Q3 2021 CS Disco Inc Earnings Call
Okay.
[music].
Ladies and gentlemen, thank you for standing by and welcome to the T. S disco third quarter of fiscal year 2021 conference call.
At this time all participants are in a listen only mode.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If he would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
If he would like to withdraw your question just press the pound key.
I would now like to hand, the conference over to your first speaker today.
Robinson see Cisco Investor Relations Pease go ahead.
Good afternoon, and thank you for joining us on today's conference call to discuss the financial results for <unk> third quarter and fiscal year 2021 with me on today's call are T V camera <unk> co founder and Chief Executive Officer, and Michael affair Discos.
Chief Financial Officer.
During today's call, we will review our financial results for the third quarter of fiscal year, 2021, and discuss our guidance for the fourth quarter and full fiscal year 2021.
Today's call will include forward looking statements pursuant to the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995, including but not limited to statements regarding our financial outlook, including our guidance for the fourth quarter and full year 2021, our market opportunity.
<unk> positioned product strategy and growth opportunities.
In addition to our prepared remarks, our earnings press release, and SEC filings and a replay of today's call can be found on our Investor Relations website at IR Dot C. S. Cisco Dot com.
Forward looking statements involve known and unknown risks and uncertainties that may cause our actual results performance or achievements to be materially different from those expressed or implied by the forward looking statements.
Forward looking statements represent our management's beliefs and assumptions only as of the date made.
Information on factors that could affect the company's financial results is included in its filings with the SEC from time to time, including the section titled Risk factors in the company's quarterly report on Form 10-Q.
For the quarter ended June 32021 filed with the SEC on September 3rd 2021.
Additional information will be made available on the company's quarterly report on Form 10-Q for the quarter ended September 32021.
In addition, during today's call we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP I.
A reconciliation between GAAP and non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures versus their closest GAAP equivalents is available in our earnings release.
That I'd like to turn the call over to Keith.
Thanks, Lee good afternoon, and welcome to our Q3 earnings call before I jump in I want to thank the entire team at <unk> for all their incredible efforts, resulting in another stellar quarter.
I also want to introduce our new Vice President of Investor Relations lead Robinson.
Many of you will interact with her in the coming days and weeks and we will make sure. There is time for all of you to become friends.
With that let's jump in.
On our last earnings call. We spent a good amount of time discussing disco our history and our strategy for those joining our earnings for the first time, so I would like to highlight a few key points.
But this grow we are well positioned to take advantage of enduring trends in the $767 billion legal services market that is being transformed by software.
These trends include the expanding a variety of legal work the ever rising volume enterprise data that can become evidence with legal matters of the growth in regulation that companies are exposed true around the world.
We leverage advances in artificial intelligence and the cloud computing to build products that automate large categories of legal work for Ya lawyers to focus on those products that require human legal judgment.
We do this by combining World class software engineering and design with a deep understanding of the law that how lawyers work some things to.
To create product experiences that field magical two lawyers, our first product <unk> E. Discovery helps lawyers quickly find the evidence and large collections of millions tens of millions or even hundreds of millions of enterprise documents and data.
<unk> review Leverages <unk> to.
<unk> automates the process of legal document to review using artificial intelligence models to automatically classify enterprise data into legal categories and identify potential COVID-19.
This showcase builder extends this product suite to witness testimony, helping lawyers funding dividends and deposition crem scripts.
Our products all leverage our extensible scalable platform that uses elastic compute to deliver phenomenal performance even on the largest dataset.
By using our products legal department save time, and money free lawyers structurally practice law and most importantly achieve better legal outcomes.
And with that I'm very pleased to provide a few updates on another strong quarter.
We continued our excellent growth trajectory in Q3 with 67% year on year growth attributable to broad based momentum across a large number of customers we.
Have successfully executed on our plan.
New customers and grow our usage with existing customers.
Following our IPO, we've continued to broaden awareness of disco by attending and speaking of thought leadership sessions at legal industry conferences, such as skilled to calm debate in conference of the International Legal Technology Association, and General Council Conference East and Midwest.
In total our leadership and sales team attended 34 events globally in Q3.
In Q3, we continued to see an increasing number of customers using more than one of our solutions are.
Our Ediscovery business has continued to grow and perform well and we are pleased with the ongoing strength of our review of business, including the expansion of customers who use review.
