LAW - CS Disco: Stagnation Continues

2024-06-14 14:38:55 ET

Summary

• CS Disco is a legal tech company facing challenges with revenue growth and customer acquisition.
• Q1 earnings show stagnation in revenues and customer count, with a negative adjusted EBITDA margin.
• A new CEO and AI-based product line may support a possible turnaround, but evidence of growth is needed to boost investor confidence.

Introduction and investment thesis

CS Disco, Inc. (LAW) is a legal tech company trying to reshape the legal services industry with its cloud-based tech suite supported by AI. Disco went public in July 2021 after printing a few strong quarters but disappointed investors afterwards. The diminishing of a few large deals has negatively impacted the company's revenue growth rate to a greater extent, which I believe wasn't communicated properly. This resulted in a shareholder litigation against the company, which is still ongoing. This has been accompanied by the abrupt departure of Founder and former CEO Kiwi Camara in September last year, so there has been a lot to do around the house recently....

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