LAW 10-K & 10-Q changes, risk factors and insider trading

In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, “process”) personal information, client information, and other sensitive information, including proprietary and confidential business information, trade secrets, intellectual property, and sensitive third-party data. As a result, we are, or may become, subject to numerous federal, state, local and foreign laws and regulations, guidance, industry standards and other obligations regarding privacy, data protection, information security and processing and protection of personal information and other content, the scope of which is changing, subject to differing interpretations and may be inconsistent among countries, or conflict with other rules. We are also subject to the terms of our internal and externally facing privacy policies and obligations to third parties (including contractual) related to privacy, data protection and information security. We strive to comply with applicable laws, regulations, policies and other legal obligations relating to privacy, data protection and information security. However, the regulatory framework for privacy and data protection worldwide is unclear and evolving rapidly, and is likely to remain uncertain, for the foreseeable future. We expect that there will continue to be new laws, regulations and industry standards concerning privacy, data protection and information security proposed and enacted in various jurisdictions. There is a risk that the requirements of these laws and regulations, or of contractual or other obligations relating to data privacy or information security, will be interpreted or applied in a manner that is, or is alleged to be, inconsistent with our management and processing practices, our policies or procedures or the features of our product offerings. We may face challenges in addressing these requirements and making necessary changes to our policies and practices and may incur significant costs and expenses in an effort to do so.

Outside the United States, an increasing number of laws, regulations, and industry standards apply to privacy, data protection and information security and impose strict requirements for processing personal information, including the European Union’s General Data Protection Regulation, or EU GDPR and the United Kingdom’s version of the GDPRGDPR, or UK GDPR.

In the United States, federal, state, and local governments have enacted numerous privacy, data protection and information security laws, including data breach notification laws, personal information privacy laws, consumer protection laws and other similar laws. For example, California enacted the California Consumer Privacy Act of 2018, or CCPA, which imposes obligations on businesses to which it applies. The CCPA gives California residents rightscertain rights, such as the right to access and require deletion of their personal information, opt out of certain personal information sharing and data processing activities, such as targeted advertising, profiling, and automated decision-making. The exercise of these rights may impact our business and ability to provide our products and services. The CCPA provides for civil penalties for violations (up to $7,500 per intentional violation),violations, as well as a private right of action for data breaches that may increasecertain data breachbreaches. litigation. At least eighteen otherMany states have also passed comprehensive privacy laws and similar laws are being considered in several other states, as well as at the federal and local levels. Certain states also impose stricter requirements for processing certain personal information, including sensitive information, such as conducting data privacy impact assessments. These state laws allow for statutory fines for noncompliance. If we become subject to these or other new state or federal data privacy laws, we may have to comply with additional obligations which may increase legal risk and compliance costs for us and third parties with whom we work.

Our business is reliant on revenue from behavioral, interest-based, or tailored advertising (collectively, “targeted advertising”), but delivering targeted advertisements is becoming increasingly difficult due to changes to our ability to gather information about user behavior through third partythird-party platforms, new laws and regulations, and consumer resistance.

Major 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 purposes. For example, in 2021, Apple began allowing users to more easily opt-out of activity tracking across devices. In February 2022, Google announced similar plans to adopt additional privacy controls on its Android devices to allow users to limit sharing of their data with third parties and reduce cross-device tracking for advertising purposes.

Additionally,For Googleexample, hasFirefox announcedand thatSafari ithave intends to phase outdisabled third-party cookies inby its Chrome browser,default, which could makemakes it more difficult for us to target advertisements. OtherWhile browsers,Google suchhas asannounced Firefoxa temporary halt of its prior plan to similarly disable third-party cookies by default in its Chrome browser, there is no guarantee that Google will not resume its plan and Safari,that haveother alreadybrowsers adoptedwill not adopt similar measures. In addition, legislative proposals and present laws and regulations regulate the use of cookies and other tracking technologies, electronic communications, and marketing. For example, in the EEA and the UK, regulators are increasingly focusing on compliance with requirements related to the targeted advertising ecosystem. European regulators have issued significant fines in certain circumstances where the regulators alleged that appropriate consent was not obtained in connection with targeted advertising activities. It is anticipated that the ePrivacy Regulation and national implementing laws will replace the current national laws implementing the ePrivacy Directive, which may require us to make significant operational changes. In the United States, the CCPA, for example, grants California residents the right to opt-out of a company’s sharing of personal information for targeted advertising purposes as well as a company’s disclosure of personal information in exchange for money or other valuable consideration, and requires covered businesses to honor user-enabled browser opt-out signals from the Global Privacy Control.