Thanks to our sales and marketing organizations efforts, we saw a very impressive sales pipeline in Q3.
This momentum contributed to net new client wins in the quarter sales performance was driven by a combination of tenured sales reps a disco seeing strong traction.
Reps, who have recently joined <unk> as well as proactive inbounds from customers seeking our solutions in the market.
We continue to see incredible outcomes for our clients and I'm constantly in the all as a result, our products can deliver.
One of our new disco clients as a leading medical device company. We were introduced to them by an am law 200 law firm, who has referred more and more of its clients to discuss.
This new corporate clients adopted multiple products and generated more than $200000 of revenue.
First quarter with us.
This is a great example of how our multi product strategy and partnerships with the law firms to drive introductions to new customers is working well.
A leading global mobility technology company recently decided to renew and expand its relationship with the discount.
This renewal and expansion was driven by the customer satisfaction with our solutions and the efficiency of using <unk> to accelerate legal document review.
This is a great example of the impact of automation can have on the productivity of deficiency of legal departments and the tremendous return on investment customers experienced by switching to disco.
This group continues to support some of the most high profile and mission critical legal matters law firms involved in the front page drug litigation matter currently use all three of Discos solutions and recently renewed their case builders subscription.
We continue to receive positive feedback from clients with a special mention of our customer service. We are incredibly focused on customer centric innovation and have a long history of using customer feedback received through the sales cycle quarterly business reviews and industry events to inform our development.
<unk>.
Based on feedback from our product Advisory Council, we developed disco early case assessment or EC.
ECA is the process of quickly evaluating large collections of evidence before a full scale legal document review.
Above ECA platform is especially beneficial.
Okay customers get access.
For the full suite of analytics, and visual search, including the ability to apply a disco AI.
To data in ECA and.
And likewise as the lawyers identify important Dr.
And then in ECA. This creates an additional signal that strengthens our disco AI models.
With the discount ECA, we have extended disco AI to a larger and richer set of data from our customers. While at the same time, making disco E discovery, our customers largest matters, we are excited to rollout.
Customers over the next few quarters and continue to build a full stack of solutions that make.
Card customers day to day work more magical.
While delivering continuous future innovation, we also continue to invest in our platform.
One of the hallmarks of our products go into all the way back to 2013 has been performance.
Over the past year, we have improved ingest speed by more than 30% search feed and viewer rendering by more than 20% and production speed by 63% was 89% of productions completed in less than 30 minutes.
So those divestitures struggled with core performance using competing solutions speeds like this are like going from dial up to broadband and as you can see we continue to invest in getting even faster.
We're also proud of the launch of <unk> University of integrity of alerting program available to <unk> channel partners and customers.
Gives these audiences the ability.
To deepen their relationship with the disco through continuous learning and certifications.
In the roughly one week between the launch at the end of the quarter we had.
We're confident that in the coming quarters.
Christie will grow to become a leading resource for legal professionals.
This is the traction.
Should we see from all of our products with customers across industries, we will continue to ambitious fully invest in our go to market.
Teams and scaled the rest of our operations to meet the needs of our clients and with that I'll turn it over to Michael <unk> our CFO.
Thank you <unk> before I discuss the results and guidance I'll reiterate a few important apps.
Effects of Discos business model.
As we mentioned on our last earnings call. We primarily have a usage based model that is driven by the number and nature of matters volume of data length of time on the platform and other factors our customers appreciate the transparent pricing model, we simple contracts that allow them to quickly adopt our solution and easily scale.
Their usage now lets discuss our results and guidance is key we mentioned Q3 revenue was $29 9 million up 67% year over year, we had strong performance with growth coming from new customer wins and.
And the expansion of existing customers across all of our product.
<unk>, a broad spectrum of clients in discussing the remainder of the income statement. Please note that unless otherwise specified all references to our expenses operating results and share count are on a non-GAAP basis. Our total gross margin was 74% up from 69% in Q3 of the prior year as a.
Minder, our gross margins fluctuate from period to period based for example on the.
The amount of our platform, we expect gross margin to continue to be within the band and some are 12.
$12 9 million or <unk>, 43% of revenue compared to 40% of them.
Revenue in Q3 of the prior year.
This represents an increase of over $5 8 million in the quarter year on year as we continue to scale our go to market organization reset.
