Q3 2024 CS Disco Inc Earnings Call
Ladies and gentlemen, thank you for standing by, and welcome to CS Discos, third quarter of fiscal year 2024 conference call. At this time, all participants aren't a listen only mode.
All lines have been placed on mute to prevent any background noise.
After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star, follow by the number 1 on your telephone keypad. If you'd like to withdraw your question, again, press the star and 1.
Speaker Change: I would now like to hand the conference over to your first speaker today. Head of Investor Relations, Alexei Lakchkov, please go ahead.
Alexei Lakchkov: Good afternoon and thank you for joining us on today's conference call for the discuss of financial results for DiscoSter Quarter of fiscal year 2024. With new today's call, Eric Friedrichsen, DiscoSciv Executive Officer and Michael Lafair, DiscoSciv's financial officer.
Today's call will include forward-looking statements within the meaning of the safe harbor provisions of the private security litigation reformat of 1995, including but not limited to statements regarding our financial outlook and the future performance.
The impact of changes to our executive leadership, our future capital expenditures, market opportunity, market position, product strategy and grow opportunities. The benefits of our product offerings and developments in the legal technology industry, including those related to the role of artificial intelligence.
In addition to our prepare remarks, our earnings press release, SEC filings, and a replay today's call can be found in our investor relations website at IR.csdiscill.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.
The following statements represent our management's beliefs and assumptions only as of the date made.
Speaker Change: 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 30, 2024.
follow the SEC on August 8th, 2024, and the company's upcoming quarterly report on Form 10-Q for the quarter ended September 30th, 2024.
in addition.
Speaker Change: 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.
Speaker Change: Reconciliations between gap and non-gap financial measures and a discussion of the limitations of using non-gap measures versus their closest gap equivalent is available on our earnings release. And with that I'd like to turn the call over to Eric.
Eric Friedrichsen: Hello, everyone, and welcome to DISCO's third quarter of 2024 Earnings Call.
Eric Friedrichsen: I'm excited to review our results today and to dive into our forward-looking strategy.
Total revenue for the third quarter of 2024 was $36.3 million, up 4% versus the same quarter last year.
Eric Friedrichsen: Adjusted EBITDA was negative 4.5 million dollars or negative 12% adjusted EBITDA margin.
We are pleased with our performance in Q3.
Eric Friedrichsen: and we continue to make progress on the initiatives that we have previously discussed along with some new ones that I will highlight on this call.
Eric Friedrichsen: and many more. Thank you. Thank you.
Eric Friedrichsen: Q3 marked my first full quarter and just last week I celebrated my six-month anniversary as Disco's CEO.
Eric Friedrichsen: In the last quarter's call, I shared how my confidence in our product was very high, and it has only grown since.
Speaker Change: I've had the opportunity to meet face-to-face with over 40 customers.
Speaker Change: including lawyers and e-discovery leaders from AMLAW firms and large corporations across the US and the UK.
These conversations have further reinforced my belief in the value that DISCO delivers.
With our powerful e-discovery tools and the advanced capabilities of Cecilia AI, Dysco stands out as the best platform in the industry.
Speaker Change: Our customers affirm this. They love Disco's intuitiveness, accuracy, and speed.
Speaker Change: Time and time again I hear how DISCO drives meaningful value by boosting efficiency, reducing costs,
Our customers are energized by DISCO's new strategic direction, our strengthened leadership, and the cultural growth that we have demonstrated.
Speaker Change: Many of them are eager to expand their engagement with us.
Speaker Change: However,
To get our product into the hands of more legal professionals, we need to continue to improve in the three primary areas that I outlined on our last call.
Speaker Change: Those are
Speaker Change: becoming a more customer-focused organization.
Speaker Change: primarily by strengthening our go-to-market motion.
Speaker Change: Enhancing our Internal Operations
Speaker Change: and fostering our continued cultural improvement.
Speaker Change: Well, I'm pleased to tell you that the changes I discussed last quarter are already starting to show positive signs.
Speaker Change: We're seeing growth in revenue and in the number of customers in the cohort of customers that spend over $100,000 with DISCO.
Speaker Change: We're also seeing greater usage of our platform overall, and we're seeing software dollar net retention improve.
Speaker Change: Next, I want to discuss the additional actions that we're taking that are in line with our strategy.
