Q2 2023 CS Disco Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the C. S fiscal second quarter of fiscal year 2023 conference call.
At this time, all participants are in listen only mode.
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After the Speakers' remarks, there will be a question and answer session.
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I would like to now hand, the Congress over to your first speaker today head of Investor Relations of Lexi locks you called please go ahead.
Good afternoon, and thank you for joining the conference call to discuss the financial results for the.
Second quarter 2023.
With me on today's call are camera it could go down.
Executive Officer, and Michael up there.
Today's call will all be looking statements within the meaning of the safe Harbor provisions of the private Securities Litigation Reform Act of 1995, including but not limited to statements regarding our financial outlook and future performance are you did capital.
Mark it up activity market because they've got.
Got it good growth opportunities and developments in the legal.
In addition to our prepared remark our earnings press release, SEC filings and a replay of today's call can be found on our Investor Relations website at IR <unk> CN.
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Well, we're looking statements involve known and unknown risks and uncertainties that may cause the actual results.
And third is 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 our filings from time to time, including the text entitled risk factors in the company's quarterly report on Form 10-Q for the quarter.
Her ended March 32023 filed with the SEC on May 10, 2023, and the company's upcoming Form 10-Q for the quarter ended June 32023.
During today's call, we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not at all.
Or or superior to measures of financial performance prepared in accordance with GAAP reconciliations between GAAP and non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures to their closest GAAP equivalent is available in our earnings release and with that I'd like to turn the call over to <unk>.
Thanks, collecting good afternoon, everyone and welcome to our earnings call for the second quarter of fiscal year 2023.
Revenue for Q2, 2023 with $34.3 million adjusted EBITDA was negative $7.4 million and we ended the quarter with 1431 were up 14% year over year.
Both revenue and adjusted EBITDA were above the high end of our guidance range with adjusted EBITDA, improving by over $5 million year over year, and adjusted EBITDA margin improving by more than 17, 100 basis point quarter over quarter.
We're pleased with our results and our progress toward profitability.
On the prior earnings call, we discussed the various sales and marketing performance driver that are improving we discussed being continued customer account growth and <unk>.
Proven and pipeline metrics.
Meeting near term opportunities and win.
That improvement continued in Q2.
Compared to Q2 of last year total meeting were up 30% and near term opportunities we're up 20% while at the same time, we have continued to enjoy the high win rates that we have experienced since our IPO.
Inbound leads have more than doubled year over year in part as a result of our recent investments in marketing.
While we have continued to see some reduction.
Cost optimization effectively from our larger customers are accelerating sales activity is allowing us to offset the reduction by bringing new customers and matters onto our platform.
These positive.
But our efforts to increase usage and accelerate product adoption are working.
Last year and early this year, we promoted several classes that sales development representative or at the yards.
Carrying account executive role, but our inside sales team.
Italy promoted wraps everything wrong or at least success with all reps producing revenue within their first 90 days, they enroll and some reps already producing more than $1 billion in annualized revenue.
We believe that the experienced FTR has gained through there.
S. P. R program experienced familiarized themselves with their product suite, our customer the legal industry and legal workflows and the ways successful sales leader at disc itself help them achieve this kind of rapid success quota carrying reps.
We believe the pipeline of talent from FTR tea inside sales and event whether functions such as customer success and our field sales will be an effective and efficient way of growing our sales team going forward.
Ready many of our top performers in these roles are alumni of our SCR program.
In our review business, we've seen a rebound in activity this quarter.
All of our total pipeline and the size of the deal in our pipeline one of our key operational initiatives has been increasing the percentage of our sales team that sells review successfully in.
In the first half of this year more than 60% of our quota carrying reps generated review revenue, which is almost double the percentage who did so in the first half of the prior year. We have also seen some increases in larger reviews with one customer that had multiple reviews in the quarter generating more.
And then $1 million in review revenue in the quarter.
This quarter I would like to highlight a large international law firm that has been a disco E discovery use there for more than five years.
This customer has been over 120 matters running simultaneously on disco and generated over $3 5 million in total revenue over the last 12 months.