Research and development expense was $9 4 million or 31% of revenue.
<unk> to 34% of revenue in Q3 of the prior year.
This represents an increase as we continue to invest in innovation.
General and administrative expense was $7 8 million or 26% of revenue compared to 16% of revenue in Q3 of the prior year.
Sure.
And operating as a public company.
Operating loss was $8 million.
10% compared to negative 20% in Q3 of the prior year.
Adjusted EBITDA was negative $7 6 million in Q3, a margin of negative 25% compared to a margin of negative 18% in the prior year overall, our EBIT decreased due to a combination of investment across all operating expense categories.
Net loss was $8 2 million versus $3 7 million in the prior year.
Versus net loss per share of <unk>.
The prior year.
Turning to the balance sheet and cash flow with $258 5 million.
Cash and cash equivalents.
The proceeds we raised in July.
$123 2 million net of underwriting discounts and commissions of year to date was negative $18 8 million compared to negative $17 7 million a year ago.
Now turning to the outlook.
For Q4, we are providing revenue guidance in the range of $28 2 million to $28 8 million representing year over year growth between 47 and.
50%.
We are providing adjusted EBITDA guidance in the range of negative 10 million, representing an adjusted EBIT.
Margin of negative 33, 3%.
As I mentioned on our last quarterly call. We do anticipate operational costs to continue to grow in Q4 and next year as we continue to invest in our product go to market team and G&A.
On a full year basis for fiscal year 'twenty. One we are raising our revenue guidance to $108 7 million $209 3 million, representing a year over year growth between 50.
Two 9% and 60%.
We expect $1 1 million to negative $21 million on a full year basis.
Okay.
The trajectory in which we are headed and we will continue to drive transformation of the legal industry.
Enabling legal professionals to efficiently provide better outcomes for their clients.
We are going after a large market and plan on making significant investments across Cisco in 2022 to ensure we can efficiently keep pace with our growth as we scale I'd like to now turn the call over to the operator to open up the line for Q&A operator.
And at this time, if you would like to ask any questions. Just press star one on your telephone keypad, if I'd draw your question press the pound key.
Just a moment to compile the <unk> roster.
And your first question comes from the line of Sterling Auty from Jpmorgan.
Your line is open.
Yeah. Thanks, Hi, guys. So one question and one follow up.
<unk>.
These are two popular ones that I've gotten from investors. So I think it's helpful. Just to level set people can you give us a sense when you look at the person.
Law firms that are out.
Okay.
Sure So all of this.
Spend for disco, obviously comes from the legal department budget litigants generally large.
Corporations in terms of users it depends on the corporation's kind of insourcing versus outsourcing strategy has a couple of in house counsel and maybe in terminals sort of paralegal style team that does.
The initial assessment of corporate data that may be relevant to a new legal matter in like an investigation or a lawsuit for example, if there is an internal whistleblower complaint the users may be entirely internal to the corporate legal department will tell us.
Our platform to collect enterprise data do their investigation, and then decide whether or not they need to take action. Similarly in the litigation context internal users in the legal department might conduct to that initial review and then decides that its appropriate to negotiate a settlement. So if that's the case never act most corporate <unk>.
Departments will engage outside counsel at a law firms to represent them in the legal matter and once that happens the preponderance of the users shift.
For conducting a legal document reviews.
So providing advice to the client and ultimately taking other actions.
Thanks.
Finally lawsuits are filing motions, taking depositions be renewables.
So disputes so the exact split of users.
<unk> company by company based on how much the company and sources.
Relative to <unk>.
So for the lifetime of a legal matter.
And that's a good bridge over to the follow up is when you look at.
On E discovery solutions any quality.
Percentage of those are.
Just corporate legal departments.
Pathway that they want to go versus those that are either partially or by the outside legal firms.
I understand how in part.
Horton on the outside legal firms.
Two the decision process on E discovery tools.
So each customer falls somewhere on a spectrum from entirely in housing the decision about E discovery to entirely outsourcing it to the law firms. They worked with at a high level Sterling a good way to think about it is.
Roughly 50 50, 50% of the time the principal decision maker will be someone sitting in the legal department, 50% of the time the principal decision maker will be someone sitting at the law firm, but when I say principal decision maker I don't mean sole decision maker right stakeholders involved in each of these.
