CS Disco (LAW) risk factors, FY2025 10-K

Risks Related to Information Technology and Cybersecurity

1. 01Some European regulators have prevented companies from transferring personal information out of Europe for allegedly violating the GDPR’s cross-border data transfer limitationsNew
2. 02Major technology platforms on which we rely to gather information about consumers have adopted or proposed measures to provide consumers with additional control over the collection, use, and sharing of their personal information for targeted advertising purposesNew
3. 03technologies, leading to the use of defective, compromised or insecure code. Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security programNew
4. 04In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive data about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position
5. 05The unavailability of or change in the terms or nature of access to third-party technology could harm our business
6. 06Elements of our product offerings use open source software, which may restrict the functionality of our product offerings or require that we release the source code of certain applications subject to those licenses91% rewritten
7. 07We use artificial intelligence in our products and operations, which may result in operational challenges, legal liability, reputational concerns and competitive risks35% rewritten

Risks Related to Our Growth and Capital Requirements

1. 08Our substantial growth since inception may not be indicative of our future growth. Our historical growth also makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful24% rewritten
2. 09We may not be able to successfully manage our growth and, if we are not able to grow efficiently, our business, financial condition and results of operations could be harmed
3. 10Our ability to timely raise capital in the future may be limited, or such capital may be unavailable on acceptable terms, if at all
4. 11Our issuance of additional capital stock in connection with financings, acquisitions, investments, our equity incentive plans or otherwise will dilute all other stockholders
5. 38Our substantial growth since inception may not be indicative of our future growth. Our historical growth also makes it difficult to evaluate our future prospects and may increase the risk that we will not be successfulNew

Risks Related to Our Business and Industry

1. 12Our business depends on customers increasing their usage of our product offerings and any loss of customers or decline in their use of our product offerings could harm our business21% rewritten
2. 13If we are unable to attract new customers and retain existing customers, our business, financial condition and results of operations will be adversely affected29% rewritten
3. 14If our platform fails to perform properly due to defects, interruptions, delays in performance or similar problems and if we fail to resolve any defect, interruption, delay or other problem, we could lose customers, become subject to service performance or warranty claims or incur significant costs
4. 15Incorrect or improper use of our product offerings could result in customer dissatisfaction and harm our business, results of operations, financial condition and growth prospects
5. 16We rely upon third-party providers of cloud-based infrastructure to host our cloud-based platform. Any disruption in the operations of these third-party providers, limitations on capacity, or interference with our use could adversely affect our business, financial condition and results of operations22% rewritten
6. 17We expect fluctuations in our financial results, which may cause period-to-period comparisons not to be meaningful
7. 18If we fail to forecast our revenue accurately or manage our expenditures, or if we fail to meet publicly announced guidance, our operating results could be adversely affected, and our stock price could decline23% rewritten
8. 19The market in which we compete is relatively new and subject to rapid technological change, evolving industry standards and regulatory changes, as well as changing customer needs, requirements and preferences37% rewritten
9. 20A limited number of customers represent a substantial portion of our revenue. If we fail to retain these customers, our revenue could decline significantly
10. 21Our revenue growth depends in part on the success of our strategic relationships with law firms and other legal services providers, and if we are unable to establish and maintain successful relationships with them, our business, operating results and financial condition could be adversely affected50% rewritten
11. 22Failure to effectively develop and expand our marketing and sales capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our product offerings
12. 23The markets in which we participate are competitive, and if we do not compete effectively, our business will be harmed75% rewritten
13. 24In addition, we expect to expand our product offerings to address additional areas of the legal function and we likely face further competition from existing companies in such areasNew
14. 25If the estimates and assumptions we have used to calculate the size of our addressable market opportunity are inaccurate, our future growth rate may be limited
15. 26If we fail to develop, maintain and enhance our brand, our ability to expand our customer base will be impaired and our business, results of operations and financial condition may suffer
16. 27We employ a pricing model that subjects us to various challenges and we may not be able to accurately predict the optimal pricing necessary to attract new customers and retain existing customers
17. 28Our sales cycles with customers can be long and unpredictable and our sales efforts require considerable time and expense
18. 29Given these factors, it is difficult to predict whether and when a customer will switch to our product offerings
19. 30If we cannot continue to build and sustain a productive corporate culture as we grow, our success and our business and competitive position may be harmed
20. 31The success of our business depends on our customers’ continued and unimpeded access to our platform on the internet
21. 32Any failure to offer high-quality support and professional services for our customers may harm our relationships with our customers and, consequently, our business
22. 33We rely on the performance of highly skilled personnel, including our management and other key employees and the loss of one or more of such personnel, or of a significant number of our team members, could harm our business25% rewritten
23. 34The failure to attract and retain additional qualified personnel could prevent us from executing our business strategy
24. 35Future acquisitions, strategic investments, partnerships, or alliances could be difficult to identify and integrate, divert the attention of management, disrupt our business and dilute stockholder value
25. 36Our current operations are international in scope and we plan on further geographic expansion, creating a variety of operational challenges
26. 37We are exposed to fluctuations in currency exchange rates33% rewritten