More recently they have become recurring users of review with three reviews active in Q2 and several more in the pipeline.
Overall, this customer buying that our platform helps them complete legal document review more quickly and efficiently across the wide range of legal matters around the world.
Another customer a global publicly traded shipping company and their am law 100 law firm has been using to go for a large global antitrust matter. They began using <unk> in Q4 of 2022 and has increased you did more than $200000 this quarter.
This customer selected disco after a rigorous review of our capabilities against our peers.
<unk> stood out as the company with the most robust technology for handling large datasets and complex review workflows quickly.
Been an exceptional partner for us and a perfect example of just go global reach and impact.
Now, let me turn to R&D.
Last earnings call, we discussed disco AI and how our AI capabilities are integrated into our platform and products. We discussed key features powered by AI, such a topic clustering with automatic indexing predicted tag and cross matter AI.
We also introduced the appeal yet.
Integrated AI chat bot for large scale E discovery.
Continue to believe that our decade long investment in our AI lab and in AI feature engineering, the private data that we have attracted to our platform.
Fact that our platform is already in the system of engagement for a variety of legal workflows that precede and follow the use of AI.
Trust, we have earned in the market as a company that product ties this cutting edge technology for legal use cases in a reliable user friendly and secure way all position us well to lead the legal industry adoption of AI.
While investment in AI is important it is also important that we continue to deepen our core not AI product capabilities. We released three key features in this category this quarter all of them long demanded by our existing customer base.
First is dynamic threatening.
In a typical E mail chain later message contained copies because earlier messages.
When do you expect an email gain it is useful to identify the emails that contain unique content and depressed. The emails that are included in other emails. So good lawyers do not waste time, reviewing the same comp had multiple pads.
For a long time <unk> has had the capability to limit reviews, the email with unique content often called the inclusive emails, but disagree with has identified inclusive emails on a global basis, considering all E mails in a given review database.
In some reviews customers preferred to identify email with unique content from a subset of documents for example, the document patrol within this pattern date range dynamic threading allows customers to identify email with unique content in arbitrary cut of the documents.
And to do so dynamically.
Is it in real time as the user setup reviewed data.
<unk> EBIT coverage.
With dynamic threading customer pattern for example, define a review universe using complex by key word date, where AI predicted tag.
And reduce debt universe.
<unk> E mail that contain unique content and progressing other emails this.
Allowing customers to further limit review population and thereby accelerate the process of legal document review.
Another exciting product released this quarter is in App translator.
This functionality allows customers to translate documents.
And over 60 different languages right in that ZIP code platform today lawyers tend to use either expensive third party translation.
Or online translation features intended for consumer use cases that while create convenient may leak private data to translate to providers with enough translation lawyers congratulate document the click of a button and do so securely with another of their data, leaving the platform.
We also released the cloud connector for office 365 email.
This allows customers to ingest email directly from Microsoft outlook with no intermediate collection or download them.
Today lawyers frequently have to export data and then repeat the process for any subsequent collections.
With the outlook cloud connector customers and then you've got the discovery data themselves with the data flowing directly from Microsoft to discount.
As more corporate data moves to the cloud we believe the direct connectors like this will become a more and more carbon way purely collecting data for legal matters.
These connectors build that are all these capabilities, which already allow for preservation and plays in a variety of cloud system, including office 365.
Now, let me share our progress on phacelia, we are on track to have good feel yet generally available to our customers by the attitude. This year in Q2, we began piloting failure with a select customer groups. The feedback we have been receiving has been overwhelmingly positive.
The affiliated with a broker.
Volker rapidly Ams parrots specific question based on data contained in customer private databases.
Citing specific documents document experts to support her answers.
And what is <unk>.
The appeal you filed an important document that the legal team had not pounding their original review using traditional methods.
And it does get a separate legal team mentioned, that's ophelia would've pave their client thousands of dollars. It's Dave the 30th many hours with document review.
This is the kind of impact we are aiming to have we.
We believe <unk> will be a big improvement for our customers and look forward to continuing to expand.