Sales. So if you think of a typical large corporate legal departments.
To a variety of insurers.
Discovery decisions so thats.
Kind of a network of decision makers.
All work together now this is why when we've talked in the past about the.
So it is so important and so effective right if you're a lawyer at the law firm represent multiple clients some of those clients.
Using disco and some of them will be using one of our competitors the lawyer at the law firm guest Scott.
<unk> has been very frequently those lawyers and develop a strong preference for discounts. So what happens to them is that they go.
The decision or if the decision is.
Outsource to them they simply makes sense.
Patients to switch to disco and Thats, how we spread from corpus to law firm to corporate the law firm.
Understood that's very clear thank you.
Thanks Sterling.
And your next question comes from Koji Ikeda from Bank of America. Your line is open.
Hey, guys. Thanks for taking my question really nice quarter here just a couple from me so looking at the fourth fourth quarter guidance and a nearly 50% growth here.
However that sequential decline is less than we saw in the Q3 guide that you gave during the second quarter results. So.
How should we be thinking about that is there any large cases that you are anticipating coming off the platform or maybe you already have in the fourth quarter or is this just another element of conservatism here.
Hey.
Thanks for your.
Thanks for the question So company and this is our second quarter.
Alright guidance Q2.
And so we were really really.
Excited about the growth of 88% in that quarter, and we are equally excited with the growth of 6%.
We want to be conservative.
<unk> said that before and we want to be prudent in our guidance, we feel really good about the quarter.
And the numbers and the momentum in the business and.
Got it got it and then just one follow up.
So look for me here on on net.
Within that out.
But maybe if you could help us understand from a directional perspective, I know you and the perspective the original IPO perspective, there was 122% for the first quarter.
Could you could you help us out maybe directionally was it was there.
Pleased with that number.
It's north of what we published in the S. One and we're really pleased with where it is.
Got it thanks, guys. Thanks for taking my questions really appreciate it.
Hi.
And your next question comes from the line of Tyler Radke Chicken <unk>. Your line is open.
I wanted to just help.
So if you could help us understand just final.
Moving pieces between Q2 and Q3, obviously as you called out Michael There was kind of unusually large impact from a large customer in Q2. So maybe just help us understand like how much did that large customer.
Revenue kind of.
Go down sequentially in <unk>.
You made that up is that primarily new customers.
Or expansions.
So this shift is not due to any particular customer as opposed to our business as a whole. If you look at Q2 the way I described that on our last earnings call was a tsunami of goodness Gibson literally everything going right that could go right in our business. If you think.
About every customer in disco or each of our.
Other fees each of them have fluctuation because of the usage based nature of our business and what you.
All of those usage based streams, having their positive variance stack up and so in some sense Q2 with 88% of growth is an example of how good good can be when everything in our business goes right now coming also fat amazing quarter, we couldnt expect that all of those.
Awaiting trends would again stackhouse magically in Q3, and so we gave you a conservative guidance, but of course as Q3 actually turned out it was another stellar quarter and we beat that guidance by 16%. So that's how to think about it there is not a particular customer that's driving.
Appropriate to think that our whole business is a usage based and has these kinds of fluctuations, which informs our guidance philosophy.
Okay that makes sense.
<unk>.
I know there was.
Quite a few job postings you guys have had on.
<unk> review.
Kind of some of the services stuff. So just curious how the progress of that organization is going in.
What you're seeing both from a hiring perspective, given the labor shortages as well as a demand perspective.
From customers. Thank you.
Yeah, we've had great progress.
Less so in services than in review, so our review business.
Been making big investments in scaling up the leadership team. So I think it's public now we added.
A leader of that team <unk>, who joins us from Eli law, and we added the director's Sayeeda Joseph who joins us from Morgan Lewis.
Two examples of really high caliber folks who we've added as we're scaling out to review operation Our services side. As you know is a much smaller portion of our business.
We've made sort of ordinary hiring there to keep up with our growth, but we're much more focused on the three core <unk> E discovery case builder and review.
Yes.
And your next question comes from Brent Thill from Jefferies. Your line is open.
Hi, This is love soda on for Brent Thill.
Congrats on a great quarter guys.
Maybe the first question for Kiwi.
Yes.
Great.
About.
Youre looking at this data from federal case data and we see this massive backlog in terms of pending cases.
