Q4 2024 CS Disco Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to see Us discuss fourth quarter and fiscal year 2024 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 you'd like to ask a question. During this time.
Speaker Change: Simply press Star followed by the number one on your telephone keypad. If you would like to withdraw your question again press Star one I would like to now hand, the conference over to your first speaker today head of Investor Relations. Alex do you locked your calls. Please go ahead.
Speaker Change: Good afternoon, and thank you for joining us on today's conference call to discuss the financial results for <unk> fourth quarter and fiscal year 2024 with me on todays call are Eric Friedrichsen, Chief Executive Officer, and Michael appear discussed Chief Financial Officer.
Speaker Change: Today's call will include forward 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 or future capital expenditures market opportunity market position product and go to market strategies and growth opportunities.
Speaker Change: And the benefits of our product offerings and developments in the legal technology industry. In addition to our prepared remarks, our earnings press release, SEC filings and a replay of today's call can be found on our Investor Relations website at IR <unk> com.
Speaker Change: 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.
Speaker Change: Forward looking statements represent our management's beliefs and assumptions only as of the date made information on factors that could affect the Companys financial results is included in its filings with the SEC from time to time, including the section entitled Risk factors in the company's quarterly report on Form 10-Q for the quarter ended September 32024 filed with the SEC.
Speaker Change: On November six 2024, and the Companys upcoming annual report on Form 10-K for the year ended December 31 2024. 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.
Speaker Change: With GAAP reconciliations between GAAP and non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures versus their closest GAAP equivalent is available in our earnings release and with that I'd like to turn the call over to Eric.
Eric: Good afternoon, everyone I am pleased to report a strong end of the year for desk as we continue to make progress in growing the reach of our platform and extending our relationships with top tier law firms and corporations.
Eric: Software revenue for fiscal year, 2024 was $121 million up 7% over the prior year.
Eric: Services revenue, which include revenue from Disco review and professional services was $24 7 million in fiscal year 2024.
Eric: Total revenue for fiscal year, 2024 was $144 8 million.
Eric: Up 5% over the previous year.
Eric: Adjusted EBITDA for fiscal year, 2024 was negative $18 7 million an.
Eric: An improvement of $7 2 million from the prior year.
Eric: And we ended the year with $129 1 million of cash and short term investments on our balance sheet.
Eric: We ended 2024 with 315 customers, who each contributed more than $100000 in total revenue, which was up 9% year over year.
Eric: Revenue from customers that contributed more than $100000 in total revenue grew at more than double the rate of those customers contributing less than $100000 in revenue.
Eric: We finished the year with 19 customers contributing more than $1 million in revenue, while our multi product attach rate was 17% at year end, including Cecilia.
Eric: Our total revenue dollar based net retention or DNR improved year over year from 92% to 96%.
Eric: And our software DNR improved year over year from 97% to 100%.
Eric: Over the past few quarters, we've seen an increase in the usage by our more than $100000 customers.
Eric: We believe that the actions that we're taking to transform and enhance our go to market approach, which I discussed at our last earnings call.
Eric: Just starting to bear fruit.
Eric: We are very excited about 2025 and focused on continuing to demonstrate further go to market improvement and success.
Eric: During our last earnings call I discussed three areas of focus for desktop.
Eric: Number one becoming a more customer focused organization.
Eric: Number two enhancing our internal operations and number three fostering a continued cultural improvement.
Eric: I'd like to discuss some of the great strides our team has made in those three areas.
Eric: Over the past quarter, we have further refined our approach to becoming a more customer focused organization.
Speaker Change: I have met with over 70 customers since joining disco three quarters ago.
Speaker Change: I continue to hear that customers love our products, they love our people and that they want to do more with desktop.
Speaker Change: <unk> the opportunity ahead of us starts with marketing the value that we provide to our customers.
Speaker Change: We believe that no one else offers our unique combination of software and services expertise.
Speaker Change: Build and deliver innovative proven an intuitive technology. It is backed by our very own experts in the most critical areas of E discovery.