Julia user base in the coming months.
We have noted that our approach to AI is different from that of many of our competitors is that we are L. O lab agnostic.
We believe that as the years passed and technology matures, there will be many winning LLS with different credit weaknesses at the optimal use cases.
We have engineered our AI platform. So that we can use different models for different paths.
Including both internal model or a third party model.
We believe this flexibility rather than going all in on a single LLM or a L. L. A provider will give us an advantage in bringing the best product capabilities to market and doing so efficiently.
Look forward to announcing our next head of AI capabilities.
Quarter.
We are happy with the progress we made this quarter at all of our teams accomplishments.
With that I will turn it over to Michael.
Thank you Kiwi.
In Q2, 2023 revenue was $34 3 million or year over year growth in the quarter is attributable to a rebound in our review Houston.
In Q2, we saw the highest.
Orderly review revenues in Q1 of 2022, we are seeing an improvement in our overall go to market activity and we are optimistic about the second half of the year.
In discussing the remainder of the income statement. Please note that unless otherwise specified all references to our gross margin operating expenses and net loss are on a non-GAAP basis adjust.
Adjusted EBITDA is also a non-GAAP financial measure.
Gross margin in Q2 with 74% as we mentioned before our gross margin fluctuate from period to period based on the nature of our customers use. It for example, the amount and type of data ingested and managed on our platform. We expect gross margin to continue to be within the band we've historically.
Dean.
Sales and marketing expense.
With $16 2 million versus 47% of revenue compared to 52% of revenue in Q2 of the prior year. This represents a decrease of $1 3 million in the quarter year on year.
Primarily driven by a decrease in sales and marketing personnel.
And development expense for Q2 was $10 5 million or 31% of revenue compared to 39% of revenue in Q2 of the prior year. This represented a decrease of approximately $2 6 million in the quarter year on year. This decrease was primarily driven by an increase in capitalized development costs.
Data with our AI investment efforts and a reduction in research and development personnel general and administrative expense in Q2 was $7 3 million or 21% of revenue compared to 24% of revenue in Q2 of the prior year. This represents a decrease of <unk> $7 million in the quarter year on year.
This decrease was primarily driven by lower costs related to reduced professional services fees through the renegotiating or termination of vendor contracts.
Operating loss, you would do with negative $8 5 million, representing an operating margin of negative 25% compared to a negative 39% in Q2 of the prior year in total our Q2 operating expenses wherever for $6 million lower than Q2 of the prior year representing an.
<unk>, 12% reduction in operating expenses.
Adjusted EBITDA was negative seven 4 million in Q2, and adjusted EBITDA margin of negative 22% compared to an adjusted EBITDA margin of negative 37% in Q2 of the prior year net loss in Q2, with Big <unk> 5 million or negative 19% of revenue compared to a net loss of.
$13 5 million or negative <unk>, 40% of revenue in Q2 of prior year net loss per share for Q2 was <unk> 11 per share compared to <unk> <unk> per share in Q2 of the prior year turning to the balance sheet and cash flow statement. We ended Q2 with $178 9 million in cash.
And cash equivalents.
Operating cash flow in the first half of 2023 was negative $21 8 million compared to negative $22 2 million in the same period of the prior year now turning to the outlook for Q3 2023, we are providing revenue guidance in the range of 33 million to $35 million and adjusted EBIT.
Guidance in the range of negative $8 million to negative $6 million for.
For fiscal year 2023, we are reiterating our prior revenue guidance of $135 million to $145 million and raising our adjusted EBITDA guidance to a range of negative $34 million and negative $30 million now I would like to turn the call over to the operator to open up the line for Q&A operator.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
We will pause for just a moment to compile the Q&A roster.
Your first question comes from the line of Cai.
Other Tyler Radke with Citi. Your line is now open.
Yes, Thank you for taking the question.
The evening, Michael in Kiwi Kiwi I wanted to start off with your comments just on the pipeline generation. It sounds like Youre seeing an uptick in Leeds and I'm wondering if you could just kind of comment on.