Speaker Change: First, we're deeply committed to being the best partner to our customers and we made material strides towards that goal in Q3.
Speaker Change: Recently, we made several strategic hires within our sales team.
Speaker Change: We're excited that Lauren Caruso has joined DISCO as our SVP and Chief Sales Officer.
Speaker Change: Lauren was a long-time disco employee and one of our most effective sales leaders before she left the company about two years ago.
Speaker Change: Lauren has a history of developing strong performing teams who are capable of successfully scaling and expanding customers at Disco year over year.
Speaker Change: We welcome her as our Chief Sales Officer.
Speaker Change: Andrea Popovitz will continue to serve as a senior leader within our sales organization, reporting to Lauren, and she will focus on leading many of our key sales teams.
Speaker Change: In addition, we further welcome two new sales leaders to focus on our largest law firm and corporate customers.
Speaker Change: They are both seasoned veterans in sales and legal technology, having worked at companies like Epic, Everlaw, and LexisNexis.
Speaker Change: These key additions are bringing in valuable expertise across the board from deep industry knowledge and sophisticated sales approaches
Speaker Change: to coaching and mentoring.
Speaker Change: These changes allow us to drive a more refined enterprise-grade sales motion with an up-leveled talent pool.
Speaker Change: which clearly reflects our strategic go-to-market shift towards larger customers.
Speaker Change: Focusing now on customer highlights, this quarter we signed a number of notable customers, including several Fortune 500 and other large companies.
Speaker Change: We're excited about this because for many of these customers this is the first step on their way to digitally transforming their legal operations and moving to a centralized provider of legal technology.
Speaker Change: An example of this is a large bank which evaluated several solutions before selecting DISCO.
Speaker Change: They selected Disco Hold after a rigorous review of our product's capabilities and security features.
Speaker Change: and they have committed to a three-year Disco Hold Agreement.
Speaker Change: Earning their trust and positioning ourselves as a strategic partner was a significant achievement and we're excited about the potential for this partnership to grow.
Speaker Change: Another customer with whom we recently signed a multi-year deal is a leading online food delivery platform.
Speaker Change: This customer welcomed a new legal team leader who had experience with DISCO at their prior firm and wanted to implement DISCO at their new organization.
Speaker Change: and implemented our capabilities via a multi-year spend commitment that provides access to our entire platform.
Speaker Change: starting with legal hope which is now being implemented.
Speaker Change: We continue to see this dynamic where champions of disco who switch companies or firms implement our platform in their new organization.
Speaker Change: We're excited about these partnerships and other important wins, and the start of what we're confident will be great long-term partnerships.
Speaker Change: The traction we're seeing this quarter is, in part, the result of improved operations across the organization.
Speaker Change: I'm seeing strong cross-departmental collaboration. We're seeing thoughtful, comprehensive solutions to our customers' challenges, incorporating feedback from multiple departments, and leveraging the expertise of our new talent.
Speaker Change: Product strategy, customer experience, sales, and finance are working together in a deeper, more integrated way.
Speaker Change: We're being proactive with our customers, engaging with them, and responding with richer platform-wide solutions.
Speaker Change: to draw on sales, product, and services teams.
Speaker Change: This is exactly what we're aiming for.
Speaker Change: And as a result, we're seeing increased involvement in larger, longer-term opportunities.
Speaker Change: As we mentioned in the last earnings call, we're focusing our resources on customers who we believe will drive the most long-term value for Disco.
Speaker Change: These are customers with significant annual e-discovery spend, large practice areas, and practices and legal areas with significant e-discovery needs.
Speaker Change: The actions we're taking now will allow us to grow with existing customers and future customers.
Speaker Change: who fit this criteria.
Speaker Change: Operationally, we've made significant strides including adding two new senior leaders to the team.
Speaker Change: Susan Garcia has joined us as General Counsel and Chief Compliance Officer.
Speaker Change: and Joe Jacobson has joined us as Senior VP of Operations.
Speaker Change: Susan comes to us from WebMD, where she served as General Counsel since 2021, overseeing legal strategy, corporate governance, compliance, litigation, corporate transactions, and ESG.
Speaker Change: I'm particularly excited for Susan to help us accelerate deal closures and drive efficiency in our legal processes.
