration; • the impact of new accounting pronouncements; • changes in the competitive dynamics of our market, including consolidation among competitors or customers; • significant security breaches of, technical difficulties with or interruptions to the delivery and use of our product offerings; • awareness of our brand and our reputation in our target markets; • errors in our forecasting of the demand for our product offerings, which would lead to lower revenues, increased costs, or both; and • our ability to control costs, including research and development and sales and marketing expenses.
Our financial results may fluctuate due to a variety of factors, many of which are outside of our control and may be difficult to predict, including, but not limited to: • the timing of our customers’ usage of our product offerings, which is impacted by the inception and completion of litigation, investigations and other legal matters, particularly in the case of usage of our DISCO Review offering; • the level of demand for or pricing of our product offerings; • our ability to grow or maintain usage by our existing customers and acquire new customers; • the timing and success of new functionality, features, integrations, capabilities and enhancements by us to our product offerings, or by our competitors to their products, or any other changes in the competitive landscape of our market; • the timing and amount of our investments to expand the capacity of our third-party cloud infrastructure providers; • changes in our customers’ budgets and in the timing of their budget cycles and purchasing decisions; • changes in regulatory or legal environments that may cause us to incur, among other elements, expenses associated with compliance; • negative media or industry or financial analyst commentary regarding us or our product offerings; • changes in personnel; • general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers participate; • the cyclical nature of the e-discovery industry; • changes in the volume of acquisitions, reorganizations, bankruptcies and other organizational changes affecting our customer base and resulting in litigation; • the effects of potential acquisitions and their integration; • the impact of new accounting pronouncements; • changes in the competitive dynamics of our market, including consolidation among competitors or customers; 24 Table of Contents • significant security breaches of, technical difficulties with or interruptions to the delivery and use of our product offerings; • awareness of our brand and our reputation in our target markets; • errors in our forecasting of the demand for our product offerings, which would lead to lower revenues, increased costs, or both; and • our ability to control costs, including research and development and sales and marketing expenses.
The EU GDPR also provides individuals with various rights in respect of their personal information, including rights of access, erasure, portability, rectification, restriction and objection and confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities (including group actions), seek judicial remedies and obtain compensation for damages resulting from violations of the EU GDPR.
The EU GDPR and UK GDPR also provides individuals with various rights in respect of their personal information, including rights of access, erasure, portability, rectification, restriction and objection and confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities (including group actions), seek judicial remedies and obtain compensation for damages resulting from violations of the EU and UK GDPR.
Major technology platforms on which we rely to gather information about consumers have adopted or proposed measures to provide consumers with additional control over the collection, use, and sharing of their personal data for targeted advertising purposes. For example, in 2021, Apple began allowing users to more easily opt-out of activity tracking across devices.
Major technology platforms on which we rely to gather information about consumers have adopted or proposed measures to provide consumers with additional control over the collection, use, and sharing of their personal information for targeted advertising purposes. For example, in 2021, Apple began allowing users to more easily opt-out of activity tracking across devices.
Any disruption as a result of cyber-attacks or similar issues, or any limitation on the capacity of our third-party hosting services, could impede our ability to onboard new customers or expand the usage of our existing customers or otherwise adversely affect our business, which could adversely affect our financial condition and results of operations.
Any disruption as a result of cyber-attacks or similar issues, or any limitation on the capacity of our third-party hosting services, could impede our ability to onboard new customers and maintain or expand the usage of our existing customers or otherwise adversely affect our business, which could adversely affect our financial condition and results of operations.
However, the regulatory framework for privacy and data protection worldwide is unclear and evolving, and is likely to remain uncertain, for the foreseeable future. We expect that there will continue to be new laws, regulations and industry standards concerning privacy, data protection and information security proposed and enacted in various jurisdictions.
However, the regulatory framework for privacy and data protection worldwide is unclear and evolving rapidly, and is likely to remain uncertain, for the foreseeable future. We expect that there will continue to be new laws, regulations and industry standards concerning privacy, data protection and information security proposed and enacted in various jurisdictions.
Additionally, our employees are routinely working remotely, which may pose additional data security risks to our information technology systems and data, as more of our employees utilize network connections, computers, and devices outside our premises or network, including working at home, while in transit and in public locations.
Additionally, our employees are routinely working remotely, which may pose additional data security risks to our information technology systems and data, as more of our employees utilize network connections, computers, and other devices outside our premises or network, including while working at home, while in transit and in public locations.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • authorize our Board of Directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights and preferences determined by our Board of Directors that may be senior to our common stock; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; • specify that special meetings of our stockholders can be called only by our Board of Directors, the chairperson of our Board of Directors or our chief executive officer; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our Board of Directors; • establish that our Board of Directors is divided into three classes, with each class serving three-year staggered terms; • prohibit cumulative voting in the election of directors; • provide that our directors may be removed for cause only upon the vote of at least 66 2/3 % of our outstanding shares of voting stock; • provide that vacancies on our Board of Directors may be filled only by a majority of directors then in office, even though less than a quorum; and • require the approval of our Board of Directors or the holders of at least 66 2/3 % of our outstanding shares of voting stock to amend our bylaws and certain provisions of our certificate of incorporation.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • authorize our Board of Directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights and preferences determined by our Board of Directors that may be senior to our common stock; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; • specify that special meetings of our stockholders can be called only by our Board of Directors, the chairperson of our Board of Directors or our Chief Executive Officer; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our Board of Directors; • establish that our Board of Directors is divided into three classes, with each class serving three-year staggered terms; • prohibit cumulative voting in the election of directors; • provide that our directors may be removed for cause only upon the vote of at least 66 2/3 % of our outstanding shares of voting stock; 42 Table of Contents • provide that vacancies on our Board of Directors may be filled only by a majority of directors then in office, even though less than a quorum; and • require the approval of our Board of Directors or the holders of at least 66 2/3 % of our outstanding shares of voting stock to amend our bylaws and certain provisions of our certificate of incorporation.
Even if we have issued or otherwise made patches or information for vulnerabilities in our software applications, products or services, our customers may be unwilling or unable to deploy such patches and use such information effectively and in a timely manner. Vulnerabilities could be exploited and result in a security incident.
Even if we have issued or otherwise made patches or information for vulnerabilities available in our software applications, products or services, our customers may be unwilling or unable to deploy such patches and use such information effectively and in a timely manner. Vulnerabilities could be exploited and result in a security incident.
Preparing for and complying with these obligations requires us to devote significant resources and may necessitate changes to our services, information technologies, systems, and practices and to those of any third parties that process personal data on our behalf.
Preparing for and complying with these obligations requires us to devote significant resources and may necessitate changes to our services, information technologies, systems, and practices and to those of any third parties that process personal information on our behalf.
Our operating results could suffer due to: • any decline in demand for our product offerings, including due to fluctuations in demand for e-discovery solutions generally due to the cyclical nature of our industry and changes in the volume of acquisitions, reorganizations, bankruptcies and other organizational changes affecting our customer base and resulting in litigation; • the failure of our product offerings to achieve continued market acceptance; • the failure of the market for cloud-based technologies for the legal industry to continue to grow, or grow as quickly as we expect; • the introduction of products and technologies that serve as a replacement or substitute for, or represent an improvement over, our product offerings; • technological innovations or new standards that our product offerings do not address; • sensitivity to current or future prices offered by us or our competitors; • our customers’ development of their own proprietary solutions; and • our inability to release enhanced versions of our product offerings on a timely basis.
Our operating results could suffer due to: 20 Table of Contents • any decline in demand for our product offerings, including due to fluctuations in demand for e-discovery solutions generally due to the cyclical nature of our industry and changes in the volume of acquisitions, reorganizations, bankruptcies and other organizational changes affecting our customer base and resulting in litigation; • the failure of our product offerings to achieve continued market acceptance; • the failure of the market for cloud-based technologies for the legal industry to continue to grow, or grow as quickly as we expect; • the introduction of products and technologies that serve as a replacement or substitute for, or represent an improvement over, our product offerings; • technological innovations or new standards that our product offerings do not address; • sensitivity to current or future prices offered by us or our competitors; • our customers’ development of their own proprietary solutions; and • our inability to release enhanced versions of our product offerings on a timely basis.
In connection with such expansion, we may face difficulties, including costs associated with expansion, varying seasonality patterns, potential adverse movement of currency exchange rates, longer payment cycle difficulties in collecting accounts receivable in some countries, increased management, travel, infrastructure and legal compliance costs associated with having operations and developing our business in multiple jurisdictions, different technical standards, existing or future regulatory and certification requirements and required features and functionality, political and economic conditions and uncertainty in each country or region in which we operate and general economic and political conditions and uncertainty around the world, tariffs and trade barriers, a variety of regulatory or contractual limitations on our ability to operate, adverse tax events, reduced protection of intellectual property rights in some countries and a geographically and culturally diverse workforce and customer base.
In connection with such expansion, we may face difficulties, including costs associated with expansion, varying seasonality patterns, potential adverse movement of currency exchange rates, longer payment cycle difficulties in collecting accounts receivable in some countries, increased management, travel, infrastructure and legal compliance costs associated with having operations and developing our business in multiple jurisdictions, different technical standards, existing or future regulatory and certification requirements and required features and functionality, political and economic conditions and uncertainty in each country or region in which we operate and general economic and political conditions and uncertainty around the world, tariffs 31 Table of Contents and trade barriers, a variety of regulatory or contractual limitations on our ability to operate, adverse tax events, reduced protection of intellectual property rights in some countries and a geographically and culturally diverse workforce and customer base.
Overall growth of our revenue depends on a number of factors, including our ability to: • price our product offerings effectively so that we are able to attract new customers and expand sales to our existing customers; • expand the functionality of our product offerings; • maintain and expand the rates at which customers use our product offerings; • provide our customers with support that meets their needs; • maintain or increase customer satisfaction with our product offerings; • continue to introduce and sell our product offerings to new markets; • continue to develop new functionality within our product offerings and successfully further optimize our product offerings, including continued innovation of our artificial intelligence system for legal documents; • successfully identify and acquire or invest in businesses, products or technologies that we believe could complement or expand our product offerings; • recruit, hire, train and manage additional qualified developers, professionals and sales and marketing personnel; and • increase awareness of our brand on a global basis and successfully compete with other companies.