Is that something that benefits you guys.
And then how do you see the sustainability of that backlog as you head into 2022 and 2023.
Yeah, I read <unk> report and I, certainly can see the thinking behind it but I can tell you on the ground. This is not something that we've been talking with customers a lot about.
It does make sense that if there is such a backlog that that backlog could create a tailwind for disco, but it just hasn't been our experience on the ground. What we hear from customers is much more of a usual thats sort of good timing as legal matters can really be controlled and it just is what it is right. If you will.
Think about the usage of our platform.
Risen by when the regulator opens an investigation or when the lawsuit is final door window whistle blower complain that comes up.
I think earlier in Covid, so the quarter right. After Covid hit there was more of an impact because you literally had courthouses shutdown.
And that cuts both ways right you had lengthened.
Kind of usage of our products for matters of that began.
And before the shutdown, but it also delayed. The addition of new data for matters that were delayed due to the shutdown of the court, but we're just not seeing that as much right now.
Got it great and then maybe a quick follow up.
You mentioned.
Great hiring on the go to market side, I guess could.
Could you.
Talk to us a little bit about how you are tracking relative to your goals I know during the IPO process. You are talking about 10 reps month is that still good.
<unk> Mark going forward in terms of go to market investments that youre, making.
We're continuing to invest aggressively in go to market and it's not just quota carrying sales reps. Although there is a tip of the sphere. It's also the roles that are to the left and right of them. So we have been increasing our investment in marketing programs things like digital and field marketing in my prepared remarks I talked to.
It's a 30 plus events that we attended in Q3, which is a notable change as the world is coming out of Covid. We've also invested in scaling head count across our SDR team. Those are folks focused on lead generation and scaling head count across our customer success organization, which is a very folks.
Obviously on customer success, but also in identifying upsell and cross sell opportunities. So if we look at what's going on in the business. What I will tell you is that our pace for investing in go to market. Both in terms of programs and head count is only accelerating and we expect to continue that not just through the end.
Of this year, but into 2022 and beyond.
Got it great. Thank you.
And your next question comes from DJ Hynes from.
From Canaccord your line is open.
Hey, guys.
So our care a great set of numbers.
Q what are you seeing the legal service providers due to slow the adoption of AI driven review solutions.
The value prop just seems so obvious to me that I'm I'm curious how they sell against it.
Well look I think we're winning I think the numbers bear that out.
So does what we're hearing on the ground I think what Youre seeing is the fact that it's a really large market right and so there is so much room for a software based solutions to grow while these services company is in some sense hang on I think many of the owners and management teams.
At the services companies are pursuing this sort of consolidation drive margins kind of a classic private equity style strategy to continue milking the market before this transformation happens.
We have been biased, but from my seat I really haven't seen an effective answer to the underlying trend, which is driving <unk> growth, which is going to move away from services to software.
Yes, yes, okay.
And then I don't know if this is better for Michael or <unk>, but I wanted to ask about R&D spend I mean, we've seen a pretty significant jump right. It's up more than 50% since Q1 of this year any way to put a finer point on kind of where that investment is going.
Being allocated towards kind of existing product enhancements as it being put towards working on new stuff just any any qualitative color there would be helpful.
It's principally being allocated to our existing three products. So E Discovery review encase builder.
One thing that I.
I think unique and special about <unk> is our focus on investing in platform as well as features.
So in my prepared remarks today, we talked about both right. We talked about an example of the innovation on the feature functionality side, which is disco ECA that we also talked about not form side, which manifest to customers and things like performance and the accuracy and capability of our AI models and so.
For us so we continue to invest aggressively in <unk>.
Randy I'll tell you one thing about our R&D spend.
I think it is important to understand when you look at kind of early stage Tech companies. There is two types of R&D right. There is the R&D that let's go build a product kind of hope the market is there and iterate until we figure out the product market fit and then there's the kind of R&D that we're doing a disco now which.
Is everything of existing.
<unk> customers ready to pony up money for.
For that for those capabilities. So it's.
Our number one focus is scaling out and go to market and SRM next year, but you will see us continue to invest in R&D because ultimately we think the way you build a great company is product.
Yes, okay, great very helpful color. Thank you guys.
And your next question comes from Derrick Wood from Cowen. Your line is now open.