Speaker Change: She brings deep expertise in optimizing playbooks for contracts which will help further streamline sales and is already well acquainted with Disco having used our platform in the past.
Speaker Change: We're thrilled to have her on board.
Speaker Change: We've also welcomed Joe Jacobson as Senior Vice President of Operations.
Speaker Change: Joe brings over two decades of experience in business transformation, operations, revenue management, and sales enablement within the technology and SaaS sectors.
Speaker Change: Joe and I worked together for several years at Concur.
Speaker Change: and most recently,
Speaker Change: Business Intelligence and Go-To-Market Operations Support and Enablement.
Speaker Change: Joe already hit the ground running and he's made an impact by helping the company align and execute on key priorities.
Speaker Change: and setting a fast pace for achieving success.
Speaker Change: This plans all areas of our business from product and engineering to services to finance
Speaker Change: But Joe's primary focus right now is to improve our go-to-market operations.
Speaker Change: Joe's driving deeper strategic thinking, rigorous prioritization, and rapid execution.
Speaker Change: all of which are helping propel the business forward.
Speaker Change: Key initiatives such as increasing customer wallet share, refining ideal customer profiles, and optimizing our quote to cash process are critical to enhancing our sales and our overall company operations.
Speaker Change: I'm excited about Joe's efforts because it's going to enable us to be more strategic with where we focus our resources.
Speaker Change: and how we target our customers.
Speaker Change: and we'll ultimately maximize the return of the effort of our go-to-market teams.
Speaker Change: On the product and engineering front, we are proud of the rapid progress our teams have made in bringing cutting-edge generative AI products to market.
Speaker Change: We believe we currently have a more comprehensive set of capabilities than anyone in the market and feedback from customers is that we're the industry leader.
Speaker Change: We aim to maintain our leadership position by continuing to build the best and most innovative legal platform in the industry.
Speaker Change: and Richard is here to help us drive that mission.
Speaker Change: As we look ahead to the rest of Q4 and into 2025, we will focus on delivering products and capabilities within our core eDiscovery platform that offer the highest near-term value to our customers.
Speaker Change: We will also enhance our Celia capabilities.
Speaker Change: This includes a deeper focus on emerging data types, advanced integrations with communications platforms,
Speaker Change: Enhanced Search and Review Capabilities
Speaker Change: and improvements in data management, administration, and permissions.
Speaker Change: Our approach will continue to be shaped by collaborating with and listening to our customers.
Speaker Change: and we will also continue to deliver the core platform enhancements.
Speaker Change: that will enable us to move off the chain.
Speaker Change: for larger customers, larger matters, and larger wallet share.
Speaker Change: At the same time, we've leveraged our internal expertise to develop innovative solutions for broader industry challenges.
Speaker Change: and many more. Thank you. Thank you.
Speaker Change: With this strategy, we aim to release capabilities and solutions that lawyers can adopt quickly.
Speaker Change: make a noticeable impact off the bat and lead to more work done in the DISCO platform.
Speaker Change: Ultimately, our goal is to accelerate revenue in an efficient and sustainable manner.
Speaker Change: and ensure that our product strategy and engineering efforts are aligned with this goal.
Speaker Change: On this call I discuss many actions that were taken to improve how DISCO is selling, building, and operating.
Speaker Change: Many of these activities require some new talent and experience.
Speaker Change: To support these efforts, we are realigning where we are investing dollars and enhancing the skills that we need at DISCO in the future.
Speaker Change: We assessed our current talent at DISCO and made a difficult decision to eliminate a small number of roles.
Speaker Change: while opening positions in other areas.
Speaker Change: Many of those affected are not just employees and co-workers, but friends.
Speaker Change: We're appreciative of their hard work and contributions and wish them great success in their next role.
Speaker Change: In order to ensure that we have the right talent and experience moving forward, we simultaneously opened several new roles in field sales, customer experience,
Speaker Change: Sales Enablement, Product Management, and Engineering.
Speaker Change: We will look to hire seasoned experts with a proven track record of successful execution.
Speaker Change: David Hynes, Scott Hill, Mark Schappel,
Speaker Change: This strategic decision was not taken lightly and the sensitivity of this moment is not lost on me.
Speaker Change: Saying goodbye is not easy.
Speaker Change: especially as culture is very important to me.