The nature of those in.
How you're how you're expecting that to progress over the coming quarters, just how you see those sales cycle lengths and then any thoughts on conversion and could that potentially lead to more.
More of an accelerating revenue growth profile as we head into 2024.
Yes, we're really pleased by the performance of the pipeline and I've talked about it on the past few earnings calls looking at how well our new team members are ramping across each step of the funnel from STR and other kinds of lead generation through to our inside sales and field sales teams closing deals.
And then our CSM team working to identify opportunities to expand existing customers at the numbers. We shared today on a year over year basis that meetings were up 30% and near term opportunities, we're up 20% and we're continuing to enjoy despite that broader pipeline the same.
Elevated win rates that we've been enjoying since the time of the IPO.
So those deals are flowing through all the way.
Yet I think you can also see this in the continued growth that we've posted in overall customer count which is now up to 1431. So these are some of this data set gives.
Give us belief that they were green shoots in terms of growth going forward.
Yes, Thank you and maybe a follow up for Michael on the the Green shoots so if I, if I take kind of the implied Q4 guidance with the updated.
Guide on Q3, and the full year guide it does imply a pretty strong sequential increase into Q4, both on our.
Quarter over quarter and year over year basis could you just talk about.
What's giving you the confidence in that.
Q4, whether it's maybe some large.
<unk> cases or.
Maybe it's a reflection of some of the pipeline commentary.
Thank you Ty.
Tyler Thanks, Thats a good question, it's really related to the pipeline and also just we're providing full year guidance.
And the range of $135 to $1 45, and also Q3 guidance.
We feel really good about where the businesses and we feel really optimistic about the second half.
Okay. Thank you.
Your next question comes from the line of Jackson Ader with Moffett Nathan Your line is now open.
Great Good evening guys.
<unk>.
Customer count I think is growing faster maybe than we expected, but average revenue per customer. The other side of that coin is a little bit weaker I'm curious.
This because new customers that are coming onboard today versus a few years ago are smaller or is it due to some of the larger customers may be putting price pricing pressure on your im curious whats driving that.
Yes, it's two dynamics, so first starting with very big customers, that's where we have experienced most of the headwinds around customers seeking to reduce their overall spend and as a consequence reduce usage or changed the nature of their usage on our platform to try to get.
That spend down now on the positive side, we've continued to add lots of new customers, but typically a disco customers start relatively small and then grows over time in the past we've talked about kind of three to five year ramps to maturity for new logos, sometimes it goes faster, especially when the.
New logo.
As somebody who has already adopted discovered a previous company, but it's still a very much a land and expand business.
And I guess just following up on that.
Let's say that the type of customer that you're landing or adding a net new customer today.
They still have the same type of thing.
Three to five year opportunity as the customers that you are landing say Neil.
235 years ago.
Yes, if anything that has actually improved in our business. So over the last three to five years. We've moved steadily upmarket. We gave some examples in the customer stories part of our script, some customers, including one very new customer who.
We had less than a year got to material size. So many of our newer logos are large multinationals or large law firms that provide big.
Big expansion opportunity, we of course continue to sign up customers all along the spectrum, but if anything I would say the average wallet potential of a new customer has got up over five years knockdown.
Thank you.
Your next question comes from the line of Derrick Wood with TD Cowen. Your line is now open.
Oh, great. Thanks.
Michael.
I know you said gross margins bounce around a bit but this was one of the first times, we've had that kind of contracting quarter and I'm just curious does that.
Does that reflect some of the investments on degenerative AI and large language models that are.
Starting.
Obviously, you have some added cost to it or are there other factors to call out.
Yes.
Yes, now that you've had a little more time building Julia any updated views on the potential impact on gross margins. Once a lot of this goes into production.
So the margin profile that we've talked about it in the past in terms of the bands that we've historically seen over the last four to eight quarters is where we expect the future to be the investments that we're making in AI or not having an impact.
On that band and we don't expect that they will in the future.
Okay.
Kiwi I'm curious your thoughts on that.
Vector search versus keyword search.