Overall growth of our revenue depends on a number of factors, including our ability to: • price our product offerings effectively so that we are able to attract new customers and expand sales to our existing customers; • expand the functionality of our product offerings; • maintain and expand the rates at which customers use our product offerings; • provide our customers with support that meets their needs; • maintain or increase customer satisfaction with our product offerings; • continue to introduce and sell our product offerings to new markets; • continue to develop new functionality within our product offerings and successfully further optimize our product offerings, including continued innovation of our artificial intelligence system for legal documents; • successfully identify and acquire or invest in businesses, products or technologies that we believe could complement or expand our product offerings; • recruit, hire, train, manage, and retain sufficient qualified developers, professionals and sales and marketing personnel; and • increase awareness of our brand on a global basis and successfully compete with other companies.
Any of these threats and issues may lead to a security incident and significant adverse consequences, including compromise of our system infrastructure or the loss, destruction, alteration, denial of access to, disclosure or dissemination of, or damage or unauthorized access to, our information technology systems, data (including trade secrets or other confidential information, intellectual property, proprietary business information and personal information) or data that is processed or maintained on our behalf, or other assets.
Any of these threats and issues could lead to a security incident and significant adverse consequences, including compromise of our system infrastructure or the loss, destruction, alteration, denial of access to, disclosure or dissemination of, or damage or unauthorized access to, our information technology systems, data (including trade secrets or other confidential information, intellectual property, proprietary business information and personal information) or data that is processed or maintained on our behalf, or other assets.
Security incidents and attendant consequences may prevent or cause customers to stop using our services, deter new customers from using our services, and negatively impact our ability to grow and operate our business.
Security incidents and material attendant consequences may prevent or cause customers to stop using our services, deter new customers from using our services, and negatively impact our ability to grow and operate our business.
We regularly train our customers in the proper use of and the variety of benefits that can be derived from our product offerings to maximize its potential.
We train our customers in the proper use of and the variety of benefits that can be derived from our product offerings to maximize its potential.
We have hired, and need to continue to hire, additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404. Management has concluded that our internal control over financial reporting was effective as of December 31, 2023.
We have hired, and need to continue to hire, additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404. Management has concluded that our internal control over financial reporting was effective as of December 31, 2024.
We compete on the basis of a number of factors, including: • our product offerings’ functionality, scalability, performance, ease of use, reliability, security, availability and cost-effectiveness relative to that of our competitors’ products and services; • our ability to utilize new and proprietary technologies to offer services and features previously not available in the marketplace; • our ability to identify new markets, applications and technologies; • our ability to attract and retain customers; • our brand, reputation and trustworthiness; • perceptions about the security, privacy and availability of our product offerings relative to competitive products and services; 20 Table of Contents • the quality of our customer support; • our ability to recruit software developers and sales and marketing personnel; and • our ability to protect our intellectual property.
We compete on the basis of a number of factors, including: • our product offerings’ functionality, scalability, performance, ease of use, reliability, security, availability and cost-effectiveness relative to that of our competitors’ products and services; • our ability to utilize new and proprietary technologies to offer services and features previously not available in the marketplace; • our ability to identify new markets, applications and technologies; • our ability to attract and retain customers; • our brand, reputation and trustworthiness; • perceptions about the security, privacy and availability of our product offerings relative to competitive products and services; • the quality of our customer support; • our ability to recruit software developers and sales and marketing personnel; and • our ability to protect our intellectual property.
We are subject to the U.S. Foreign Corrupt Practices Act, or FCPA, U.S. domestic bribery laws, the United Kingdom Bribery Act and other anti-corruption and anti-money laundering laws in the countries in which we conduct activities. Due to the international scope of our operations, we must comply with these laws in each jurisdiction where we operate.
Foreign Corrupt Practices Act, or FCPA, U.S. domestic bribery laws, the United Kingdom Bribery Act and other anti-corruption and anti-money laundering laws in the countries in which we conduct activities. Due to the international scope of our operations, we must comply with these laws in each jurisdiction where we operate.
The occurrence of any defects, errors, disruptions in service or other performance problems, or delays with our product offerings, whether in connection with the day-to-day operations or otherwise, could result in: • loss of customers; • loss of partners; • reduced customer usage of our product offerings; • reduced ability to attract new customers; • lost or delayed market acceptance and sales of our product offerings; 15 Table of Contents • delays in payment to us by customers; • injury to our reputation and brand; • legal claims, including warranty claims, against us; and • diversion of our resources, including through increased service and warranty expenses or financial concessions, and increased insurance costs.
The occurrence of any defects, errors, disruptions in service or other performance problems, or delays with our product offerings, whether in connection with the day-to-day operations or otherwise, could result in: • loss of customers; • loss of partners; • reduced customer usage of our product offerings; • reduced ability to attract new customers; • lost or delayed market acceptance and sales of our product offerings; • delays in payment to us by customers; • injury to our reputation and brand; • legal claims, including warranty claims, against us; and • diversion of our resources, including through increased service and warranty expenses or financial concessions, and increased insurance costs.
Taxing authorities may challenge our position that we do not have sufficient nexus in a taxing jurisdiction or assert that our product offerings is subject to use, VAT, GST and other taxes, which could result in increased tax liabilities for us or our customers, which could harm our business.
Taxing authorities may challenge our position that we do not have sufficient nexus in a taxing jurisdiction or assert that our product offerings are subject to use, VAT, GST and other taxes, which could result in increased tax liabilities for us or our customers, which could harm our business.
Individuals are now more aware of options related to consent, “do not track” mechanisms (such as browser signals from the Global Privacy Control), and “ad-blocking” software to prevent the collection of their personal information for targeted advertising purposes.
Individuals are now more aware of options related to consent, “do not track” mechanisms (such as browser opt-out signals from the Global Privacy Control), and “ad-blocking” software to prevent the collection of their personal information for targeted advertising purposes.
Additionally, where an AI/ML model ingests personal data and makes connections using such data, those technologies may reveal other personal or sensitive information generated by the model. Moreover, AI/ML models may create flawed, incomplete, or inaccurate outputs, some of which may appear correct.
Additionally, where an AI/ML model ingests personal information and makes inferences using such data, those technologies may reveal other personal or sensitive information generated by the model. Moreover, AI/ML models may create flawed, incomplete, or inaccurate outputs, some of which may appear correct.
In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal controls over financial reporting in our first annual report required to be filed with the SEC following the date we are no longer an “emerging growth company.” Our compliance with Section 404 requires that we incur substantial expenses and expend significant management efforts.
In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal controls over financial reporting in our first annual report required to be filed with the SEC following the date we are no longer an 39 Table of Contents “emerging growth company.” Our compliance with Section 404 requires that we incur substantial expenses and expend significant management efforts.
In particular, usage of DISCO Review, our AI-powered document review offering, decreases and increases more significantly with the completion and inception of litigation, investigations and other legal matters than with our other 13 Table of Contents offerings, and as a result can have a material impact on our quarter-to-quarter revenue fluctuations, even though revenues from such offering currently constitute a small proportion of our overall annual revenues.
In particular, usage of DISCO Review, our AI-powered document review offering, decreases and increases more significantly with the completion and inception of litigation, investigations and other legal matters than with our other offerings, and as a result can have a material impact on our quarter-to-quarter revenue fluctuations, even though revenues from such offering currently constitute a small proportion of our overall annual revenues.
The success of our business will depend, in part, on our ability to adapt and develop enhancements for our product offerings that respond effectively to these changes on a timely basis and in a user-friendly manner.
The success of our business will depend, in part, on our ability to adapt and develop or acquire enhancements for our product offerings that respond effectively to these changes on a timely basis and in a user-friendly manner.
The increased pace of consolidation in certain industries, in part due to opportunistic acquisitions in a depressed valuation environment, may also 25 Table of Contents result in reduced overall spending on information technology and legal services. We cannot predict the timing, strength or duration of any economic slowdown, instability or recovery, generally or within any particular industry.
The increased pace of consolidation in certain industries, in part due to opportunistic acquisitions in a depressed valuation environment, may also result in reduced overall spending on information technology and legal services. We cannot predict the timing, strength or duration of any economic slowdown, instability or recovery, generally or within any particular industry.
We rely on third-party service providers and technologies to operate critical business systems to process personal information, confidential information, customer information, intellectual property and other sensitive information in a variety of contexts, including, without limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, content delivery to customers, and other functions.
We rely on third-parties and third-party technologies to operate critical business systems to process personal information, confidential information, customer information, intellectual property and other sensitive information in a variety of contexts, including, without limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, content delivery to customers, and other functions.
Additionally, certain privacy laws extend rights to consumers (such as the right to delete certain personal data) and regulate automated decision making, which may be incompatible with our use of AI/ML.
Additionally, certain privacy laws extend rights to consumers (such as the right to delete certain personal information) and regulate automated decision making, which may be incompatible with our use of AI/ML.
The amount of taxes we pay in different jurisdictions may depend on the application of the tax laws of the various jurisdictions, including the United States, to our international business activities; changes in tax rates; new or revised tax laws or interpretations of existing tax laws and policies; and our ability to operate our business in a manner consistent with our corporate structure and intercompany 36 Table of Contents arrangements.
The amount of taxes we pay in different jurisdictions may depend on the application of the tax laws of the various jurisdictions, including the United States, to our international business activities; changes in tax rates; new or revised tax laws or interpretations of existing tax laws and policies; and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements.
Although we normally contractually limit our liability with respect to such obligations, we may still incur substantial liability related to them, and in the case of an intellectual property infringement indemnification claim, we may be required to cease use of certain functions of our product offerings as a result of any such 27 Table of Contents claims.
Although we normally contractually limit our liability with respect to such obligations, we may still incur substantial liability related to them, and in the case of an intellectual property infringement indemnification claim, we may be required to cease use of certain functions of our product offerings as a result of any such claims.
If we fail to enter into 16 Table of Contents agreements or integrate our product offerings with third-party offerings that our customers require to operate their businesses, or to provide the proper support or ease of integration our customers require, we may not be able to offer the functionality that our customers and their consumers expect, which would harm our business.
If we fail to enter into agreements or integrate our product offerings with third-party offerings that our customers require to operate their businesses, or to provide the proper support or ease of integration our customers require, we may not be able to offer the functionality that our customers and their consumers expect, which would harm our business.
Successfully maintaining and enhancing our brand will depend largely on the effectiveness of our marketing efforts and strategies, our ability to provide reliable product offerings that continue to meet the needs of our customers at competitive prices, our ability to maintain our customers’ trust, our ability to 21 Table of Contents continue to develop new functionality for our product offerings and our ability to successfully differentiate our product offerings from competitive products and services.