Speaker Change: To achieve our goals our customers must know that we are with them in every case, including large complex cases with tight deadlines.
Speaker Change: Our customers must feel confident that we are available to meet their needs on their deadlines with exceptional quality and reliability.
Speaker Change: Building. This trust is an essential part of establishing <unk> as the go to solution for our customers large matters.
Speaker Change: We're doing that in two ways.
Speaker Change: First we're continuing to add innovative technological capabilities that help with complex cases.
Speaker Change: Second we are educating the market on the breadth and expertise of our services teams, who provide the support that our customers want for those large matters.
Speaker Change: We have successfully helped our customers with hundreds of complex multiple terabyte matters, and we need to make sure the market knows that.
Speaker Change: So how do we get there.
Speaker Change: How do we drive towards this customer centric standard in 2025.
Speaker Change: Well, it's in the work that we have been refining over the past several months, which primarily centers around our go to market strategy.
Speaker Change: In sales Lauren Caruso, who returned to disco in October as our Chief sales officer has been thoughtfully aligning the sales organization towards our customer centric approach.
Speaker Change: For efforts have been focused in three key areas.
Speaker Change: First it's talent, we feel confident in the talent that we have in place today over.
Speaker Change: Over the past quarter, we've made several important changes to our organizational structure, including right sizing management layers and reallocating funds to hire more enterprise sellers.
Speaker Change: We believe that we are adequately staffed from a sales perspective, and we will continue to recruit top talent.
Second is focus we.
Speaker Change: We have significantly increased our focus on customers and prospects with significant annual ediscovery spend.
Speaker Change: In practice areas, where we believe we can add the most value.
Speaker Change: Over the past few months, we assessed our customer base.
Speaker Change: Determined our ideal customer profile.
Speaker Change: <unk> the potential wallet size of each customer and aligned and staffed our sales teams to focus on customers with the highest potential value to disco.
Speaker Change: While we will continue to support the broader base of our business. The majority of our attention is now on attracting and expanding these target accounts.
Speaker Change: Third as incentives our goal is to incentivize sales reps to drive new usage and expansion.
Speaker Change: To achieve this we've realigned our sales incentive structures and performance metrics to prioritize growth over account management.
Speaker Change: To free up their bandwidth we've transitioned many account management responsibilities to the customer success team, allowing our sales reps to focus on winning more business.
Speaker Change: This shift enables our sales team to concentrate on driving growth while customer success focus is on satisfaction retention and expansion.
Speaker Change: We believe that this realignment enhances our ability to provide exceptional support throughout the customer journey.
Speaker Change: By focusing on enhanced talent target accounts and aligned incentives. We believe we will see a meaningful improvement in how we win and grow our customers.
Speaker Change: Similarly, we have pivoted, our marketing and lead generation strategy to focus on our target accounts, we're concentrating our energy resources and budget I'm, making a great first impression with the right prospects.
Speaker Change: This means that every touch point from marketing to sales to customer success and professional services, we aim to deliver a seamless and positive customer experience.
Speaker Change: And if something goes wrong, we will work to remedy it right away.
Speaker Change: We believe that the progress we have made over the past quarter lays a strong foundation for 2025 and 2026.
By aligning our sales marketing and customer success efforts around a more targeted strategy. We believe we can maximize every interaction deepened.
Speaker Change: Deepen customer trust and deliver exceptional value.
Speaker Change: Our goal remains clear to become an indispensable partner for our customers in every matter every time.
Speaker Change: And with the groundwork we have laid I am confident we are on the path to achieving it.
Speaker Change: We know the strategy works because when analyzing our largest customers we see clear success patterns.
Speaker Change: For example.
Speaker Change: One of our analog 200 customers that spent more than $1 million with us and software in 2024.
Speaker Change: Increased their year over year software spend by over 40%.
Speaker Change: This expansion was driven by our focus on a deep understanding of the customer's goals and challenges.
Speaker Change: We worked with our clients centralized team.
Speaker Change: To align organizational goals and deepened product knowledge.
Speaker Change: We did this while demonstrating the full breadth of <unk> platform capabilities.