Alright, Thanks for taking my questions. Congrats on another strong quarter Kiwi I wanted I wanted to ask what kind of impact you've seen in brand awareness since the IPO and I know you mentioned attending more events this quarter, but any way to couch, how the IPO if any as given you more market awareness or how it may be helped.
With lead Gen or win rates.
The number one change in our business. We have seen is a tidal wave of inbound rfps.
It's hard to I mean.
We get so many of these rfps now that we actually struggled to answer them.
Which is of course, a wonderful problem to have and one that will be addressed through hiring.
But that I would say is kind of the single biggest change across our business right. We are seeing great engagement at the field marketing events that we go to and we're also you'll remember last quarter I talked about an increase in our win rates.
More recently, we've seen that increased win rate and be sustained in.
In Q3 and so.
Whether thats discos maturity or some lift from the IPO process I think what's going through customers minds is look <unk> is a well capitalized public company is somebody I can partner with as I think about my journey to adopt legal technology over the next three 510 years and beyond.
Makes sense.
And Michael one for you on the gross margin side.
We've seen that bump around 73 to 71 now 74, just remind us the mechanics behind what what changes does and then maybe what youre thinking about.
How to model Q4, and what's the what's kind of baked into your guidance.
So Jerry good question.
As I've mentioned before.
And it does move around is kind of similar to the fact that we've got this usage based model and the type of data that suggested the mix of the data can potentially impact the margin I wouldn't read too much into the margins in Q3. It was it was an awesome quarter I'll take 74% blended margin.
Any day of the week.
Margins in Q2 were a little bit lower that was going to outsized performance quarter, but still a 67% year over year growth is also outsized and exceeded our expectations. So we're really pleased with the 16%.
And just any any help.
Help in terms of directional comments around how to think about Q4.
So Q4, I really would look at our guidance both the revenue and the adjusted EBIT margin, we're not guiding at the gross margin level, but I would say that.
You should basically look at the historical band that we've seen over the last couple of quarters and that's really the guide you should go by.
Got it thank you.
And your next question comes from Scott Berg from <unk> your.
Your line is open.
Hi, Kiwi and Michael Congrats on a great quarter and thanks for taking my questions.
I guess I ask to QE in Europe pre scripted remarks, you talked about seeing customer.
Customers use more than one product a little bit more but it sounded like review was the specific module that had a pickup there but.
I assume most of your net dollar retention today still just expanded usage on the discovery side of the platform, but as a customer adds those additional products how should we think about their spend.
With Tesco, if theyre, adding review of our case fill or does the dollar go to another dollar goes to $3 may be buying all three solutions or what is that ratio look like.
One dollar goes to $3. So this obviously varies a bit customer by customer, but if you look at mature customers, who are adopting all solutions. Their total spend is two to three X very discovery on the spend and Thats why were so excited about this multi product strategy right. It creates.
I mean, an enormous tailwind for growth as we go into 'twenty, two and 'twenty three and continue to drive higher multi product attach rates and it also demonstrates one of the key pieces of the leverage in our business, which is over time as we add more and more products to our portfolio, we're able to capture a bigger <unk>.
Tonnage of the legal budgets of our clients with very little incremental SMN spend providing a pathway for long term operating leverage.
Very good helpful. Though thank you and then from a follow up perspective, I know you had talked about.
One of your.
Legal firm partners, referring to the large customer in the quarter that add $200000 revenue a quarter.
But how should we think about kind of that partner traction overall in terms of the leads or referral business that youre seeing from them today versus.
Maybe six or nine months ago.
Well I can give you color that are our relationships with law firms are absolutely core to our strategy Youll remember that's my own background rate. The origin story of disco is a bunch of lawyers and a law firm from being so frustrated with existing solutions.
That we actually built our own.
Back in the day, we had no intent to prompt pay was not our intent to start a company. We were just so frustrated we wanted better tooling for ourselves.
And then we said Oh Wow, there's a lot of demand for this and we spun it out and that's the story of disco, but it's woven throughout our organization.
Phrase we use is to build the product experience, who has the field magical for lawyers and that's just that's who we are it's in our DNA and the lawyers at these law firms. They see it and then they become champions and advocates and it works two ways. It works both in that kind of partnership.
This us to their clients to corporate legal departments, but it also works in a second order way because most in house Council started out as associates are partners with law firms, so get to know disco using it.