Speaker Change: Culture has been a top priority in every leadership role that I've held and it's especially true here at DISCO.
Speaker Change: I believe that strong cultures foster healthy workplaces.
Speaker Change: more creative ideas, more productive employees, better outcomes for customers, and better performance for investors.
Speaker Change: In regards to culture, this quarter we rolled out new company values, which set the standards for DISCO, and were created by our employees.
Speaker Change: These values are.
Speaker Change: Think forward.
Speaker Change: Give space and grace.
Speaker Change: lead with stewardship and step up to the challenge.
Speaker Change: These values now drive our decision-making, actions, and performance, and we take them seriously.
Speaker Change: This is an important step in our cultural evolution.
Speaker Change: and I'm confident that the changes we are making will allow us to realize all of them.
Speaker Change: So in aggregate I'm excited about what I've seen throughout Q3 at DISCO. We are moving faster as a company, collaborating more effectively across the organization, and competing for and winning larger deals.
Speaker Change: I see a revitalized and energized disco team driven by one goal.
Speaker Change: to become the leading legal technology platform in the industry.
Speaker Change: I'm looking forward to what Q4 and 2025 holds.
Speaker Change: With that, I'll turn it over to Michael.
Michael Lafair: September saw an especially strong software usage net inflow. Services revenue were $6.1 million, down 7% year-over-year, predominantly driven by review usage.
Speaker Change: 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.
Speaker Change: Justin Ibbottai is also a non-GAAP financial measure.
Speaker Change: Our gross margin in Q3 was 74%. As we mentioned before, our gross margins fluctuate from period to period based on the nature of our customers' usage, for example, the amount and types of data ingested and managed on our platform.
Speaker Change: Sales and marketing expense for Q3 was $13.8 million, or 38% of revenue, compared to 44% of revenue in Q3 of the prior year.
Speaker Change: The year-over-year decline is predominantly driven by a combination of lower total headcount and redistribution of our investment within sales and marketing.
Speaker Change: Research and development expense for Q3 was $11.1 million, or 31% of revenue, compared to 29% of revenue in Q3 of the prior year. The increase was driven by both domestic and international headcount.
Speaker Change: General and administrative expense in Q3 was $7.7 million, or 21% of revenue, compared to 19% of revenue in Q3 of the prior year. Leadership changes in Q3 2023 reduced G&A expenses in that quarter.
Speaker Change: Operating loss in Q3 was $5.6 million, representing an operating margin of negative 15% compared to negative 17% in Q3 of the prior year.
Speaker Change: Adjusted EBITDA was negative 4.5 million in Q3, representing an adjusted EBITDA margin of negative 12%, compared to an adjusted EBITDA margin of negative 13% in Q3 of the prior year.
Speaker Change: Net loss in Q3 was $3.9 million, or negative 11% of revenue, in line with Q3 of the prior year.
Speaker Change: Net loss per share for Q3 was $0.06, in line with Q3 of the prior year.
Speaker Change: Turning to the balance sheet and cash flow statement, we ended Q3 with $126.8 million in cash.
Speaker Change: cash equivalents and short-term investments and no debt. Operating cash flow for the first three quarters of 2024 was negative $10.8 million compared to negative $28.7 million in the same period of the year prior.
Speaker Change: Turning to the Outlook.
Speaker Change: For Q4 2024, we are providing total revenue guidance in the range of $35.2 million to $37.2 million and software revenue guidance in the range of $30 million to $31 million.
Speaker Change: We expect adjusted ovidocity in the range of negative 7.6 million to negative 5.6 million.
Speaker Change: for fiscal year 2024.
Speaker Change: We anticipate total revenue guidance in the range of $143 million.
Speaker Change: $245 million.
Speaker Change: and Software Revenue Guidance in the range of $119.4 million to $120.4 million. We expect Adjusted EBITDA to be in the range of negative $22 million to negative $20 million. Now, I'd like to turn the call over to the operator to open up the line for Q&A. Operator?
Speaker Change: At this time I'd like to remind everyone in order to ask a question press star then the number one on your telephone keypad. Our first question comes from the line of Koji Ikeda with Bank of America. Your line is open.
Koji Ikeda: Thank you.