Successfully maintaining and enhancing our brand will depend largely on the effectiveness of our marketing efforts and strategies, our ability to provide reliable product offerings that continue to meet the needs of our customers at competitive prices, our ability to maintain our customers’ trust, our ability to continue to develop new functionality for our product offerings and our ability to successfully differentiate our product offerings from competitive products and services.
Given these factors, it is difficult to predict whether and when a customer will switch to our product offerings. 22 Table of Contents Further, some of our potential customers may undertake a significant evaluation and negotiation process due to size, organizational structure and approval requirements, all of which can lengthen our sales cycle.
Given these factors, it is difficult to predict whether and when a customer will switch to our product offerings. Further, some of our potential customers may undertake a significant evaluation and negotiation process due to size, organizational structure and approval requirements, all of which can lengthen our sales cycle.
Our effective tax rate could be adversely impacted by several factors, including: • Changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates; • Changes in tax laws, tax treaties and regulations or the interpretation of them, including federal income tax legislation proposed by Congress (which has not yet been enacted); • Changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax-planning strategies and the economic and political environments in which we do business; • The outcome of current and future tax audits, examinations or administrative appeals; and • Limitations or adverse findings regarding our ability to do business in some jurisdictions. 37 Table of Contents Should our effective tax rate rise, our business could be harmed.
Our effective tax rate could be adversely impacted by several factors, including: • Changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates; • Changes in tax laws, tax treaties and regulations or the interpretation of them, including federal income tax legislation proposed by Congress (which has not yet been enacted); • Changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax-planning strategies and the economic and political environments in which we do business; • The outcome of current and future tax audits, examinations or administrative appeals; and • Limitations or adverse findings regarding our ability to do business in some jurisdictions.
If we are unable to achieve and sustain profitability, the value of our common stock could decline and our business may be harmed. We have limited historical financial data and operate in a rapidly evolving and cyclical market that is prone to significant periodic fluctuations.
If we are unable to achieve and sustain profitability, the value of our common stock could decline and our business may be harmed. We have limited historical financial data at our current scale and operate in a rapidly evolving and cyclical market that is prone to significant periodic fluctuations.
Additionally, many anti-bribery and anti-corruption laws, including the FCPA, have long-arm statutes that can expand the applicability of these laws to our operations worldwide. Accordingly, we must incur significant operational costs to support our ongoing compliance with anti-bribery and anti-corruption laws at all levels of our business.
Additionally, many anti-bribery and anti-corruption laws, including the FCPA, have long-arm statutes that can expand the applicability of these laws to our operations worldwide. Accordingly, we must incur significant operational costs to support our ongoing 35 Table of Contents compliance with anti-bribery and anti-corruption laws at all levels of our business.
If our product offerings do not allow us or our customers to comply with the latest regulatory requirements, our existing customers may decrease their usage on our product offerings and new customers will be less likely to adopt our product offerings. A limited number of customers represent a substantial portion of our revenue.
If our product offerings do not allow us or our customers to comply with the latest regulatory requirements, our existing customers may decrease their usage on our product offerings and new customers will be less likely to adopt our product offerings. 25 Table of Contents A limited number of customers represent a substantial portion of our revenue.
For these reasons, we may not be able to utilize a material portion of our NOLs, even if we were to achieve profitability. Our international operations may subject us to potential adverse tax consequences. We are expanding our international operations and staff to better support our growth into international markets.
For these reasons, we may not be able to utilize a material portion of our NOL carryforwards, even if we were to achieve profitability. Our international operations may subject us to potential adverse tax consequences. We are expanding our international operations and staff to better support our growth into international markets.
Securities litigation, including currently ongoing securities litigation against us as well as any future securities litigation, and stockholder activism, including potential proxy contests, could result in substantial 42 Table of Contents costs, including significant legal fees and other expenses, and divert our management and Board of Directors’ attention and resources from our business.
Securities litigation, including currently ongoing securities litigation against us as well as any future securities litigation, and stockholder activism, including potential proxy contests, could result in substantial costs, including significant legal fees and other expenses, and divert our management and Board of Directors’ attention and resources from our business.
If there is no lawful manner for us to transfer personal information from the EEA, the UK, or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory 32 Table of Contents actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business.
If there is no lawful manner for us to transfer personal information from the EEA, the UK, or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions (such as Europe) at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal information necessary to operate our business.
We may have experienced ownership changes in the past and may experience ownership changes in the future as a result of subsequent shifts in our stock ownership (some of which shifts are outside our control). Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations.
We may have experienced ownership changes in the past and may experience ownership changes in the future as a result of subsequent shifts in our stock ownership (some of which shifts are outside our control). Furthermore, our ability to utilize NOL carryforwards of companies that we may acquire in the future may be subject to limitations.
We may face challenges in addressing their requirements and making necessary changes to our policies and practices and may incur significant costs and expenses in an effort to do so.
We may face challenges in addressing these requirements and making necessary changes to our policies and practices and may incur significant costs and expenses in an effort to do so.
It can be difficult to successfully enforce intellectual property rights and the fact that we have certain intellectual property rights 26 Table of Contents does not necessarily mean that such rights are broad or strong enough to afford us a meaningful degree of protection.
It can be difficult to successfully enforce intellectual property rights and the fact that we have certain intellectual property rights does not necessarily mean that such rights are broad or strong enough to afford us a meaningful degree of protection.
If we fail to obtain licenses to use such third-party offerings or otherwise integrate our product offerings with such offerings, our business may be harmed. If the cost of licensing or maintaining the third-party intellectual property significantly increases, our operating earnings could significantly decrease.
If we fail to obtain licenses to use such 11 Table of Contents third-party offerings or otherwise integrate our product offerings with such offerings, our business may be harmed. If the cost of licensing or maintaining the third-party intellectual property significantly increases, our operating earnings could significantly decrease.
We may issue additional capital stock in the future that will result in dilution to all other stockholders. We expect to grant equity awards to employees, directors and consultants under our equity incentive plans. We may also raise capital through equity financings in the future.
We may issue additional capital stock in the future that will result in dilution to all other stockholders. We have granted and expect to continue to grant equity awards to employees, directors and consultants under our equity incentive plans. We may also raise capital through equity financings in the future.
Partially as a result of these developments, individuals are becoming increasingly resistant to the collection, use, and sharing of personal data to deliver targeted advertising.
Partially as a result of these developments, individuals are becoming increasingly resistant to the collection, use, and sharing of personal information to deliver targeted advertising.
Any sensitive information (including confidential, competitive, proprietary, or personal data) that we input into a third party generative AI/ML platform could be leaked or disclosed to others, including if sensitive information is used to train the third parties’ AI/ML model.
Any sensitive information (including confidential, competitive, proprietary, or personal information) that we input into a third-party generative AI / machine learning, or ML, platform could be leaked or disclosed to others, including if sensitive information is used to train the third parties’ AI/ML model.
Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities.
Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale 41 Table of Contents of additional equity securities.
As a result, it is difficult to evaluate our current business and our future prospects, including our ability to plan for and model future growth, and any predictions about our future revenue and expenses may not be as accurate as they 12 Table of Contents would be if we had a longer operating history or operated in a more predictable market.
As a result, it is difficult to evaluate our current business and our future prospects, including our ability to plan for and model future growth, and any predictions about our future revenue and expenses may not be as accurate as they would be if we had a longer operating history or operated in a more predictable market.
Our ability to timely raise capital in the future may be limited, or such capital may be unavailable on acceptable terms, if at all. We have funded our operations since inception primarily through payments received from our customers, sales of equity securities, including our IPO in July 2021, and borrowings under our former credit facility.
Our ability to timely raise capital in the future may be limited, or such capital may be unavailable on acceptable terms, if at all. We have funded our operations since inception primarily through payments received from our customers, sales of equity securities, and borrowings under our former credit facility.
Because our decision to issue securities in future offerings will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing or nature of any future issuances of debt or equity securities.
Because our decision to issue securities in future offerings will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing or nature of any future 19 Table of Contents issuances of debt or equity securities.
Because our substantial growth since inception has resulted in the rapid expansion of our business and revenues, we do not have a long history upon which to base forecasts of future revenue and operating results.
Because our substantial growth since inception has resulted in the rapid expansion of our business and revenues, we do not have a long history at our current scale upon which to base forecasts of future revenue and operating results.
For all of these reasons, we may not be able to compete successfully and competition could result in the failure of our product offerings to achieve or maintain market acceptance, any of which could harm our business.
For all of these reasons, we may not be able to compete successfully 27 Table of Contents and competition could result in the failure of our product offerings to achieve or maintain market acceptance, any of which could harm our business.
We may expend significant resources or modify our business activities to try to protect against security incidents. Additionally, certain data privacy and security obligations may require us to implement and maintain specific security measures or industry-standard or reasonable security measures to protect our information technology systems and sensitive data.
We may expend significant resources or modify our business activities to try to protect against security incidents. Additionally, certain data privacy and security obligations may require us to implement and maintain specific security measures to protect our information technology systems and sensitive data.
Further, governmental and highly regulated entities may demand contractual terms that differ from our standard arrangements and are less favorable than terms agreed with private sector customers, including preferential pricing or “most favored nation” terms and conditions or are contract provisions that are otherwise time-consuming and expensive to satisfy and monitor.
Further, governmental and highly regulated entities may demand contractual terms that differ from our standard arrangements and are less favorable than terms agreed with private sector customers, including preferential pricing or “most favored nation” terms and conditions or are contract provisions that are otherwise time-consuming and expensive to satisfy and 36 Table of Contents monitor.
We are also subject to the terms of our privacy policies and obligations to third parties (including contractual) related to privacy, data protection and information security. We strive to comply with applicable laws, regulations, policies and other legal obligations relating to privacy, data protection and information security.
We are also subject to the terms of our internal and externally facing privacy policies and obligations to third parties (including contractual) related to privacy, data protection and information security. We strive to comply with applicable laws, regulations, policies and other legal obligations relating to privacy, data protection and information security.
The market price of our common stock may be highly volatile and may fluctuate or decline substantially as a result of a variety of factors, some of which are beyond our control, including: • actual or anticipated fluctuations in our financial condition or results of operations; • variance in our financial performance from expectations of securities analysts; 39 Table of Contents • changes in the pricing of our product offerings; • changes in our projected operating and financial results; • announcements by us or our competitors of significant business developments, acquisitions or new offerings; • changes in laws or regulations applicable to our product offerings; • significant data breaches, disruptions to or other incidents involving our software; • our involvement in litigation, including currently ongoing litigation against us; • future sales of our common stock by us or our stockholders; • changes in senior management or key personnel; • the trading volume of our common stock; • changes in the anticipated future size and growth rate of our market; and • general economic, political and market conditions and overall fluctuations in the financial markets in the United States and abroad, such as the Russia-Ukraine and Israel-Hamas war.