Speaker Change: This tailored hands on approach build trust through our partnership and gave this customer confidence to bring more and larger matters to discount.
Speaker Change: Another example of this approach in action is from a $40 billion data and analytics company that grew their annual software spend with us by over 150% in 2024.
This company began as a relatively new customer in 2022.
Speaker Change: Continuing to grow in 2023.
Speaker Change: And significantly expanded in 2024.
Speaker Change: Initially they primarily operated as a self service customer leveraging the simplicity of disco for a small number of matters.
Speaker Change: However, as our sales and customer teams engaged with them.
Speaker Change: Introduced the breadth of our offerings and demonstrated our capabilities as a true partner their usage more than doubled.
Speaker Change: Expanded their adoption to include Cecilia Q&A and disco review.
Speaker Change: We earned their trust by supporting them in large complex matters.
Speaker Change: Provided significant leverage for their legal teams through our professional services organization.
Speaker Change: This example highlights our successful customer outcome stemming from the seamless integration of software and services delivering exceptional results and reinforcing discos role as an indispensable partner in every case.
Speaker Change: A number of our top customers have already shown a willingness to adopt and expand their use of our platform proving that this strategy is both repeatable and scalable.
Speaker Change: Notable law firms, such as Orrick, Herrington, and Sutcliffe, LLP and Manatt, Phelps and Phillips LLP have deepen their engagement with disco through 2024, reinforcing the opportunity ahead is significant and obtainable.
Speaker Change: Our priorities in product and engineering are just as critical to our long term success.
Speaker Change: As is our go to market strategy.
Speaker Change: Our customer centric approach extends to product development, ensuring that we build the capabilities and features that target customers want to expand their use of disco.
Speaker Change: We are strategically prioritizing our engineering efforts across both <unk> and backend development to deliver meaningful enhancements.
Speaker Change: <unk> ongoing refinements for improvements to our CIS, so yet generative AI offerings.
Speaker Change: In 2025, our priority is to introduce capabilities to make it even faster for customers to drive broad adoption within their organizations.
Speaker Change: We are laser focused on the feedback from our target customers their pain points areas for improvement and the capabilities that they desire.
Speaker Change: Our goal is to ensure that our products are more powerful efficient and accurate than anything else on the market.
Speaker Change: Our investments in our core platform are a highly targeted and prioritize continuation of the work that we began in 2024.
Speaker Change: The capabilities, we launched last year, particularly those designed for large matters, such as mass reductions and data typing for custom fields.
Speaker Change: Have been well received.
Speaker Change: In Q4, we introduced new capabilities that will make it significantly more efficient for our users to manage production workflows on their fastest moving most complex matters both in the U S and internationally.
Speaker Change: In Q4, we introduced several new capabilities to our core product, including advanced reproductions, enabling users to rerun, our production with updated settings, redactions and document contents, ensuring consistency across past and current work.
Speaker Change: This feature is especially valuable for large matters with extensive document volumes saving lawyers significant hours.
Speaker Change: Additionally, we released document level base numbering a new option in a production tool that applies to a single Bates stamp per document with individual page Suffolk team.
Speaker Change: This enhancement expand support for international document labeling standards.
Speaker Change: While this may not be the most exciting sounding feature at first glance. It is important for lawyers, who spent 80 hour weeks and driving case team's illegal outcomes, where workflow improvements make a meaningful impact.
Speaker Change: We believe our Cecilia Q&A capabilities have been instrumental in locating key documents faster.
Speaker Change: We are pleased with the increased number of customers adopting to see a Q&A customers are finding an invaluable in our largest matters where needles in the haystack are the hardest defined using the traditional methods of search and review.
Speaker Change: Orrick Herrington and Sutcliffe LLP is at the forefront of leveraging Cecilia Q&A to enhance its litigation practice.
Speaker Change: As outside counsel and complex matters to firm has used to Celia to accelerate document review quickly surface key evidence and streamline discovery.