Koji Ikeda: Yeah, hey guys, thanks so much for taking the question. I wanted to ask a couple here
Speaker Change: maybe the first one on the new chief sales officer, realizing, I think she's coming back to Disco, and so thinking about how the company has evolved over the last couple of years, and the product itself has evolved over the last couple of years, just trying to think of, you know, what sort of further evolution she might drive in the go-to-market from here.
Speaker Change: Yeah, thanks Koji very much for the question. I am so excited to have Lauren Caruso join us at DISCO as our Chief Sales Officer.
Koji Ikeda: You know, I mentioned when I got on board that I was going to evaluate our management team and look for opportunities to Bring in new talent and and when I decided that we need the new chief sales officer I put a lot of time and effort to make sure that we
Koji Ikeda: defined the criteria very quickly and closely.
Koji Ikeda: and that we looked at a lot of different candidates. And so I'm sure you can probably imagine with my background, I have a great network of extremely strong sales leaders. And so we spoke with many of them and we also spoke with several other potential sales leaders outside the organization.
Koji Ikeda: ultimately determined that Lauren was a perfect fit for us. So Lauren was one of our top sales leaders at Disco in the past. She's got a very enterprise oriented mindset.
Koji Ikeda: So she worked with some of our biggest customers in the past.
Koji Ikeda: She's very strategic in her thought process And she knows eDiscovery and specifically Disco inside and out so she knows our products extremely well She knows our client base extremely well, so I'm thrilled to have Lauren on board and and look
Koji Ikeda: I'm still...
Koji Ikeda: overall responsible for the revenue for this organization. As you know, I've got a lot of go-to-market experience in my background. Lauren will be reporting directly to me as our Chief Sales Officer. Sales is obviously an extremely important part of our revenue, but it's not the only.
Koji Ikeda: important part of our revenue. Our head of customer success and services reports directly to me. Our head of marketing and demand gen reports directly to me. And so I'm going to keep a close pulse on the opportunity and make sure that we're doing everything we can to
Koji Ikeda: increase our revenue, but I'm thrilled to have Lauren on board as our Chief Sales Officer.
Speaker Change: Got it. No, no, thank you for that. And I wanted to ask another question here on the restructuring Just maybe from a big-picture perspective in any way to categorize how big it was It sounds like there was some in the sales organization that was affected, you know, was that the only organization within Disco that was affected and are you
Koji Ikeda: targeting to end up the full year with lower headcount than starting the full year. Thank you guys.
Speaker Change: You bet, Koji. So, in terms of the restructuring...
Speaker Change: First of all, those kind of things are never easy to do, as I'm sure you know. You know, we had to say goodbye to some people that we care a lot about, who helped DISCO get to where we are today and contributed significantly. So that part's tough, but as I said before, I committed to this organization that when I came on board, I would quickly balance the urgency along with learning the business.
Koji Ikeda: developing our strategy and then determining where we needed new talent. That's from an organizational structure standpoint, a role standpoint, and then just a pure talent and experience standpoint.
Koji Ikeda: You know, I made the decision that we needed to make a change. In terms of scope, 31 people were affected, so 31 people we let go this week. At the same time, we opened up 22 new roles.
Koji Ikeda: Action, this is all about refocusing our resources, our efforts, our investments where I think
Koji Ikeda: We're going to best grow and what's going to be best for the company moving forward and so Sales was a fairly significant
Koji Ikeda: portion of that, not half, but a reasonably significant portion of that. Most of the people in the sales organization by far were either in our sales development team or in our inside sales team and then we opened up ten enterprise regional sales executive roles. So we're bringing in experienced
Koji Ikeda: enterprise-oriented salespeople.
Speaker Change: Got it. Thank you. And just one last question, if I may, here. I don't think I heard a customer count metric. You typically do give that. Any color or if we could get that metric, or if we can't, any color on if it's higher or lower than where you ended up in the second quarter. Thanks, guys. Thanks for taking the questions.
Speaker Change: Yeah, you bet, Koji. So, our customer count at the end of Q3 was 1,439 customers.
Speaker Change: which is relatively flat for the year. It's down 10 quarter over quarter. As you know, our customer count will fluctuate. The reason I didn't talk about customer count though is because it's just not the metric that we're focused on.