The market price of our common stock may be highly volatile and may fluctuate or decline substantially as a result of a variety of factors, some of which are beyond our control, including: • actual or anticipated fluctuations in our financial condition or results of operations; • variance in our financial performance from expectations of securities analysts; • changes in the pricing of our product offerings; • changes in our projected operating and financial results; • announcements by us or our competitors of significant business developments, acquisitions or new offerings; • changes in laws or regulations applicable to our product offerings; • significant data breaches, disruptions to or other incidents involving our software; • our involvement in litigation, including currently ongoing litigation against us; • future sales of our common stock by us or our stockholders; • changes in senior management or key personnel; • the trading volume of our common stock; • changes in the anticipated future size and growth rate of our market; and • general economic, political and market conditions and overall fluctuations in the financial markets in the United States and abroad.
Government demand and payment for our product offerings are affected by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our product offerings. 29 Table of Contents These customers may also be subject to a rapidly evolving statutory and regulatory framework that may influence their ability to use our product offerings.
Government demand and payment for our product offerings are affected by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our product offerings. These customers may also be subject to a rapidly evolving statutory and regulatory framework that may influence their ability to use our product offerings.
We are also bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful. For example, certain privacy, data protection and information security laws, such as the GDPR and the CCPA, require our customers to impose specific contractual restrictions on their service providers.
We are also bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful. For example, certain privacy, data protection and information security laws, such as the 13 Table of Contents GDPR and the CCPA, require our customers to impose specific contractual restrictions on their service providers.
Our business and operations could be negatively affected as a result of currently ongoing securities litigation against us or if we become subject to stockholder activism, which could cause us to incur significant expenses, hinder the execution of our business and growth strategy and impact the price of our common stock.
Our business and operations could be negatively affected as a result of currently ongoing securities litigation or if we become subject to any stockholder activism. 43 Table of Contents Our business and operations could be negatively affected as a result of currently ongoing securities litigation against us or if we become subject to stockholder activism, which could cause us to incur significant expenses, hinder the execution of our business and growth strategy and impact the price of our common stock.
As a result, it is difficult to predict exactly when, or even if, we will make a sale to a potential customer or if we can increase sales to our existing customers. If we cannot improve and sustain our corporate culture as we grow, our success and our business and competitive position may be harmed.
As a result, it is difficult to predict exactly when, or even if, we will make a sale to a potential customer or if we can increase sales to our existing customers. If we cannot continue to build and sustain a productive corporate culture as we grow, our success and our business and competitive position may be harmed.
We take steps designed to detect, mitigate and remediate security vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties upon which we rely), but we may not be able to detect and remediate them all on a timely basis.
We take steps designed to detect, mitigate and remediate security vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties upon which we rely). We may not, however, detect and remediate them all on a timely basis.
Our ability to attract new customers 14 Table of Contents depends in part on our ability to convert the non-paying users. Our success also depends in part on our ability to offer compelling product offerings and the effectiveness of our sales organization.
Our ability to attract new customers depends in part on our ability to convert the non-paying users. Our success also depends in part on our ability to offer compelling product offerings and the effectiveness of our sales organization.
In addition, particularly if we grow rapidly, new members of our sales force will have relatively little experience working with us, our product offerings and our business model.
In addition, particularly if we grow rapidly, new members of our sales force will have relatively little experience working with us, our product offerings and our business 26 Table of Contents model.
Our limited operating history and our history of operating losses makes it difficult to evaluate our current business and prospects and may increase the risks associated with your investment. We launched our business in 2013 and have experienced net losses in each fiscal year since inception.
Our limited operating history at our current scale and our history of operating losses make it difficult to evaluate our current business and prospects and may increase the risks associated with your investment. We launched our business in 2013 and have experienced net losses in each fiscal year since inception.
If we are unable to evolve our cloud platform to satisfy our customers’ needs and provide enhancements or add new and innovative features and capabilities to our product offerings that keep pace with rapid technological and industry change, or if the release of new features and capabilities are delayed, our revenue and operating results could be adversely affected.
If we are unable to evolve our cloud platform to satisfy our customers’ needs and provide enhancements or add new and innovative features and capabilities to our product offerings that keep pace with rapid technological and industry change, including developments in the area of AI, or if the release of new features and capabilities are delayed, our revenue and operating results could be adversely affected.
Our employees and personnel use generative artificial intelligence (AI) technologies to perform their work, and the disclosure and use of personal data in generative AI technologies is subject to various privacy laws and other privacy obligations. Governments have passed and are likely to pass additional laws regulating generative AI.
Our employees and personnel use generative AI technologies to perform their work, and the disclosure and use of personal information in generative AI technologies is subject to various privacy laws and other privacy obligations. Governments have passed and are likely to pass additional laws regulating generative AI.
Additionally, if third parties we rely upon, such as vendors or developers, violate applicable data privacy or security laws or regulations, certifications, documentation or our policies, such violations may also put our customers’ content at risk and could in turn have an adverse effect on our business.
Additionally, if third parties with whom we work, such as vendors or developers, violate applicable data privacy or security laws or regulations, certifications, documentation or our policies, such violations may also put our customers’ content at risk and could in turn have an adverse effect on our business.
In addition, we have limited experience with respect to determining the optimal pricing for our product offerings and, as a result, we have changed our pricing model in the past and expect that we may need to change it in the future.
In addition, we have limited experience with 28 Table of Contents respect to determining the optimal pricing for our product offerings and, as a result, we have changed our pricing model in the past and expect that we may need to change it in the future.
In the ordinary course of business, we and the third parties upon which we rely, collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit and share (collectively, processing) potentially highly sensitive and confidential electronic documentation for use by our law firm and non-law firm customers in various legal matters, including litigation and governmental investigations and as a result. we and the third parties upon which we rely face a variety of evolving threats.
In the ordinary course of business, we and the third parties with whom we work, collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit and share (collectively, process) potentially highly sensitive and confidential electronic documentation for use by our law firm and non-law firm customers in various legal matters, including litigation and governmental investigations and, as a result, we and the third parties with whom we work face a variety of evolving threats.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeDepending on the nature of the services provided, the sensitivity of the Information Systems and Data at issue, and the identity of the provider, our vendor management process may involve different levels of assessment designed to help identify cybersecurity risks associated with a provider and impose contractual obligations related to cybersecurity on the provider. 43 Table of Contents For a description of the risks from cybersecurity threats that may materially affect the Company and how they may do so, see our risk factors under Part 1.
Biggest changeDepending on the nature of the services provided, the sensitivity of the Information Systems and Data at issue, and the identity of the provider, our vendor management process may involve different levels of assessment designed to help identify cybersecurity risks associated with a provider and impose contractual obligations related to cybersecurity on the provider.
Depending on the particular environment and systems, we implement and maintain various technical, physical, and organizational measures, processes, standards and policies designed to manage and mitigate material risks from cybersecurity threats to our Information Systems and Data, including, for example: incident response plan and/or incident response policy, asset management, tracking and disposal, incident detection and response, systems monitoring, vulnerability management policy, vendor management program, disaster recovery/business continuity plans, employee training, risk assessments, penetration testing, cybersecurity insurance, encryption of data, dedicated cybersecurity staff/officer, network security controls, asset management, tracking and disposal, data segregation, systems monitoring, and access controls.
Depending on the particular environment and systems, we implement and maintain various technical, physical, and organizational measures, processes, standards and policies designed to manage and mitigate material risks from cybersecurity threats to our Information Systems and Data, including, for example: incident response plan and/or incident response policy, asset management, tracking and disposal, incident detection and response, systems monitoring, vulnerability management policy, vendor management program, disaster recovery/business continuity plans, employee training, risk assessments, penetration testing, cybersecurity insurance, encryption of data, dedicated cybersecurity staff/officer, network security controls, asset management, tracking and disposal, data segregation, and access controls.
We use third-party service providers to assist us from time to time to identify, assess, and manage material risks from cybersecurity threats, including for example, professional services firms, penetration testing firms, threat intelligence service providers, dark web monitoring services, cybersecurity consultants.
We use third-party service providers to assist us from time to time to identify, assess, and manage material risks from cybersecurity threats, including for example, professional services firms, penetration testing firms, threat intelligence service providers, dark web monitoring services, and cybersecurity consultants.
The Audit Committee receives regular reports from various individuals that are part of the Cybersecurity Function concerning our significant cybersecurity threats and risk and the processes we have implemented to address them. The Audit Committee and full board also has access to various reports, summaries or presentations related to cybersecurity threats, risk, and mitigation.
The Audit Committee receives regular reports from various individuals that are part of the Cybersecurity Function concerning our significant cybersecurity threats and risk and the processes we have implemented to address them. The Audit Committee and the full Board also has access to various reports, summaries or presentations related to cybersecurity threats, risk, and mitigation.
Our Vice President, Global Head of Information Technology and Chief Information Security Officer and our Security Steering Committee (which includes our Chief Financial Officer, Chief Product Officer, Senior Vice President of Engineering and General Counsel), identify, assess and manage the Company’s cybersecurity threats and risks (the “Cybersecurity Function”).
Our Vice President, Global Head of Information Technology and Chief Information Security Officer and our Security Steering Committee (which includes our Chief Financial Officer, Chief Product and Technology Officer, Senior Vice President of Engineering, and General Counsel and Chief Compliance Officer), identify, assess and manage the Company’s cybersecurity threats and risks (the “Cybersecurity Function”).
Our current Vice President, Global Head of Information Technology and Chief Information Security Officer has over a decade of IT management experience, over eight years of cybersecurity management experience and is currently an ISACA Certified Information Security Manager (CISM). He reports directly to our Chief Financial Officer.
Our current Vice President, Global Head of Information Technology and Chief Information Security Officer has over a decade of IT management experience, over nine years of cybersecurity management experience and is currently an ISACA Certified Information Security Manager (CISM). He reports directly to our Chief Financial Officer.
For example, the security organization works with management to prioritize our risk management processes and mitigate cybersecurity threats that are more likely to lead to a material impact to our business, and our senior management evaluates material risks from cybersecurity threats against our overall business objectives and reports to the Audit Committee of the Board of Directors, which evaluates our overall enterprise risk.
For example, the security organization works with management to prioritize our risk management processes and mitigate cybersecurity threats that are more likely to lead to a material impact to our business, and our senior 44 Table of Contents management evaluates material risks from cybersecurity threats against our overall business objectives and reports to the Audit Committee of the Board of Directors, which evaluates our overall enterprise risk.