Speaker Change: In one case work estimates that have reduced the time spent on document review by over 50%, allowing attorneys to focus on higher value legal work.
Speaker Change: By using <unk> Q&A function the team could ask questions in natural language and received narrative answers almost instantly with citations to the relevant documents.
Speaker Change: This enabled <unk> to quickly assess the relevance of requests demonstrating how AI is transferring legal workflows with faster insights and more strategic decision making.
Speaker Change: With our shift to focusing our resources on winning within our ideal customer profile. We believe that we will add more large matters to our platform.
Speaker Change: These large matters help accelerate revenue growth have longer life spans and require a deeper partnership with our customers to execute.
Speaker Change: The work we've been doing on the go to market and product side has been yielding positive results and we are seeing growth of large matters on our platform.
Speaker Change: Our.
Speaker Change: <unk> on enhancing internal operations has made <unk> a faster more agile organization.
Speaker Change: The internal prioritization framework that we implemented the organizational adjustments, we made and the leaders that we have brought in have all contributed to more efficient decision, making and execution.
Speaker Change: These improvements have significantly strengthened our customer and product prioritization efforts as well as our overall go to market progress, allowing us to move with greater speed and precision.
Speaker Change: We are seeing the impact of these changes and we are pleased with the results.
Speaker Change: Culturally <unk> is a very different company than it was a year ago.
Speaker Change: <unk> survey results show embarked improvement and positive sentiment and attrition has declined.
Speaker Change: The combination of leadership changes, a clear strategic vision, and new employee value proposition and a more collaborative internal dynamic has created a stronger more unified disco.
Speaker Change: I want to take a moment to thank the disco leaders and all employees, who have leaned in with us to make this happen.
Speaker Change: While there is always room to improve I am excited about where we are today and the foundation that we've built for the future.
Speaker Change: As we look ahead, we are committed to executing our go to market strategy with disciplined refining.
Speaker Change: Refining our internal operations, leading in product innovation and driving growth.
Speaker Change: The progress we've made over the past year has positioned us well and we are confident in our ability to build on this momentum.
Speaker Change: Our focus remains on delivering real value to our customers expanding our market presence.
Speaker Change: Accelerate revenue growth and driving the business sustainable profitability.
Speaker Change: If we execute our planned strategy and the way we think we can and we believe we can reach breakeven adjusted EBITDA in Q4 2026.
Speaker Change: My belief in the future of <unk> is greater than ever.
Speaker Change: I am consistently delighted to hear feedback from our customers about how the value of our products and our people and how they want to do more with us.
Speaker Change: We have a solid foundation, a strong strategy and the right team to execute moving forward I am excited for 2025 and beyond.
Speaker Change: With that I'll turn it over to Michael.
Michael: Thank you Eric and in Q4 of 2024 total revenue was 37 zero million up 4% year over year.
Michael: <unk> revenue was $30 8 million up 5% year over year services revenue was $6 2 million down 4% year over year predominantly driven by review usage.
Michael: Full year 2024 revenue was $144 8 million up 5% year over year software revenue was $120 1 million up 7% from prior year services revenue was $24 7 million down 4% year over year due to a year over year decline in review revenue in.
Michael: Discussing the remainder of the income statement. Please note that unless otherwise specified our references to gross margin operating expenses and net loss are on a non-GAAP basis. Adjusted EBITDA is also a non-GAAP financial measure.
Michael: Our gross margin in Q4 was 75% and gross margin for fiscal year 2024, with 75% in line with fiscal year 2023.
Michael: 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.
Michael: Sales and marketing expense for Q4 was $13 9 million or 37% of revenue compared to 36% of revenue in Q4 of the prior year for fiscal year, 2024 sales and marketing expense was $56 7 million or 39% of revenue compared to 45% of revenue for fiscal year 2023.
Michael: A decrease of over $5 $4 million year on year. The decrease was primarily driven by a decrease in personnel costs and a reduction in marketing spend.
Michael: Research and development expense for Q4 was $11 9 million or 32% of revenue compared to 24% of revenue in Q4 of the prior year for fiscal year 2020 for research and development expenses were $43 8 million or 30% of revenue compared to 31% of revenue in fiscal year 2023.