As you think about trying to get more contextual answers with natural language queries.
Do you.
Are you thinking about it you've got a embracing more vectors search capabilities or what your view on that technology.
Yeah, absolutely, we're big believers in vector search technology and.
This is one of those things that has suddenly become in Vogue, but it's not at all new this is something that we've worked on for many many years, it's been around for many many years and that is a key component of some of the feature functionality that.
We are delivering to clients so.
We're big believers in fact research I will say, though some people, saying that vector search will replace the historical kinds of search that are.
Or perhaps more precise or at least more transparent to the user about what the search. He is returning we think vector search and technologies like it are going to be a supplement to not a replacement of more traditional ways of searching.
Okay got it thank you.
Your next question comes from the line of Scott Berg with Needham. Your line is now open.
Sure.
Hi, everyone. Thanks for taking my questions I guess, you've got a couple here.
Keith you talked about some of the cost optimizations that your customers.
Still kind of had in the quarter.
How should we think about maybe.
The magnitude or size of those reductions relative to what you've seen over the last maybe two to four quarters and this macro backdrop.
I think they are consistent with what we've seen over the last two to four quarters. So neither larger nor smaller the problem is that it's different customers right. So different customers go through this process at different times, depending on their internal budget cycles, and prioritization and so on and so we are.
We're still rolling through the customer base and different customers.
Taking a sharper eye on cost.
Got it helpful and then.
I know, it's a big topic you guys are certainly making a lot of investments is celia.
Demo that I recently saw that it was very compelling but is it popping up yet in your sales cycles in your sales processes, maybe not Cecilia specifically, although it could be.
The use of AI in general with your platform.
Yes, absolutely. This is our core historical strengths right with the AI capabilities that have been built into our platform for many years. Those AI capabilities are a part of virtually every presentation that we do about the platform because they're a key part of the way that we deliver value to our clients by automating or greatly.
Accelerating a growing range of legal work the newer AI things Cecilia as well as some other capabilities that we look forward to announcing shortly.
We've already begun demonstrating those quite regularly to a range of clients as we talked about in our prepared remarks, we now have Cecilia alive and private access for real clients on actively litigated client matters and we've got clients driving tremendous value one of the cool things.
We'd like to see is when clients use share capability and our products you can find the document share. It and then put a note to your colleagues about what it is you found and Theres a ton of those where people are going and they're sharing a document that you're saying all I was trying this cool AI thing in liquid phacelia fab.
And so this is I think only going to grow as a focus area and customer conversations both with new prospects and existing customers.
Excellent that's all I have thank you for taking my questions.
Your next question comes from the line of Parker Lane with Stifel. Your line is now open.
Yes, hi, good afternoon, thanks for taking the questions guys.
You referenced the recent marketing investments you've made.
As an accelerant to inbound lead volume I think that doubled year over year can you take us under the hood at exactly where you're putting those incremental marketing dollars to work and how much sustainability you see in the inbound lead volume throughout the remainder of the year.
So it's a mix of things I'm, a big believer that marketing programs are interconnected in the sense that for example, when you do brand marketing it improves the performance of your digital performance marketing it improves to turn out a defense it improves win rates and that sort of thing the biggest new addition, as if.
Of course, the launch of our law better campaign, and the Lady J ads that maybe you've seen Scott encourage you to take a look.
<unk> got tremendous reception with our customer base anecdotally, when we talk to our reps.
<unk> started to come into meetings, where not only has the customer heard of us before but they've seen the AD. They like the ads they talk about the AD and it can be the beginning of the customer to understand not just our products and offerings, but who we are as a company that we are a company that cares about the law, that's trying to use technology to make the law work.
Better and so there can be that kind of alignment in spirit and intent with our customers before we dive into a more detailed discussion about the functionality. We can provide and the results that we can drive so I think the big brand campaign is one contributor but we've also done a lot of work optimizing things like.
Performance marketing digital marketing, social marketing and our field events, both large at industry conferences and small local events that we do in different regions to provide opportunities for <unk> to connect with our customers, but also for large existing customers to connect with <unk>.