Risks Related to Socioeconomic Factors

1. 39Unfavorable conditions in the global economy, including a global or domestic recession or the fear thereof, could cause reductions in legal spending and harm our business
2. 40International trade policies, including tariffs, sanctions and trade barriers may adversely affect our business, financial condition, results of operations and prospectsNew
3. 41used by us or our third-party vendors could raise costs, constrain supply or affect service reliability, which could harm our competitive position, reduce customer demand and damage customer relationshipsNew

Risks Related to Our Intellectual Property

1. 42Any failure to protect our proprietary technology and intellectual property rights could substantially harm our business and operating results
2. 43Failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brands as well as our competitive advantage
3. 44We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time-consuming and unsuccessful
4. 45We may be subject to claims asserting that our employees, consultants or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own intellectual property
5. 46Provisions in various agreements to which we are party potentially expose us to substantial liability for intellectual property infringement, data protection and other losses

Risks Related to Litigation, Regulatory Compliance and Governmental Matters

1. 47Any currently ongoing or future litigation against us could be costly and time-consuming to defend
2. 48We operate in a highly regulated industry and either are or may be subject to a wide range of federal, state and local, as well as foreign, laws, rules and regulations and our failure to comply with these laws and regulations may force us to change our operations or harm our business
3. 49We are subject to anti-corruption, anti-bribery, anti-money laundering and similar laws and noncompliance with such laws can subject us to criminal or civil liability and harm our business, financial condition and results of operations
4. 50Sales to government entities and highly regulated organizations are subject to a number of challenges and risks
5. 51We are subject to governmental export and import controls that could impair our ability to compete in international markets or subject us to liability if we violate such controls

Risks Related to Tax and Accounting Matters

1. 52Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations
2. 53Our international operations may subject us to potential adverse tax consequences
3. 54Our results of operations may be harmed if we are required to collect sales or other related taxes for our product offerings in jurisdictions where we have not historically done so46% rewritten
4. 55significant administrative burdens for us, discourage potential customers from utilizing our product offerings due to the incremental cost of any such sales or other related taxes, or otherwise harm our business. We continue to analyze our exposure for such taxes and liabilitiesNew
5. 56Changes in our effective tax rate or tax liability may harm our business61% rewritten
6. 57Our financial results may be adversely affected by changes in accounting principles applicable to us
7. 58If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected

Risks Related to Being a Public Company

1. 59Our management team has limited experience managing a public company
2. 60If we fail to maintain effective internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired
3. 61We may not be able to successfully manage the growth of our business if we are unable to improve our internal systems, processes and controls
4. 62We will no longer qualify as an “emerging growth company” as of December 31, 2026 and, as a result, we will no longer be able to avail ourselves of certain reduced reporting and disclosure requirementsNew

Risks Related to Ownership of Our Common Stock

1. 63Insiders have substantial control over us and will be able to influence corporate matters
2. 64Our stock price may be volatile, and the value of our common stock may decline
3. 65Sales of our common stock in the public market could cause the market price of our common stock to decline
4. 66If securities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, the market price and trading volume of our common stock could decline
5. 67We do not intend to pay dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock
6. 68Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock
7. 69Our business and operations could be negatively affected as a result of securities litigation against us or if we become subject to stockholder activism, which could cause us to incur significant expenses, hinder the execution of our business and growth strategy and impact the price of our common stockNew