Speaker Change: focused on acquiring customers regardless of how big or small they are. Our focus right now is clear. We are focused on acquiring and growing within customers that we believe have a lot of opportunity where we can add value and where we really think they can grow. For us, that is
Speaker Change: Large corporations that are in highly litigious industries, that is large law firms, AMLAW 200 firms, and large litigation boutiques.
Speaker Change: that have big centralized e-discovery teams that work in practice areas that generate a lot of e-discovery work and therefore they have a lot of e-discovery needs. And so that's where we are putting our focus today, and that's that's really more of the way we're thinking about it. So in terms of
Speaker Change: The good news there is that we're seeing some progress.
Speaker Change: per year from us. We've got record usage of our platform. Our dollar net retention for software also went up quarter over quarter. And overall our revenue went up. So those are some of the things that we look at.
Speaker Change: Thanks for taking the questions.
Speaker Change: And your next question comes from the line of Brian Essex with JP Morgan. Your line is open.
Brian Essex: Hi, good afternoon, and thank you for taking the question.
Brian Essex: I was wondering maybe if to start if you could talk about Cecilia and what the plans are for
Brian Essex: for that platform, particularly with regard to accelerating your penetration within customers and monetizing that platform as customers might find a lot of value with it.
Speaker Change: Yeah, thanks Brian. You know, I'm very excited about the future of Cecilia AI.
Speaker Change: I mean, our AI platform. I mean, just in general, AI has been part of our core e-discovery platform for more than 10 years.
Speaker Change: So we've got great traction around AI. Cecilia, which is our generative AI platform, has a lot of potential.
Speaker Change: Keep in mind that lawyers are not always the fastest industry to adopt new technology.
Brian Essex: But we've built Cecilia AI with that in mind. So there's a number of things that we've done around the platform to ensure that we get good adoption and the feedback we've gotten so far is really strong. So, for example, we have, you know, the most secure platform in the industry. We've got.
Brian Essex: The ability where we tag every single document and explain why we tag every single document. When users are writing queries, we provide services along with it to help.
Brian Essex: help our customers learn how to write prompts for AI and get the best experience out of that.
Brian Essex: We measure the effectiveness of our solutions by looking at the recall rates and the precision rates and we provide that data to make the results ultimately more defensible. So we've built our platform specifically to help a conservative industry be more likely to adopt
Brian Essex: our solutions.
Brian Essex: And look, the feedback we're getting so far is extremely positive. We were with one of the largest law firms in the country, in the U.S.
Brian Essex: last week and they are a big user of the eDiscovery platform of our biggest competitor and they wanted to see our generative AI solution. We showed them Cecilia and they said it was light years ahead of
Brian Essex: our competitors solution. And so they are now evaluating the idea of using the Cecilia AI platform and along with that moving some matters over to over to Disco. So that's just an example. We certainly have gotten traction. We've acquired customers.
Brian Essex: We've got many customers that are starting to use the system, but the reality is still for this year, for the next few quarters, it's not going to be a material effect on our revenue. And so, you know, that's kind of where we're at right now.
Speaker Change: Scott, that's super helpful. Maybe just a quick follow-up. You know, I understand you still have a lot of cash in your balance sheet, but you've kind of rolled up your sleeve, you're reorienting the sales force.
Brian Essex: Scott Hill, Eric Friedrichsen, Aleksey Lakchakov
Brian Essex: get some goalposts around what direction the target model might run in.
Speaker Change: Yeah, Brian let me tell you the way I think about profitability. First off, you know, our number one goal is to accelerate our growth. This is a, you know, this, the TAM in this market is billions and billions of dollars and, you know, our goal is to accelerate our growth and get as much of that TAM as we can.
Speaker Change: You know, that in mind, if I look at where our cost structure is today,
Brian Essex: I'm more inclined to shift our focus rather than just continually add cost to our structure. You know, I believe in next year we will grow our revenue at a faster pace than we did this year. So far this year, you know, if you look at how we've performed year-to-date along with what we have...
Brian Essex: guided for for Q4, our growth rate will be more than double what it was last year. And look, I think we're on the path that we can increase our software, that's our software growth rate, that we can increase our software growth rate next year even further.
Brian Essex: I do think our expenses will go up next year, but our expenses will not go up as much as our revenue. So the reality is this is more about shifting our focus, shifting our resources, and our investments than it is adding cost to the model.