Specs right that kind of old fashion, social selling I think is still very effective today.
Got it thanks for the color there and I think we're approaching.
18 months, Mark is bringing a holding request to the platform curious if you could just talk about cross sell efforts there how much interest you're seeing in both of those tools and.
The growth algorithm, how much of that is baked in from these tools in the 2023 outlook and beyond.
Yes, we're really pleased with the reception that those tools have.
Two reasons. One is suggested gives customers more places to get started on our platform and more ways to expand but second if stat.
With enterprise customers, where we sell directly to the general counsel as we've talked about on prior earnings calls that's been a very big growth driver in terms of new logos and frequently away those folks will want to get started is holding request now they may not wind up buying holding requests first they might start.
Art with E discovery or review or something else, but many of them do start withholding request, but very often the conversation starts with general counsels desire to have a product like holter request that can help them comply with incoming legal demands conduct preservation and <unk>.
Place and also manage their organizations overall migration to the cloud and so we've been pleased with holding requests we're actively investing in those products. Your Trs on earnings calls talk about feature enhancements integrations between those products and the rest of our product suite and we are.
Overall pleased with the trajectory of those products have demonstrated.
Understood I appreciate you answering the questions here. Thank you.
Our next question comes from the line of Mark Scheffel with loop capital. Your line is now open.
Hi, Good evening. Thank you for taking my question.
Is it fair to assume that your discovery product is still generating about 80% of revenues in this quarter.
We don't disaggregate revenue by product line, but I can say that ediscovery still represents by far the largest share of iris.
Okay, great. Thanks, and then I was just wondering if you just talk a little bit about just kind of relative growth rates of some of the other products.
Case builder legal hold that youre seeing and how.
How they're coming along.
Of the other products enjoys smaller basis and as a consequence have higher growth rates.
In terms of color.
Let's focus on <unk>, which you mentioned I'm really pleased with the growing adoption of case builder and we're seeing tremendous growth in terms of the number of matters on the platform. The number of users using case filter and the number of each of the sort of the things with the platform stores.
So we track a number of depositions in case builder number of timelines and chronology that have been built number of events that have been created and all of those metrics for usage are showing very very strong growth.
In addition.
We're going to have some announcements coming shortly around building. Some of this new generative AI technology into case builder and other parts of our product suite and we think those will only accelerate the growth of those products.
Great. Thank you.
Your next question comes from the line of D. J Hynes with Canaccord. Your line is now open.
Hey, Good evening guys can you me what has the feedback been on proposed pricing mechanisms versus sealy.
In your early customer conversations and I'm wondering kind of how that's informing your strategy as you think about general availability.
So we're going to start having that kind.
Great bulk of those conversations in the coming quarter in particular, there is a big industry conference coming up called the Ilkka at which some of these conversations will start happening. So I think it's early days to provide feedback on pricing. Our goal is over the course of Q3 and Q4.
To settle on what the at least call. It first year's pricing for the AI platform and AI capabilities will wind up being and we'll provide an update on our annual earnings call about our thoughts on what AI pricing will be at a high level, we believe the right mix.
And I think I've talked about this a bit on the last earnings call is some mix of platform based AIC with usage based billing on top for certain AI capabilities.
Okay got it. Thank you and then Michael just given the timing of your Q2 restructuring is it fair to assume that the magnitude of cost savings are not fully reflected in Q2 run rate opex.
Yes.
Okay got it thank you guys.
Okay.
Our next question comes from the line of Cozy Akita with Bank of America. Your line is now open.
Hey, guys. Thanks, so much for taking the question so when listening to the prepared remarks.
Like you had some review cases that came in better than expected in Q2, So just kind of taken a step back and when you originally guided to Q2 on the last earnings call.
There any review incorporated in that guide just trying to understand kind of the puts and takes with the review performance.
Yes.
Okay. Thanks, Kiwi and then.
When looking at.
I guess as a follow up to a previous question and the annualized <unk>.
So maybe ask the question in a different way and I think it would be super helpful too.