Michael: An increase of a $1 5 million year on year. This increase was primarily driven by an increase in research and development head count.
Michael: General and administrative expense in Q4 was $7 3 million or 20% of revenue compared to 22% of revenue in Q4 of the prior year for fiscal year 2020 for general and administrative expenses were $31 $8 million or 22% of revenue consistent with general and administrative expenses as a <unk>.
Michael: <unk> revenue in fiscal year, 2023, general and administrative expenses increased $1 6 million year on year. This increase was primarily driven by professional service fees and additional senior level talent, we added to disco adjust.
Michael: Adjusted EBITDA was negative $4 3 million in Q4, representing an adjusted EBITDA margin of negative 12% compared to an adjusted EBITDA margin of negative 3% in Q4 of the prior year adjusted EBITDA in fiscal year 2024, It was negative $18 7 million a margin of negative 13%.
Michael: <unk> margin of negative 19% in 2023.
Michael: Net loss in Q4 was $4 3 million or negative 12% of revenue compared to a net loss of <unk> three.
Michael: $3 million or negative 1% of revenue in Q4, the prior year net loss in fiscal year, 2024 was $17 2 million or negative 12% of revenue compared to net loss of $22 8 million or negative <unk>, 17% of revenue in 2023 net loss per share for fiscal year 2024 was <unk>.
Michael: 29 per share compared to 38 per share for fiscal year 2023.
Michael: Turning to the balance sheet and cash flow statement.
Michael: Ended Q4 with $129 1 million in cash cash equivalents and short term investments and no debt operating cash flow in fiscal year 2024 was negative $8 7 million compared to negative $25 5 million in fiscal year 2023, driven primarily by improvements in working capital.
Michael: And strong collections.
Michael: One other thing I wanted to touch on in Q4, we recorded a full noncash impairment charge of $15 $2 million on our primary asset and related capitalized development.
Michael: This impairment charge does not impact adjusted EBITDA, we are focusing our efforts on core E discovery and fulfill your AI capabilities.
Michael: Now turning to the outlook.
Michael: For Q1 2025, we are providing total revenue guidance in the range of 35 million to $37 million and software revenue guidance in the range of $30 1 million and $31 1 million, we expect adjusted EBITDA to be in the range of negative 8.0 million to negative $6.
Michael: Zero million for.
Michael: For fiscal year 2025, we anticipate total revenue guidance in the range of $145 5 million to 157 $5 million and software revenue guidance in the range of 124 million to $131 million, we expect adjusted EBITDA to be in the range of negative $19 million.
Michael: <unk> 15 million.
Michael: Now I'd like to turn the call over to the operator to open up the line for Q&A operator.
Speaker Change: Thank you we will now begin the question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue.
Speaker Change: I would like to withdraw your question simply press Star One again, we'll pause for just a moment to compile the Q&A roster.
Koji Aikido: Your first question comes from the line of Koji Aikido from Bank of America. Your line is open.
Speaker Change: Yeah, Hey, guys. Thanks, so much for taking the questions I wanted to ask about maybe the selling environment in legal tech and specifically on AI tools.
Speaker Change: Is it potentially getting harder selling AI legal tools today versus maybe a few years ago and the fact that it seems like theres a lot of tools out there now and when when we see that within the software category that tends to cause a lot of confusion with buyers and so maybe help us understand what does the selling environment like and what is the key.
Speaker Change: What's your value prop today that is driving new customer adoption.
Speaker Change: Sure Koji. Thank you very much for the question I really appreciate it.
Speaker Change: I would say that.
Speaker Change: The selling opportunity within the legal industry actually has gotten a little bit easier more recently than it has in the past in terms of their interest or willingness to look at various AI tools. I think you know the disco has had AI built into our platform since almost the inception of the company.
Speaker Change: Several years ago. So the degenerative AI solutions, obviously are much newer within the last 18 months, we've seen pretty incredible adoption over the last year of our <unk> products.