Added
For a description of the risks from cybersecurity threats that may materially affect the Company and how they may do so, see our risk factors under Part 1. Item 1A.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our headquarters are located in Austin, Texas, where we lease approximat ely 46,000 square feet pursuant to a lease that expires in July 2028. We have other offices located in New York , New York, London, United Kingdom, and Gurugram, India. These offices are leased, and we do not own any real property.
Biggest changeItem 2. Properties Our headquarters are located in Austin, Texas, where we lease approximat ely 46,000 square feet pursuant to a lease that expires in July 2028. We have another office lease located in New York, New York that expires in January 2028. These offices 45 Table of Contents are leased, and we do not own any real property.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+1 added−3 removed4 unchanged
Biggest changeOn December 12, 2023, the Court appointed a lead plaintiff and lead counsel.
Biggest changeOn December 12, 2023, the Court appointed a lead plaintiff and lead counsel. On January 8, 2024, the Court transferred the case to the United States District Court in the Western District of Texas. On March 8, 2024, the lead plaintiff filed an amended complaint.
Removed
On January 8, 2024, the Court transferred the case to the United States District Court in the Western District of Texas. 44 Table of Contents On November 3, 2023, a purported stockholder class action lawsuit was filed against us and certain of our current and former officers in New York Supreme Court, County of New York, alleging violations under Sections 11 and 12(a)(2) of the Securities Act of 1933.
Added
On May 10, 2024, we filed a motion to dismiss the amended complaint, which was fully briefed as of August 12, 2024. On January 30, 2025, the Court issued an order granting in part and denying in part our motion to dismiss. Item 4. Mine Safety Disclosures None. 46 Table of Contents Part II
Removed
The complaint alleged that we made false or misleading statements about the factors that were driving revenue growth between July 21, 2021 and August 11, 2022. The complaint sought an unspecified amount of damages, interest, attorneys’ fees, expert fees, costs, rescission, equitable and injunctive relief, and other relief as the court may deem just and proper.
Removed
On January 18, 2024, this purported stockholder class action lawsuit was dismissed without prejudice. Item 4. Mine Safety Disclosures None. 45 Table of Contents Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOn February 15, 2024, the last reported sale price of our common stock on the New York Stock Exchange was $8.24. As of February 15, 2024, we had 36 holders of record of our common stock.
Biggest changeOn February 14, 2025, the last reported sale price of our common stock on the New York Stock Exchange was $5.31. As of February 14, 2025, we had 33 holders of record of our common stock.
The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owner s, but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

71 edited+18 added−19 removed64 unchanged
Biggest changeYear Ended December 31, (in thousands) 2023 2022 Revenue $ 138,090 $ 135,190 Cost of revenue (1) 34,948 34,163 Gross profit 103,142 101,027 Operating expenses: Research and development (1)(2) 51,623 59,258 Sales and marketing (1)(2) 68,132 72,839 General and administrative (1)(2) 33,232 40,738 Total operating expenses 152,987 172,835 Loss from operations (49,845) (71,808) Other income (expense): Interest and other income 8,306 1,702 Interest and other expense (168) (473) Total other income (expense) 8,138 1,229 Loss from operations before income taxes (41,707) (70,579) Income tax provision (443) (186) Net loss attributable to common stockholders $ (42,150) $ (70,765) ______________ (1) Includes stock-based compensation expense as follows: Year Ended December 31, (in thousands) 2023 2022 Cost of revenue $ 1,036 $ 938 Research and development 7,767 8,068 Sales and marketing 5,366 4,186 General and administrative 1,989 8,545 Total $ 16,158 $ 21,737 (2) Includes restructuring charges as follows: Year Ended December 31, (in thousands) 2023 2022 Research and development $ 1,510 $ — Sales and marketing 648 — General and administrative 432 — Total $ 2,590 $ — 51 Table of Contents Year Ended December 31, 2023 2022 Consolidated Statement of Operations and Comprehensive Loss as a percentage of revenue:** Revenue 100 % 100 % Cost of revenue 25 25 Gross profit 75 75 Operating expenses: Research and development 37 44 Sales and marketing 49 54 General and administrative 24 30 Total operating expenses 111 128 Loss from operations (36) (53) Other income (expense): Interest and other income 6 1 Interest and other expense * * Total other income (expense) 6 1 Loss from operations before income taxes (30) (52) Income tax provision * * Net loss attributable to common stockholders (31) % (52) % ______________ * Less than 0.5% of revenue. ** Columns may not add up to 100% due to rounding.
Biggest changeResults of Operations The following tables set forth our results of operations and such data as a percentage of our revenue for each of the periods presented (in thousands): Year Ended December 31, 2024 2023 Revenue $ 144,841 $ 138,090 Cost of revenue (1) 37,414 34,948 Gross profit 107,427 103,142 Operating expenses: Research and development (1)(2) 51,511 51,623 Sales and marketing (1)(2) 61,377 68,132 General and administrative (1)(2) 41,049 33,232 Impairment of intangible asset and capitalized development 15,213 — Total operating expenses 169,150 152,987 Loss from operations (61,723) (49,845) Other income (expense): Interest and other income 6,837 8,306 Interest and other expense (556) (168) Total other income (expense) 6,281 8,138 Loss from operations before income taxes (55,442) (41,707) Income tax provision (332) (443) Net loss attributable to common stockholders $ (55,774) $ (42,150) ______________ (1) Includes stock-based compensation expense as follows (in thousands): Year Ended December 31, 2024 2023 Cost of revenue $ 1,715 $ 1,036 Research and development 7,709 7,767 Sales and marketing 4,676 5,366 General and administrative 8,169 1,989 Total $ 22,269 $ 16,158 (2) Includes restructuring charges as follows (in thousands): Year Ended December 31, 2024 2023 Research and development $ — $ 1,510 Sales and marketing — 648 General and administrative — 432 Total $ — $ 2,590 52 Table of Contents Year Ended December 31, 2024 2023 Consolidated Statement of Operations and Comprehensive Loss as a percentage of revenue:** Revenue 100 % 100 % Cost of revenue 26 25 Gross profit 74 75 Operating expenses: Research and development 36 37 Sales and marketing 42 49 General and administrative 28 24 Impairment of intangible asset and capitalized development 11 — Total operating expenses 117 111 Loss from operations (43) (36) Other income (expense): Interest and other income 5 6 Interest and other expense * * Total other income (expense) 4 6 Loss from operations before income taxes (38) (30) Income tax provision * * Net loss attributable to common stockholders (39) % (31) % ______________ * Less than 0.5% of revenue. ** Columns may not add up to 100% due to rounding.
However, we have irrevocably opted not to use the extended transition period for complying with any new or revised financial accounting standards, and as such, we are required to adopt new or revised standards at the same time as other public companies. 7A.
However, we have irrevocably opted not to use the extended transition period for complying with any new or revised financial accounting standards, and as such, we are required to adopt new or revised standards at the same time as other public companies.
Our long-term offerings strategy is aimed at building features and offerings that address more and more types of legal work so that customers can continue to centralize on our platform as the system of record and engagement for the legal function.
Our long-term offering strategy is aimed at building features and offerings that address more and more types of legal work so that customers can continue to centralize on our platform as the system of record and engagement for the legal function.
We also offer our customers the option to enter into subscriptions based on committed minimum usage on an annual or multi-year basis, which represented 11% of our revenue in each of the years ended December 31, 2023 and 2022. In addition, we generate revenue from a range of professional services aimed at accelerating the time-to-value for our customers.
We also offer our customers the option to enter into subscriptions based on committed minimum usage on an annual or multi-year basis, which represented 11% of our revenue in each of the years ended December 31, 2024 and 2023. In addition, we generate revenue from a range of professional services aimed at accelerating the time-to-value for our customers.
On May 20, 2022, the Compensation Committee approved the CEO Performance Award to Kiwi Camara, the Company’s Co-Founder and who was then serving as the Chief Executive Officer, subject to approval of our stockholders at the 2022 Annual Meeting of Stockholders.
On May 20, 2022, the Compensation Committee approved the CEO Performance Award to Kiwi Camara, our Co-Founder who was then serving as the Chief Executive Officer, subject to approval of our stockholders at the 2022 Annual Meeting of Stockholders.
The CEO Performance Award is a 10-year nonstatutory stock option, the vesting of which is tied solely to achieving stock price milestones. The milestone price requirement is considered a market condition under ASC Topic 718 Compensation - Stock Compensation.
The CEO Performance Award was a 10-year nonstatutory stock option, the vesting of which was tied solely to achieving stock price milestones. The milestone price requirement was considered a market condition under ASC Topic 718 Compensation - Stock Compensation.
Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred and recorded within product development expenses in our consolidated statements of operations and comprehensive loss.
Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred and recorded within research and development expenses in our consolidated statements of operations and comprehensive loss.
We calculate our dollar-based net retention rate as of the end of a period by using (a) the revenue from all customers during the twelve months ending one year prior to such period as the denominator and (b) the revenue from all customers during the twelve months ending as of the end of such period minus the revenue from all customers who are new customers during those twelve months as the numerator.
W e calculate our dollar-based net retention rate as of the end of a period by using (a) the revenue from all customers during the twelve months ending one year prior to such period as the denominator and (b) the revenue from all customers during the twelve months ending as of the end of such period minus the revenue from all customers who are new customers during those twelve months as the numerator.
We intend to continue to invest additional resources in our infrastructure to expand the capability of our product offerings and ensure that our customers are realizing the full benefit of our product offerings. The level, timing and relative investment in our cloud infrastructure could 49 Table of Contents affect our cost of revenue in the future.
We intend to continue to invest additional resources in our infrastructure to expand the capability of our product offerings and ensure that our customers are realizing the full benefit of our product offerings. The level, timing and relative investment in our cloud infrastructure could affect our cost of revenue in the future.
Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training and retaining 48 Table of Contents sufficient numbers of sales personnel to support our growth. We will need to spend significant resources to expand, retain and motivate our sales and marketing personnel.
Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training and retaining sufficient numbers of sales personnel to support our growth. We will need to spend significant resources to expand, retain and motivate our sales and marketing personnel.
The expected volatility is derived from a weighted average of DISCO’s volatility and the historical volatilities of the common stock of several entities with characteristics similar to ours, such as the size and operational and economic similarities to our principle business operations. 57 Table of Contents • Risk-free interest rate . The risk-free interest rate is based on the U.S.