Super helpful to us to start understanding the underlying kind of new versus expand opportunity.
But I do realize that you guys only give net revenue retention on an annual basis. So maybe if you could give it in a qualitative aspect it'd be really helpful. So the question is the net revenue retention in the quarter was it above or below 100.
Well, we only as you point out we give the number on an annual basis, but I'm more than happy to provide color Kochi that may be helpful. So I <unk>.
A couple of things are going on in terms of expansion and retention. So first we still have the falling away.
Really big reviews that we had for a sequence of four quarters and that now has left now we are seeing some green shoots and this goes to your first question, where we did see review outperformance in particular, we had one customer that.
Across a number of reviews it added up to more than $1 million in the quarter and Thats something that we didn't have.
Certainly in the previous quarter. So there is that so review has shrunk right and that is a take.
From retention.
The other thing Thats happening on retention is what we talked about on last earnings call and I think one of the earlier questions here, which is taking customers seeking to manage their overall spend in our platform, which they do by changing the overall volume of usage or changing the way they use our <unk>.
Platform for example, more aggressively using features like HCA involved as opposed to active review in the Ediscovery product as a way of reducing costs.
Offsetting that we still have the more normal dynamic, especially among our smaller and more medium sized customers, where just this has been true throughout the history of Cisco those customers tend to start relatively small call. It five figures of spend and then grow their spend over time as they grow their usage.
Each of the first product they started winds and as they adopt more products across the product portfolio.
Got it no. Thank you Keith you that's super helpful. Thanks, So much.
Our final question comes from the line of Brent Thill with Jefferies. Your line is now open.
Thank you.
Love stood on for Brent Thill, Thanks, Kiwi and Michael for taking my questions.
Wanted to ask one on the review site TV you mentioned that you now have 60% of reps selling.
New products I guess are these new sales are they starting at AR.
At a lower volume and then are there ramps baked into that just any color around.
The new Green shoots around review.
Sure.
I think the way to think about this is.
If you have an established sales team and especially if like disco you were a single product company for many many years your sellers get good at selling that one product and going from one to two is harder than going from two to three right. So there is as sort of step function.
To get sellers and to get the market and customers to think of us as a multi product company.
Think of therapy, many different ways of using our platform rather than a single way of using our platform.
That being E discovery.
Our success at making that jump from single product to multi product is what I'm talking about when I share. This stat that now more than 60% of our quota carrying reps that generated review revenue almost doubled the percentage for the first half of last year.
This I think is good not only because it's green shoots for the review business, but also because it's indicative of our sales team and the market and our customers beginning to make that transition from thinking of disco single product just thinking of Cisco is a platform that can be applied.
Across many different kinds of legal work and we've definitely seen improvements in the multi product attach rate. If you will the percentage of customers who are using more than one product.
Got it that's Super helpful. And then just one quick follow up for Michael.
Michael If you look at the EBITDA guidance for the year I guess.
In embedded margin for Q4.
He is now in the low teens versus negative mid teens guide previously so.
I'm. Just wondering are you are you baking in additional leverage from certain line items.
What what might that be thank you.
Thanks for the question so.
As you are aware, we've improved our adjusted EBITDA guidance for the full year and also have guided to Q3, an improvement on on where where you expected we were going to come out in your models.
Hi.
We obviously theres four levers that are going to hit those numbers and it's a combination of revenue.
Cogs optimization that we've been working on in terms of working with AWS also both not just for Cogs, but also below the line.
We talked about this in the prepared remarks, but just a very aggressive <unk>.
Managing our kind of non staff costs around things like software.
And then the fourth is really and we've talked about this before globalization and attracting the best talent on a worldwide basis, but on a per unit basis that is more attractive than what we've had in the past. So those are the levers that will impact our overall numbers.
Perfect. Thank you so much.
I will now turn the call back over to Kiwi camera co founder and CEO for closing remarks. Your line is open.
Thank you for joining us today and thank you for your interest in disclosure.
Ladies and gentlemen.
That concludes today's call. Thank you for joining you may now disconnect.
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Yes.
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