Speaker Change: <unk>.
Speaker Change: Keep in mind that our Cecilia products are very specific to the use cases that we are trying to solve for so if you think about to say your Q&A. It's all about asking questions of the facts in the database to help our customers do early case assessments for their clients to help them very very quickly.
Speaker Change: Get to the facts of the case that are the most important.
Speaker Change: And we had a customer that I heard about actually just today, who leverage to so your Q&A to help analyze the facts and the database to determine the best questions that might come up during.
During a trial and help prepare.
Speaker Change: The people in the trial to be able to answer questions from the opposing counsel and really nailed. It. So our cecilia products are offering very very specific.
Speaker Change: Solutions as opposed to general solutions, and they leverage <unk> to do that the other one is Cecilia Auto review, obviously that does the first pass review of the database and.
Speaker Change: Again, it's very much tailored to that exact process. We've designed it such that the results can be very defensible, we look at the precision rates. The recall rates every document they gets tagged we explained why it got tagged and all of this provides a very very specific solution for our customers.
Speaker Change: Problems.
Got it no. Thank you so much that's very very helpful and a follow up here.
Speaker Change: I think I heard on the call if I heard this correctly, there's a target out there setting a target for breakeven adjusted EBITDA by the fourth quarter for 2006, I mean is this a hard target and.
Speaker Change: And what I mean by that is regardless of where growth ends up.
Speaker Change: Business willing to do what needs to be done to achieve that breakeven <unk> EBITDA target of <unk> 26, and once that is achieved is it safe to assume that adjusted EBITDA should be positive from there on out on an annual basis. Thank you.
Speaker Change: Okay.
Speaker Change: A good question. So we're really confident in our strategy and our kind of re shift on focusing on large customers and the guidance range. We provided in 2025, we obviously havent provided revenue guidance for 2026, our goal and we've been talking about this consistently is working towards sustainable profitability.
Speaker Change: And growth long term, we have reallocated our investments in areas that we believe will make the biggest impact to drive revenue growth, especially around our targeted customers.
Speaker Change: By focusing on larger customers, it's going to enable us to grow more efficiently.
Speaker Change: Our current cost structure with really modest increases we believe will support the business as we drive revenue growth look there's many ways to get to positive adjusted EBITDA and while there are many ways to get there I am confident in our strategy to grow revenue and to achieve achieve sustainable profitability in to hit that target at the end of next year in Q4.
Speaker Change: Thanks, guys. Thank you so much.
Speaker Change: You bet.
Speaker Change: Your next question comes from the line of Brent Thill from Jefferies. Your line is open.
Speaker Change: Hi, This is <unk> on for Brent Thill. Thank you for taking my question.
Speaker Change: Movement in overall dollar net.
Speaker Change: Do you see that number going above 100, again and if so can you talk about vectors for growth there so volume versus multi product adoption.
Speaker Change: Yes sure.
Speaker Change: Look in terms of our improvement of DNR I'm very pleased I think we probably included.
Speaker Change: Most of the salient points within the prepared notes, but our software retention got back to a 100% from 97%. Our total revenue retention went from 92% to 96%.
Speaker Change: And that software that improvement was really driven by our larger customers by those who spend more than $100000 with disco. So I'm confident that with our go to market approach, we have the opportunity to continue to improve DNR overtime.
Speaker Change: Got it that's Super helpful. And then can you also talk about level of conservatism that youre embedding into the guide for 2025.
Speaker Change: I'll take that let me just discuss guidance so the guidance that.
Speaker Change: We are providing for the full year and also for Q1, it's the best estimate of where we think we think things are going to land in the quarter and for the full year I'm really confident in our overall strategy.
Speaker Change: We do believe that it may take a bit of time to see some of the results from the actions, we're taking as we focus on larger customers.
Speaker Change: You didn't ask about Q1 guide, but I'll just mentioned part of the Q1 guide includes volatility in their review component of services.
Speaker Change: But I am confident in our overall strategy at.
Speaker Change: At our guidance for the full year.
Speaker Change: Great. Thank you.