Adam I'll firm for one of our corporate clients and then that lawyer as they become more senior in their career well taken in house job and they'll bring disco with them and then over time, they will move across multiple companies and they will take <unk> with them.
That kind of network effect and investing behind the absolute delight of individual users is just key to our strategy.
Excellent congrats again on the strong quarter.
And again, if he would like to ask any questions. Just press star one on your telephone keypad Parker lean from Stifel. Your line.
Okay.
Yes.
I wanted to ask about the international opportunity Kiwi just referenced <unk> had a tidal wave of inbound Rfps I was wondering how many of those have come from internationally domiciled organization and how that's informing your investments.
They're a physical presence or not much stronger go to market investments to address these areas in 2022.
I don't have that stat close to half come from internationally headquarters.
We had companies, but I can give you two pieces of color there.
One is these rfps generally come from large multinationals and so sort of regardless of where they are headquartered in the scope of the RFP tends to.
To be global legal matters or at least more than one country, sometimes it's a particular geography.
So thats kind of data point number one.
One data point number two is that we continue to see strong momentum outside the United States and importantly, a big chunk of I mean, the vast majority of that momentum is being driven trend in office solely to serve as American headquarter.
<unk> clients.
We both have American headquartered clients and we've had success at developing local business with European headquartered multinationals. So over the next few years, you'll see us accelerate our investment.
In international expanding to more geographies elsewhere in the world of those to capture that local business and so that we can service our existing clients everywhere.
Yes, Thanks, a lot of sense and then thinking about your commentary on adjusted production speed improvements how much of that has come from your own internal development efforts versus those of third parties like Amazon Web services that Youre actually building the platform on top of.
Yeah, So look.
We think that taking advantage of.
Cloud computing and the network of technology is that folks like Amazon and elastic has built on top of the cloud is really table Stakes for how you shouldn't build a modern product.
But yet it's not universal and legal right. It still remains one of our huge differentiators that we did in forklift. The code base written to run fund some service providers kind of server under their desk and just run it in a cloud environment and call. It cloud instead, we built at cloud made.
<unk> product that aggressively leverages.
The elastic compute.
Big user of Amazon Lambda.
Which lets us rapidly scale out compute to deal with the searches that data.
Able to get fleet <unk> Gpus for very small increments of time, which lesser supply the latest pensive approaches to machine.
Learning and AI.
So those things are sort of quarter to what we do.
And while you would think they would be.
Broadly adopted in legal tech in our view they still have enough depth now on top of that.
Half of our R&D budget is dedicated to investing in platform and you can think of those as the things that <unk> has built on top of those cloud native technologies, where even if you did the cloud native part you Havent done the disco proprietary apart and thats all kinds of things throughout the platform.
They tell me that I, sometimes bore people with the technical details. So I'll spare you, but one example.
Is what.
When you think about.
Any given document that document will be related to the many other documents for example, it could be an E mail that's in the conversation with other emails or it might be a document that has similar documents that might be earlier drafts of our contract with somebody is looking at it could have dozens of these other kinds of relationships and one of them.
Our big investments was building a system that allows us to update documents, even though the document contains all of these other relationships which might make it.
Basically very expensive to update from a compute in time point of view. That's one example.
The kind of technical investment that is perhaps flooring to our customer but translates into things with our customers cared deeply about which are the performance stats that I included in my prepared remarks.
Okay.
Yes appreciate all the color.
Congrats on the quarter.
And that concludes our question and answer session I will turn the call over back to see if this cowen <unk> co founder and CEO Kieran Mcgrath for closing remarks.
Thank you for joining us today I'm very excited about the momentum we are building in our third quarter results are a fantastic representation of this we have firm belief in our ability to scale, our business attract new customers and accelerate adoption of our solutions with both new and existing customers, we strive everyday to it.
<unk> and create a magical experience for our customers. They are our focus we will continue to aggressively invest behind each of our growth opportunities and are confident that we can drive long term durable growth and redefine how law is practiced we thank you for your interest in <unk> and for joining our Q3 2021.
Earnings call.
Thank you.
Yes.
Okay.
Yes.
Yes.
Okay.
Okay.
Sure.
Okay.
Okay.
Globally.
[music].
Okay.
Okay.
Yes.
Yes.
Thank you.
Great.
Okay.
Yes.