The expected volatility was derived from a weighted average of DISCO’s volatility and the historical volatilities of the common stock of several entities with characteristics similar to ours, such as the size and operational and economic similarities to our principle business operations. 58 Table of Contents • Risk-free interest rate . The risk-free interest rate was based on the U.S.
This access facilitates widespread adoption of our product offerings , as these law firms and other legal service providers often become customers on their own or recommend our product offerings to other legal industry participants after realizing the benefits of our product offerings .
This access facilitates adoption of our product offerings , as these law firms and other legal service providers can become customers on their own or recommend our product offerings to other legal industry participants after realizing the benefits of our product offerings .
The fair value of our underlying common stock is determined by the closing price of our common stock on the date of grant, as reported by the NYSE. • Expected volatility.
The fair value of our underlying common stock was determined by the closing price of our common stock on the date of grant, as reported by the NYSE. • Expected volatility.
The expected dividend is assumed to be zero as we have never paid dividends and have no current plans to pay any dividends on our common stock. • Exercise behavior. The exercise behavior is assumed to be the midpoint of (i) the later of the time-based vest date and performance hurdle achievement date, and (ii) the expiration date.
The expected dividend was assumed to be zero as we have never paid dividends and had no plans to pay any dividends on our common stock. • Exercise behavior. The exercise behavior was assumed to be the midpoint of (i) the later of the time-based vest date and performance hurdle achievement date, and (ii) the expiration date.
We provide legal departments with the ability to centralize legal data into a single platform, improving security and privacy for our customers, enabling transparent collaboration with other legal industry participants and allowing customers to reuse data and lawyer work product across legal matters.
We provide legal departments with the ability to centralize legal data into a single platform, improving security and privacy for our customers, enabling transparent collaboration with other legal industry 47 Table of Contents participants and allowing customers to reuse data and lawyer work product across legal matters.
Large customers accounted for approximately 75%, and 78% of our revenue for the years ended December 31, 2023 and 2022, respectively. Our go-to-market strategy is focused on acquiring new customers and driving continued use and increased usage of our product offerings for existing customers.
Large customers accounted for approximately 76%, and 75% of our revenue for the years ended December 31, 2024 and 2023, respectively. Our go-to-market strategy is focused on acquiring new customers and driving continued use and increased usage of our product offerings for existing customers.
Our ability to attract new customers will depend on a number of factors, including the effectiveness and pricing of our products, the offerings of our competitors and the effectiveness of our sales and marketing efforts.
Our ability to attract 49 Table of Contents new customers will depend on a number of factors, including the effectiveness and pricing of our products, the offerings of our competitors and the effectiveness of our sales and marketing efforts.
By automating the manual, 46 Table of Contents time-consuming and error-prone parts of legal hold, legal request, ediscovery, legal document review and case management, we empower legal departments to focus on delivering better legal outcomes. We generate substantially all of our revenue from our customers’ actual usage of our product offerings .
By automating the manual, time-consuming and error-prone parts of legal hold, legal request, ediscovery, legal document review and case management, we empower lawyers to focus on delivering better legal outcomes. We generate substantially all of our revenue from our customers’ actual usage of our product offerings .
In each of the years ended December 31, 2023 and 2022, usage-based revenue represented 89% of total revenue and subscription revenue fees represented 11% of total revenue. Cost of Revenue Cost of revenue consists primarily of third-party cloud infrastructure expenses incurred in connection with our customers’ use of our product offerings.
In each of the years ended December 31, 2024 and 2023, usage-based revenue represented 89% of total revenue and subscription revenue fees represented 11% of total revenue. 50 Table of Contents Cost of Revenue Cost of revenue consists primarily of third-party cloud infrastructure expenses incurred in connection with our customers’ use of our product offerings.
In the near term, w e e xpect that our sales and marketing expenses will remain relatively consistent in absolute dollars but will continue to be our largest operating expense for the foreseeable future as we grow our business. Our sales and marketing expenses may fluctuate as a percentage of our revenue over time.
W e e xpect that our sales and marketing expenses will increase in absolute dollars and continue to be our largest operating expense for the foreseeable future as we grow our business. Our sales and marketing expenses may fluctuate as a percentage of our revenue over time.
Revenue generated from our services product offerings decreased $0.1 million, or 0.5%, for the year ended December 31, 2023 compared to the same period in 2022. This change was driven by decreases in usage of our services product offerings by several 52 Table of Contents of our existing customers, particularly within DISCO Managed Review.
Revenue generated from our services product offerings decreased $1.1 million, or 4%, for the year ended December 31, 2024 compared 53 Table of Contents to the same period in 2023. This change was driven by decreases in usage of our services product offerings by several of our existing customers, particularly within managed review.
We believe our market leadership and differentiated product offerings will enable us to efficiently acquire new customers across all channels . As of December 31, 2023 , we had 1,441 customers, increasing from 1,327 customers as of December 31, 2022 .
We believe our market leadership and differentiated product offerings will enable us to efficiently acquire new customers across all channels. As of December 31, 2024, we had 1,478 customers, increasing from 1,463 customers as of December 31, 2023.
In the near term, we expect that our general and administrative expenses will increase in absolute dollars as our business grows but may fluctuate as a percentage of total revenue from period to period.
In the near term, we expect that our general and administrative expenses will remain relatively consistent in absolute dollars but may fluctuate as a percentage of total revenue from period to period.
Revenue generated from our software product offerings increased by $3.0 million, or 3%, for the year ended December 31, 2023 compared to the same period in 2022 due to increases in usage of our software product offerings.
Revenue generated from our software product offerings increased by $7.9 million, or 7%, for the year ended December 31, 2024 compared to the same period in 2023 due to increases in usage of our software product offerings.
Our ability to successfully develop, market and sell new offerings will depend on a number of factors, including the availability of capital to invest in innovation, our customers’ satisfaction with such offerings, competition, pricing and overall changes in our customers’ spending levels. Expand Internationally Our market is global and we believe there is a significant opportunity to expand internationally.
Our ability to successfully develop, market and sell new offerings will depend on a number of factors, including the availability of capital to invest in innovation, our customers’ satisfaction with such offerings, competition, pricing and overall changes in our customers’ spending levels.
As of December 31, 2023 and 2022 , our dollar-based net retention rate was 92% and 106%, respectively.
As of December 31, 2024 and 2023, our dollar-based net retention rate was 96% and 92%, respectively.
We define Adjusted EBITDA as net loss, adjusted to exclude: depreciation and amortization expense; income tax provision; interest and other, net; stock-based compensation expense; payroll tax expense on employee stock transactions; CEO Performance Award issuance expense; unoccupied lease expense; restructuring charges; acquisition revaluation expense; expenses associated with stockholder litigation; and other one-time, non-recurring items, when applicable.
We define Adjusted EBITDA as net loss, adjusted to exclude: depreciation and amortization expense; income tax provision; interest and other, net; stock-based compensation expense; payroll tax expense on employee stock transactions; restructuring charges; acquisition revaluation expense; expenses associated with stockholder litigation; impairment of intangible asset and capitalized development; and other one-time, non-recurring items, when applicable.
Revenue related to new customers added since December 31, 2022 contributed $13.9 million, which was partially offset by an $11.0 million decrease in revenue from customers that existed as of December 31, 2022. The change in revenue from existing customers was driven by decreases in usage of our product offerings by several of our existing customers.
Revenue related to new customers added since December 31, 2023 contributed $11.3 million, which was partially offset by a $4.6 million decrease in revenue from customers that existed as of December 31, 2023. The change in revenue from existing customers was driven by decreases in usage of our product offerings by several of our existing customers.
While each of these factors present significant opportunities for our business, they also pose important challenges that we must successfully address in order to sustain our growth, improve our results of operations and establish and maintain profitability. Maintain and Advance Our Innovation and Brand Our success depends in part on our ability to maintain and advance our innovation and brand.
Key Factors Affecting Our Performance We believe that the growth and future success of our business depends on many factors. While each of these factors present significant opportunities for our business, they also pose important challenges that we must successfully address in order to sustain our growth, improve our results of operations and establish and maintain profitability.
Likewise, if a law firm is our customer, the law firm may add users from its clients’ legal departments to our platform in order to collaborate with them. These users may then become champions and encourage the companies they work for to become customers. As of December 31, 2023, we had $159.6 million of cash and cash equivalents.
Likewise, if a law firm is our customer, the law firm may add users from its clients’ legal departments to our platform in order to collaborate with them. These users may then become champions and encourage the companies they work for to become customers.
We may be required to expend significant resources in connection with the pursuit of acquisitions and investments. Key Components of Statement of Operations Revenue All of our revenue-generating activities directly relate to the sale and support of our legal product offerings within a single operating segment. We have two primary types of contractual arrangements: usage-based and subscription.
Key Components of Statement of Operations Revenue All of our revenue-generating activities directly relate to the sale and support of our legal product offerings within a single operating segment. We have two primary types of contractual arrangements: usage-based and subscription.
We intend to continue combining our deep legal domain expertise and commitment to world-class software engineering to continue delivering features and introducing new product offerings to address more areas of legal work, such as our ediscovery chatbot, Cecilia, which was released in the fourth quarter of 2023 in the U.S., and access to sources of primary law, which we acquired through our Fastcase license and intend to launch in 2024.
We intend to continue combining our deep legal domain expertise and commitment to world-class software engineering to continue delivering features and introducing new product offerings to address more areas of legal work, such as our ediscovery chatbot, Cecilia, which was released in the fourth quarter of 2023 in the United States and in the third quarter of 2024 in Europe.
Cost of Revenue Year Ended December 31, 2023 2022 Change % Change (dollars in thousands) Cost of revenue $ 34,948 $ 34,163 $ 785 2 % Percentage of revenue 25 % 25 % Total cost of revenue increased by $0.8 million, or 2%, for the year ended December 31, 2023 compared to the same period in 2022.
Cost of Revenue Year Ended December 31, 2024 2023 Change % Change (dollars in thousands) Cost of revenue $ 37,414 $ 34,948 $ 2,466 7 % Percentage of revenue 26 % 25 % Total cost of revenue increased by $2.5 million, or 7%, for the year ended December 31, 2024 compared to the same period in 2023.
Our dollar-based net retention rate could decrease over time as our customer base matures and the amount of revenue used in the denominator to calculate net retention grows. Add New Customers We believe we have a significant opportunity to continue to grow our customer base.
Our dollar-based net retention rate could decrease over time as our customer base matures and the amount of revenue used in the denominator to calculate net retention grows.