Speaker Change: Yes.
Speaker Change: Again, if you'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Your next question comes from the line of Mark Chapelle from Loop capital markets. Your line is open.
Mark Chapelle: Alright. Thank you for taking my question Erika I jumped on the call a bit late here. So I apologize if you've already addressed my question in your prepared remarks I was wondering if you just.
Speaker Change: Spell out your investment priorities for the coming year.
Erika: Yeah, Hi, Mark nice to hear from you.
Erika: Very clearly we are invested in growth we have determined exactly who we think are ideal customer profile is the exact types of matters that we believe.
Erika: We will we are the most successful with that we can help our clients the most with and to create the most opportunity to accelerate revenue for disco. So that's really where we're putting our investment in terms of go to market. We've got from a sales perspective, we shifted significant investment over the last quarter from.
Erika: From account executives and sales development representatives over to enterprise sales reps. So we've beefed up our enterprise sales staff, we have restructured.
Erika: Restructuring and an enhanced our sales leadership.
Erika: A marketing perspective, we have pivoted to more of an account based marketing strategy. It is very much focused on targeting our top accounts. Those that we think have the most opportunity and that can grow and then from a customer success standpoint, we've really started to rebuild our whole customer success function.
Erika: One of the things that I included in my prepared remarks was a discussion about how we've changed the roles for our sales and customer success teams. Our salespeople have traditionally been more of account managers that are really kind of manage that book of business and what we have done now is we've restructured their rules. So that salespeople are very much focused.
Erika: Im going to go get the next matters and going to sell the next products and really expand the relationship with our customers.
Erika: Our customer success team is responsible for.
Erika: Customer satisfaction responsible for adoption of our products responsible for renewals and retention of those particular customers and therefore, we've also reset our compensation strategy and comp plan for our salespeople to really really incentivize them to help grow accounts.
Erika: From a product standpoint, we are doubling down on our core ediscovery products in our Cecilia generative AI products, Thats, where were putting the vast majority of our investment when it comes to product.
Erika: That's helpful. Thank you.
Speaker Change: You bet Mark.
Speaker Change: Your next question comes from the line of Brian Essex from Jpmorgan. Your line is open.
Brian Essex: Hi, good afternoon, and thank you for taking the question Hi.
Speaker Change: Great great to see the large customer growth on the platform and I guess, if I could maybe just pivot back to the question that was a SaaS and some of the color you provided on.
Speaker Change: Go to market changes, particularly among the sales force can you help me understand that.
Speaker Change: How much.
Speaker Change: Head count.
Speaker Change: Addition, or change was there associated with those changes and as these sales reps.
Speaker Change: Assume new.
Speaker Change: Functions more I guess sales focused.
Speaker Change: Roll how mature would you.
Speaker Change: I'm trying to get to a level of maturity, particularly with regard to executing on the platform and when you think they might reach full maturity and when we might see better productivity in the numbers and then I have a quick follow up.
Speaker Change: Okay sure.
Speaker Change: I think the first thing I would just say is that I'm already very pleased at the early results that we've gotten in our penetration for larger customers are.
Speaker Change: Number of customers, who spent more than $100000 with disco last year went up by 9%.
Speaker Change: The amount of revenue generated from that same group of customers that.
Speaker Change: Then with 100000 of US grew at more than double significantly more than double the rate in fact, the vast majority of the.
Speaker Change: The growth that we had last year came from that segment. So that is we're already starting to see some progress.
Speaker Change: With our focus on those largest customers in terms of the team.
Speaker Change: We've already hired a number of new enterprise sellers, we still have some roles open that were hiring for but I feel like we are adequately staffed at this point.
Speaker Change: Biggest change that we needed to have really was to free up time from our salespeople to stop doing account management and to put all of their focus and effort into selling so that's that was the main shift.
Speaker Change: So a lot of that was done by by shifting workload to customer success reps. Some of it has also been done by the operational improvements that we've put into the business.
Speaker Change: Got it is there is there are like.
Speaker Change: You had to gauge it an average level of maturity you would assign the salesforce and then.