Brian Essex: and ultimately we're working our way towards
Brian Essex: sustainable profitability. So we're making investments in our go-to-market and our sales enablement, our customer success, by shifting funds rather than just adding a lot of expense to our model.
Speaker Change: Got it. Very helpful context. Thank you.
Speaker Change: David Hynes, Scott Hill, Mark Schappel,
Speaker Change: And your next question comes from the line of Mark Schapell with Loop Capital. Your line is open.
Mark Schappel: Hi, thank you for taking my question. Eric, besides the sales heads that were let go during the quarter, I was wondering if you could just go into a little greater detail around some of the go-to-market changes that took place during the September quarter.
Eric Friedrichsen: Yeah, you know, we have, we had already started making some shifts and focus, as you know, to work on, to assign more resources to our larger accounts. So from a sales perspective, that means
Eric Friedrichsen: putting experienced salespeople on larger accounts that we believe have
Brian Essex: And from a marketing standpoint, we started to build an account-based marketing, sort of an integrated marketing model, so that we can put more focus on the customers that we think have the most opportunity, both acquiring those customers and growing those customers.
Brian Essex: Yeah, to do that we needed to add some new talent. So as I mentioned
Brian Essex: In my prepared remarks, we've added now three very experienced sales leaders. So a couple more in addition to Lauren, that are more enterprise oriented, very seasoned leaders within this marketplace. We've added a number of sales people as well in the last quarter. And then we've started to add various expertise in our marketing organization as well.
David Hynes: David Hynes, David Hynes,
David Hynes: Great, thank you. And then during your prepared remarks, you noted that you're seeing increased interest in involvement in longer-term opportunities. I'm wondering if you could just expand on that a little bit.
Speaker Change: Yeah, you know, we're getting invited to the table. So in this industry, as I mentioned, it's a very large industry and it is a growing industry.
Speaker Change: You know, we're a hundred and forty million dollar approximately revenue company in a multiple billion dollar industry So there's there's a lot of opportunity for us to go gain more share or more Opportunity and the thing that we need to do is to market ourselves better Within our large existing customers. And so when I'm out speaking with customers, I'm asking them questions about You know what we need to do to expand our presence
Speaker Change: to do more e-discovery work and for them to use our platform for more and more of their matters and for larger matters.
Speaker Change: as they're working with Larger Matters with us. And then just the scope of the Large Matters, you know, we've...
Speaker Change: had hundreds of multiple terabyte matters that we've done at Disco. And some of our customers don't know that. So a lot of this is about education, and so we're doing...
Speaker Change: you know, less of a broad-based marketing approach and more of a specific, you know, one-to-one, one-to-many type marketing approach. One-to-few, I should say.
Speaker Change: Thank you.
Speaker Change: And as a reminder if you'd like to ask a question please press the star and 1 on your telephone keypad. Our next question comes from the line of in black with Needham and Company. Your line is open.
Speaker Change: Hi, as you guys move up market, should we expect higher usage of Celiac AI?
Speaker Change: and our Cecilia auto review solution because it's so fast and it can act as if it was a hundred and forty person managed review team you know can can be very very helpful in this larger matter so I think there's a lot of interest
Speaker Change: among our biggest customers in our Cecilia products. But again, we're still in the relatively early stages, and I wanna temper expectations in terms of how fast that part of our business is gonna grow.
Speaker Change: David Hynes, Scott Hill,
Speaker Change: And there are no further questions at this time. I would now like to turn the call back over to the CEO, Eric Friedrichsen.
Speaker Change: David Hynes, Scott Hill, Mark Schappel,
Eric Friedrichsen: Thank you, I appreciate it, and really thank you to everybody for joining us today. We are making strides all the way across the business, anywhere from advancing our product capabilities to strengthening our team, and we're delivering results that position us for long-term success.
Eric Friedrichsen: I'm encouraged by the green shoots that we're starting to see and I'm 100% confident that we have a solid plan for success.
Eric Friedrichsen: Our focus remains on driving innovation, improving execution, and capitalizing on the opportunities that we've got ahead.
Eric Friedrichsen: So we're excited about the progress, we're excited about what we've done so far, and what's coming next. And I look forward to updating you in the quarters to come. Thank you.
Speaker Change: This concludes today's conference call. You may now disconnect.
Eric Friedrichsen: [music]