The change was primarily related to a decrease of $5.0 million in personnel costs, including stock-based compensation and variable compensation, for our sales personnel. Additionally, professional services and travel and entertainment expenses decreased $1.3 million and $0.5 million, respectively.
The change was primarily related to a decrease of $4.2 million in personnel costs, including stock-based compensation and variable compensation, for our sales personnel. In addition, marketing expenses decreased $1.0 million and software related costs decreased $0.5 million.
Other Income (Expense), Net Other income (expense), net consists primarily of interest income, income related to non-operating activities, interest expense and gains and losses from foreign currency transactions and remeasurements of foreign currency-denominated monetary assets and liabilities to the U.S. dollar.
Other Income (Expense), Net Other income (expense), net consists primarily of interest income, income related to non-operating activities, interest expense, gains and losses from foreign currency transactions and remeasurements of foreign currency-denominated monetary assets and liabilities to the U.S. dollar. 51 Table of Contents Income Tax Provision Income tax provision consists primarily of income taxes related to foreign and state jurisdictions in which we conduct business.
Sales and Marketing Year Ended December 31, 2023 2022 Change % Change (dollars in thousands) Sales and marketing $ 68,132 $ 72,839 $ (4,707) (6 %) Percentage of revenue 49 % 54 % Sales and marketing expenses decreased by $4.7 million, or 6%, for the year ended December 31, 2023 compared to the same period in 2022.
Sales and Marketing Year Ended December 31, 2024 2023 Change % Change (dollars in thousands) Sales and marketing $ 61,377 $ 68,132 $ (6,755) (10 %) Percentage of revenue 42 % 49 % Sales and marketing expenses decreased by $6.8 million, or 10%, for the year ended December 31, 2024 compared to the same period in 2023.
As of December 31, 2023 and 2022, our principal sources of liquidity were cash and cash equivalents, totaling $159.6 million and $203.2 million, respectively. Cash equivalents include highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less.
As of December 31, 2024, our principal sources of liquidity were cash and cash equivalents and short-term investments, totaling $52.8 million and $76.4 million, respectively. Cash equivalents include highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less. Short-term investments consist of highly-rated U.S.
We generated Adjusted EBITDA of $(25.9) million and $(44.5) million for the years ended December 31, 2023 and 2022, respectively. See the section titled “—Non-GAAP Financial Measure” for the definition of Adjusted EBITDA, as well as a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure stated in accordance with GAAP.
See the section titled “—Non-GAAP Financial Measure” for the definition of Adjusted EBITDA, as well as a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure stated in accordance with GAAP.
Operating Expenses Research and Development Year Ended December 31, 2023 2022 Change % Change (dollars in thousands) Research and development $ 51,623 $ 59,258 $ (7,635) (13 %) Percentage of revenue 37 % 44 % Research and development expenses decreased by $7.6 million, or 13%, for the year ended December 31, 2023 compared to the same period in 2022.
Operating Expenses Research and Development Year Ended December 31, 2024 2023 Change % Change (dollars in thousands) Research and development $ 51,511 $ 51,623 $ (112) — % Percentage of revenue 36 % 37 % Research and development expenses decreased by $0.1 million, or less than 1%, for the year ended December 31, 2024 compared to the same period in 2023.
This change was primarily attributable to a $6.5 million decrease in personnel costs, including stock-based compensation. This decrease included a $7.7 million reversal of stock-based compensation costs related to the cancelled 10-year performance award previously granted to our former CEO (the “CEO Performance Award”). Had the CEO Performance Award not been cancelled, personnel costs would have increased $1.2 million.
This change was primarily attributable to a $7.9 million increase in personnel costs, including stock-based compensation, as a result of the $7.7 million reversal of stock-based compensation related to the 10-year performance award previously granted to our former CEO (the “CEO Performance Award”) that was cancelled in 2023.
Because of these limitations, when evaluating our performance, you should consider Adjusted EBITDA alongside other financial measures, including our net loss and other results stated in accordance with GAAP.
Because of these limitations, when evaluating our performance, you should consider Adjusted EBITDA alongside other financial measures, including our net loss and other results stated in accordance with GAAP. We expect Adjusted EBITDA to improve over the long term as we achieve greater scale in our business and efficiencies in our operating expenses.
Financing Activities Net cash provided by financing activities for the year ended December 31, 2023 was $1.9 million, a decrease of $1.6 million from net cash provided by financing activities of $3.5 million for the year ended December 31, 2022.
Financing Activities Net cash used in financing activities for the year ended December 31, 2024 was $20.0 million, a change of $21.9 million from net cash provided by financing activities of $1.9 million for the year ended December 31, 2023.
This change was primarily driven by a $0.5 million increase in amortization of internally developed software and a $0.2 million increase in costs for cloud hosting as a result of increased usage of our product offerings.
This change was primarily driven by a $1.5 million increase in costs for cloud hosting as a result of increased usage of our software product offerings and a $1.7 million increase in salary and benefits costs. This increase was partially offset by a $0.9 million decrease in outsourced staffing vendor fees.
We expect Adjusted EBITDA to improve over the long term as we achieve greater scale in our business and efficiencies in our operating expenses. 54 Table of Contents The following table presents a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure stated in accordance with GAAP, for the periods presented: Year Ended December 31, 2023 2022 (in thousands) Net loss $ (42,150) $ (70,765) Depreciation and amortization expense 4,159 2,974 Income tax provision 443 186 Interest and other, net (8,138) (1,229) Stock-based compensation expense 16,158 21,737 Payroll tax expense on employee stock transactions 470 520 CEO Performance Award issuance expense — 386 Unoccupied lease expense — 1,127 Restructuring charges 2,590 — Acquisition revaluation expense 500 540 Expenses associated with stockholder litigation 74 — Adjusted EBITDA $ (25,894) $ (44,524) Liquidity and Capital Resources We have financed operations primarily through customer payments and net proceeds from sales of equity securities, including our IPO in July 2021.
The following table presents a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure stated in accordance with GAAP, for the periods presented (in thousands): Year Ended December 31, 2024 2023 Net loss $ (55,774) $ (42,150) Depreciation and amortization expense 3,926 4,159 Income tax provision 332 443 Interest and other, net (6,281) (8,138) Stock-based compensation expense 22,269 16,158 Payroll tax expense on employee stock transactions 537 470 Restructuring charges — 2,590 Acquisition revaluation expense 303 500 Expenses associated with stockholder litigation 757 74 Impairment of intangible asset and capitalized development 15,213 — Adjusted EBITDA $ (18,718) $ (25,894) Liquidity and Capital Resources We have financed operations primarily through customer payments and net proceeds from sales of equity securities, including our IPO in July 2021.
We maintain a valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred assets will be utilized. 50 Table of Contents Results of Operations The following tables set forth our results of operations and such data as a percentage of our revenue for each of the periods presented.
We maintain a valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred assets will be utilized.
Our customers include a diverse set of enterprises across a broad set of industries, as well as law firms, legal services providers of all sizes and government organizations. While we serve customers across many different industries, the way in which lawyers and legal professionals use our product offerings is similar regardless of the specific industry in which each customer operates.
While we serve customers across many different industries, the way in which lawyers and legal professionals use our product offerings is similar regardless of the specif ic industry in which each customer operates.
In particular, we believe that the use of Adjusted EBITDA is helpful to our investors as it is a measure used by management in assessing the health of our business and evaluating our operating performance, as well as for internal planning and forecasting purposes.
In particular, we believe that the use of Adjusted EBITDA is helpful to our investors as it is a measure used by management in assessing the health of our business and evaluating our operating performance, as well as for internal planning and forecasting purposes. 55 Table of Contents Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP.
Cash Flows The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2023 2022 Change % Change (dollars in thousands) Cash used in operating activities $ (25,531) $ (46,014) $ 20,483 (45) % Cash used in investing activities (20,035) (9,688) (10,347) 107 % Cash provided by financing activities 1,873 3,469 (1,596) (46) % Net decrease in cash and cash equivalents $ (43,693) $ (52,233) $ 8,540 (16) % Operating Activities Our largest source of operating cash is payments received from our customers.
Cash Flows The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2024 2023 Change % Change (dollars in thousands) Cash used in operating activities $ (8,749) $ (25,531) $ 16,782 (66) % Cash used in investing activities (78,035) (20,035) (58,000) 289 % Cash (used in) provided by financing activities (19,996) 1,873 (21,869) (1,168) % Net decrease in cash and cash equivalents $ (106,780) $ (43,693) $ (63,087) 144 % Operating Activities Our largest source of operating cash is payments received from our customers.
Although fluctuations in general macroeconomic conditions, such as the current inflationary environment and rising interest rates, the Russia-Ukraine and Israel- 55 Table of Contents Hamas wars, have not materially impacted our liquidity to date, we plan to continue to evaluate aspects of our spending, including capital expenditures, discretionary spending, and strategic investments throughout 2024.
Although fluctuations in general macroeconomic conditions, including conditions resulting from fluctuations in inflation and interest rates, the potential 56 Table of Contents imposition of tariffs in the United States and abroad, and the Russia-Ukraine war and conflict in the Middle East, have not materially impacted our liquidity to date, we plan to continue to evaluate aspects of our spending, including capital expenditures, discretionary spending, and strategic investments throughout 2025.
The change was primarily driven by a decrease of $6.9 million in personnel costs, including stock-based compensation, as a result of decreased headcount and the expansion of our operations to lower-cost international locations, and a $2.1 million increase in capitalized software development.
The change was primarily driven by a decrease of $0.4 million in personnel costs, including stock-based compensation, as a result of the expansion of our operations to lower-cost international locations, and a $1.5 million decrease in nonrecurring restructuring charges related to our reductions in force in January and May 2023.
Investing Activities Net cash used in investing activities for the year ended December 31, 2023 was $20.0 million, an increase of $10.3 million from net cash used in investing activities of $9.7 million for the year ended December 31, 2022.
Investing Activities Net cash used in investing activities for the year ended December 31, 2024 was $78.0 million, an increase of $58.0 million from net cash used in investing activities of $20.0 million for the year ended December 31, 2023. The change in cash used in investing activities was primarily related to purchases of short-term investments of $87.9 million.
This commonality has created efficiencies in our sales and marketing and research and development activities because we do not need to tailor our sales and marketing activities to a wide range of different customer use cases. As of December 31, 2023, we had 1,441 customers, increasing from 1,327 customers as of December 31, 2022.
This commonality has created efficiencies in our sales and marketing and research and development activities because we do not need to tailor our sales and marketing activities to a wide range of different customer use cases. We define a customer as an entity that we have a contract with and from whom we have recognized revenue during the preceding month.