How how long it would take to get them to full maturity productivity.
Speaker Change: I don't have a specific metric to share around that.
Speaker Change: Okay.
That's fine and then maybe just a follow up on the guidance commentary.
Speaker Change: It seems like a bit of a Y a wider range of guidance, particularly on the top line that you've offered this year.
Speaker Change: I guess, how would you frame your approach to guidance I know you said, you're confident in your ability to execute to that level, but what would be the primary governors of achieving the upper end of that guidance range.
Speaker Change: So it's a fair question.
Speaker Change: I don't believe the range. This year is really any different than the range. We provided last year at this time for 'twenty four.
Speaker Change: The in terms of the confidence.
Speaker Change: What we talked about a little bit is and what I. Previously mentioned is the there is a shift in strategy and as a result of that shift in strategy with a focus on larger customers. We do believe that that's going to lead to.
Speaker Change: And drive us to revenue Reacceleration at a faster rate than the old approach that we used to have that could take a little bit of time, we're not exactly sure when that's going to move in completely in the direction.
Speaker Change: We are really confident that the strategy is going to works, we already have seen signs of it working.
Speaker Change: And I believe Theres a lot of upside from our focus on large customers as you can see just from the metrics. The large customer count grew 9% year over year and the contribution of our growth from from those from the larger cohort has been very significant is as opposed to the tail. So it's really a shift I believe theres a lot of upside.
Speaker Change: Got it that's super helpful. Thank you so much and my area. It does look like the same range so apologize for that but thanks for the color I appreciate it.
Speaker Change: Yes.
Ian Black: Your next question comes from the line of Ian Black from Needham <unk> Company. Your line is open.
Speaker Change: Hi, Ann you guys.
Speaker Change: Hey, Scott you guys, you guys called out a 17% multi product attach rate are you seeing significantly different tax rates amongst your enterprise customers. Then you are kind of historic customer base.
Speaker Change: We I mean, the attach rate went up I believe from 15% from what we previously disclosed to 17% that includes our Cecilia.
Speaker Change: Correct.
Speaker Change: And we're happy with the growth in the attach rate, but we don't we don't I don't actually know that number off hand, and we don't disclose kind of the mix between enterprise versus non enterprise.
Speaker Change: There has been I would say there has been a ton of interest from all of our customers and Cecilia Q&A.
Speaker Change: The enterprise large law firms and also the smaller firms and it does attract a ton of interest and it's we're really pleased with the.
Speaker Change: The number of customers and the growth that we saw particularly in Q4, yes, just to add on to that regarding Cecilia and specifically Cecilia Q&A, what I consistently hear I've been with over 70 customers in the last nine months since I started and what I consistently hear from them is where they see the most value. This is cecilia Q&A is on our largest matters.
Speaker Change: And.
Speaker Change: Typically its our largest customers that end up bringing the largest matters into disco.
Speaker Change: When customers adopt Cecilia Q&A do you usually see them adopted one matter in time trying to figure it out test it out first or do you see kind of full adoption across there.
Speaker Change: Yes.
Speaker Change: Yes, typically they will start with one matter and then from there they will grow to additional matters when they have success.
Speaker Change: Thank you for taking my questions you bet.
Speaker Change: And that concludes our question and answer session I will now turn the call back over to CEO, Eric Fredrickson for closing remarks.
Eric Fredrickson: Thank you everyone and good evening I really appreciate all of you joining us today I am extremely excited about what we have going on right now at <unk>, we are making very good progress we are advancing our products. We're strengthening our team were delivering results that we really believe set us up for long term success.
Speaker Change: Yes.
Speaker Change: I am encouraged by the early signs that we're seeing in our strategy is starting to take hold and I've got confidence in our plan to execute.
Speaker Change: Our focus remains on driving innovation, improving execution and making the most of the opportunities ahead.
Speaker Change: We're excited about what we've accomplished and we're even more excited about what's next.
Speaker Change: I look forward to sharing our progress in the coming quarters. Thank you.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Okay.