We define a customer as an entity that we have a contract with and from whom we have recognized revenue during the preceding month. As of December 31, 2023 we had 289 large customers, defined as customers with revenue in excess of $100,000 over the previous 12-month period, increasing from 265 large customers as of December 31, 2022 .
As of December 31, 2024, we had 1,478 customers, increasing from 1,463 customers as of December 31, 2023. As of December 31, 2024 we had 315 large customers, defined as customers with revenue in excess of $100,000 over the previous 12-month period, increasing from 289 large customers as of December 31, 2023.
We intend to continue to selectively pursue acquisitions and strategic investments that we believe can expand the functionality and value of our product offerings and bring talent to our company. We believe that the combination of our market leadership, deep legal expertise and powerful end-to-end platform provides an advantage in pursuing select acquisitions.
Operationally, we expect to continue to expand our global employee headcount in India. Pursue Strategic Acquisitions and Strategic Investments We intend to continue to selectively pursue acquisitions and strategic investments that we believe can expand the functionality and value of our product offerings and bring talent to our company.
Net cash used in operating activities for the year ended December 31, 2023 was $25.5 million, a decrease of $20.5 million from net cash used in operating activities of $46.0 million for the year ended December 31, 2022. The change in cash flow used in operations was primarily due to a decrease in net loss of $28.6 million.
Net cash used in operating activities for the year ended December 31, 2024 was $8.7 million, a decrease of $16.8 million from net cash used in operating activities of $25.5 million for the year ended December 31, 2023.
Our future success is dependent on our ability to successfully develop, market and sell our product offerings to both new and existing customers. Maintain and Increase Usage and Penetration Within Our Existing Customer Base Our large base of customers represents a significant opportunity for further sales expansion.
Our future success is dependent on our ability to successfully develop, market and sell our product offerings to both new and existing customers.
These decreases were partially offset by a $1.8 million increase in marketing expenses as well as $0.8 million in restructuring costs related to our reductions in force in January and May 2023. 53 Table of Contents General and Administrative Year Ended December 31, 2023 2022 Change % Change (dollars in thousands) General and administrative $ 33,232 $ 40,738 $ (7,506) (18 %) Percentage of revenue 24 % 30 % General and administrative expenses decreased by $7.5 million, or 18%, for the year ended December 31, 2023 compared to the same period in 2022.
Further, $0.6 million of the decrease was also due to nonrecurring restructuring charges related to our reductions in force in January and May 2023. 54 Table of Contents General and Administrative Year Ended December 31, 2024 2023 Change % Change (dollars in thousands) General and administrative $ 41,049 $ 33,232 $ 7,817 24 % Percentage of revenue 28 % 24 % General and administrative expenses increased by $7.8 million, or 24%, for the year ended December 31, 2024 compared to the same period in 2023.
These decreases were partially offset by $0.2 million in restructuring costs related to our reductions in force in January and May 2023. Non-GAAP Financial Measure We report our financial results in accordance with generally accepted accounting principles, or GAAP. However, management believes that Adjusted EBITDA, a non-GAAP financial measure, provides investors with additional useful information in evaluating our performance.
We recorded no such impairment charges in the year ended December 31, 2023. Non-GAAP Financial Measure We report our financial results in accordance with generally accepted accounting principles, or GAAP. However, management believes that Adjusted EBITDA, a non-GAAP financial measure, provides investors with additional useful information in evaluating our performance.
We generated revenue of $138.1 million and $135.2 million in the years ended December 31, 2023 and 2022, respectively, representing a period-over-period growth of 2%. Our net loss was $42.2 million and $70.8 million for the years ended December 31, 2023 and 2022, respectively.
Our net loss was $55.8 million and $42.2 million for the years ended December 31, 2024 and 2023, respectively. We generated Adjusted EBITDA of $(18.7) million and $(25.9) million for the years ended December 31, 2024 and 2023, respectively.
For example, negative conditions in the general economy both in the United States and abroad, including conditions resulting from inflation, rising interest rates, and the Russia-Ukraine and Israel-Hamas wars have led to economic uncertainty globally. Historically, during periods of economic uncertainty and downturns, businesses may slow spending on information technology, which may impact our business and our customers’ businesses.
For example, negative conditions in the general economy both in the United States and abroad, including conditions resulting from fluctuations in inflation and interest rates, the potential imposition of tariffs in the United States and abroad, and the Russia-Ukraine war and conflict in the Middle East, have led to economic uncertainty globally.
The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods. If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed.
If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed. For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see the section titled “Risk Factors”.
We believe our existing cash and cash equivalents will be sufficient to fund anticipated cash requirements for the next 12 months. We believe we will meet our longer-term expected future cash requirements primarily from a combination of cash flow from operating activities and available cash and cash equivalents.
We believe we will meet our longer-term expected future cash requirements primarily from a combination of cash flow from operating activities and available cash and cash equivalents and short-term investments. We may also engage in equity or debt financings to secure additional funds.
Other purchase commitments primarily encompass non-cancellable software agreements to support our internal functions. These expenses are incurred as services are performed and are in the normal course of business.
Cloud platform and other purchase commitments are expensed as incurred as services are performed and are in the normal course of business.
The following table summarizes our quarterly revenue by groups of similar offerings (in thousands): Three Months Ended March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 Software $ 27,560 $ 27,012 $ 28,413 $ 29,282 Services 5,569 7,264 6,530 6,460 Total revenue $ 33,129 $ 34,276 $ 34,943 $ 35,742 Comparison of the Years Ended December 31, 2023 and 2022 Revenue Year Ended December 31, 2023 2022 Change % Change (dollars in thousands) Revenue $ 138,090 $ 135,190 $ 2,900 2 % Total revenue increased by $2.9 million, or 2%, for the year ended December 31, 2023 compared to the same period in 2022.
The following table summarizes our quarterly revenue by groups of similar offerings (in thousands): Year Ended December 31, 2024 2023 Software $ 120,134 $ 112,267 Services 24,707 25,823 Total revenue $ 144,841 $ 138,090 Comparison of the Years Ended December 31, 2024 and 2023 Revenue Year Ended December 31, 2024 2023 Change % Change (dollars in thousands) Revenue $ 144,841 $ 138,090 $ 6,751 5 % Total revenue increased by $6.8 million, or 5%, for the year ended December 31, 2024 compared to the same period in 2023.
For example, our ediscovery chatbot, Cecilia, which was released in the fourth quarter of 2023 in the U.S., and we intend to offer our customers access to sources of primary law, which we acquired through our Fastcase license and intend to launch in 2024.
For example, our ediscovery chatbot, Cecilia, which was released in the fourth quarter of 2023 in the United States and in the third quarter of 2024 in Europe.
The increase in cash used in investing activities was primarily related to the purchase of the primary law intangible asset from Fastcase, Inc. of $14.0 million to support new features in our product offerings. This increase was partially offset by a $4.1 million decrease in cash paid for the acquisition of legal workflow products from Congruity.
This was further offset by cash paid in 2023 for the primary law intangible asset of $14.0 million and $1.2 million for the acquisition of legal workflow products from Congruity360, LLC (“Congruity”).
The change in cash flows was primarily related to a decrease in proceeds from exercises of stock options of $3.5 million due to an decrease in 56 Table of Contents option exercise activity. This decrease was partially offset by net proceeds received from the issuance of common stock under the ESPP of $1.5 million.
Additionally, there was a decrease in proceeds from 57 Table of Contents exercises of stock options of $0.5 million due to a decrease in option exercise activity, and a decrease in net proceeds received from the issuance of common stock under the ESPP of $0.9 million. Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with GAAP.
In 2023 , less than 10% of our revenue was generated by customers outside of the United States. We expect to continue to expand our global employee headcount in India. International expansion, including our global sales efforts, will add increased complexity and cost to our business.
Expand Internationally Our market is global and we believe there is a significant opportunity to expand our international customer base, particularly in the United Kingdom, and further expand our operations internationally, particularly in India. In the year ended 2024 , less than 10% of our revenue was generated by customers outside of the United States.
This decrease was partially offset by $1.5 million in restructuring costs related to our reductions in force in January and May 2023.
Additionally, professional services increased $1.3 million, of which $0.7 million was due to legal fees related to the stockholder litigation. These increases were partially offset by a $0.6 million decrease in insurance expense and a $0.4 million decrease in nonrecurring restructuring charges related to our reductions in force in January and May 2023.
These decreases in cash used in operating activities were partially offset by a decrease in stock-based compensation of $5.6 million primarily related to the cancellation of the CEO Performance Award, a $3.4 million increase in accounts receivable related to lower collections of outstanding balances, as well as a $1.4 million decrease in deferred revenue as performance obligations are satisfied.
Additional offsets include the change in stock-based compensation which increased $6.1 million primarily related to the cancellation of the CEO Performance Award in 2023 and the change in accounts receivable which increased $8.5 million related to increased collections from customers.
Removed
For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see the section titled “Risk Factors.” 47 Table of Contents Key Factors Affecting Our Performance We believe that the growth and future success of our business depends on many factors.
Added
Our customers include a diverse set of enterprises across a broad set of industries, as well as law firms, legal services providers of all sizes and government organizations.
Removed
Pursue Strategic Acquisitions and Strategic Investments In February 2022, we acquired legal workflow products from Congruity360, LLC, or Congruity, in a purchase that expanded our offerings to provide a modern digital solution for legal hold obligations and legal request compliance.
Added
Legal departments that use our product offerings and use many law firms across their legal matters, as well as law firms and service providers that use our product offerings for multiple clients, are generally treated as one customer. However, in some cases where they have separate billing terms, we may count these as multiple customers.
Removed
Income Tax Provision Income tax provision consists primarily of income taxes related to foreign and state jurisdictions in which we conduct business.
Added
As of December 31, 2024, we had $52.8 million of cash and cash equivalents and $76.4 million of short-term investments. We generated revenue of $144.8 million and $138.1 million in the years ended December 31, 2024 and 2023, respectively, representing a period-over-period growth of 5%.
Removed
The decrease is also attributable to $1.3 million in unoccupied lease charges and moving expenses incurred in 2022 related to the opening of our new headquarters in Austin, Texas, as well as $0.4 million in issuance costs related to the CEO Performance Award granted in 2022. Further, corporate insurance costs decreased $0.7 million.
Added
Historically, during periods of economic uncertainty and downturns, businesses may slow spending on information technology, which may impact our business and our customers’ businesses. 48 Table of Contents The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods.
Removed
Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP.

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