If our information technology systems or data, including the personal information and other sensitive information we process, or the information technology systems or data of third parties with whom we work, are or were comprisedcompromised or affected by a cybersecurity incident, we could experience adverse consequences, including, but not limited to, additional costs, loss of revenue, significant liabilities, harm to our brand, material disruption of our operations and other adverse consequences.

In the ordinary course of business, we and the third parties with whom we work, collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit and share (collectively, process) potentially highly sensitive and confidential electronic documentationdocumentation, including for use by our law firm and non-law firm customers in various legal matters, including litigation and governmental investigations and, as a result, we and the third parties with whom we work face a variety of evolving threats. Due to the nature of our services, and the legal and regulatory context in which our services are utilized by customers, our ability to protect the confidentiality, availability and integrity of our customers’ information is critical to our ability to attract and retain customers, generate revenue and the overall success of our business, and our failure or perceived failure to maintain adequate protections could materially affect our business.

Our information technology systems and those of third parties with whom we work are potentially vulnerable to breakdown or other damage or interruption from service interruptions, system malfunction, natural disasters, terrorism, war and telecommunication, electrical failures and security incidents. Cyberattacks and other malicious internet-based activity continue to increase and are increasingly difficult to detect, respond to and mitigate. Other evolving threats to our information systems and data include, but are not limited to, social engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacksattacks, (credential stuffing), attacks, credential harvesting, personnel misconduct or error, and supply-chain attacks.attacks, infrastructure failures or operational errors resulting in breaches of service level agreements. In addition to traditional computer “hackers,” threat actors, internal personnel, sophisticated nation-state and nation-state supported actors and organized criminals now engage in attacks. We have and may in the future experience a security incident or significant vulnerability, including without limitation, those resulting from acts, errors or omissions of our personnel (including those caused by our, or our vendors’, employees or contractors), including inadvertent storage or disclosure of personal information, our confidential information, or our customers’ confidential information, or coding errors, defects and bugs, or accidentally providing a customer with access to or copies of another customer’s confidential information.information, or unauthorized and exfiltration of customer data generally. Ransomware and cyber extortion attacks, including those perpetrated by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and can lead to significant interruptions in our operations, loss of data and income, leaks and public disclosures of sensitive information, extortion of our customers, reputational harm, and diversion of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. It may be difficult and/or costly to detect, investigate, mitigate, contain, and remediate a security incident. Our efforts to do so may not be successful. Actions taken by us or the third parties with whom we work to detect, investigate, mitigate, contain, and remediate a security incident could result in outages, data losses, and disruptions of our business. Threat actors may also gain access to other networks and systems after a compromise of our networks and systems. For example, threat actors may use an initial compromise of one part of our environment to gain access to other parts of our environment, or leverage a compromise of our networks or systems to gain access to the networks or systems of third parties with whom we work, such as through phishing or supply chain attacks. Additionally, our employees are routinely working remotely, which may pose additional data security risks to our information technology systems and data, as more of our employees utilize network connections, computers, and other devices outside our premises or network, including while working at home, while in transit and in public locations.

Future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.technologies, especially during rapid innovation cycles where insufficient testing is performed on new systems and technologies, 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 program.

We have incorporated artificial intelligence, or AI, including generative artificial intelligence, or generative AI, features into our product and services as well as our internal operations. The incorporation of generativeAI AItechnologies has the potential to result in adverse effects to our financial condition, results or reputation. The use of generative AI technologytechnologies and processes at scale is relatively new and may lead to challenges, concerns and risks that are significant or that we may not be able to predict, especially if our use of these technologies in our products and services becomes more important to our operations over time. Generative AI features may be difficult to deploy successfully due to operational issues inherent to the nature of such technologies, including the development and maintenance of the technology used, and our customers’ reluctance or failure to adopt or implement our new products and features as intended.

Additionally, sensitive data of the Company or our customers could be leaked, disclosed, or revealed as a result of or in connection with our employees’, personnel’s, or vendors’ use of generative AI technologies. Any sensitive information (including confidential, competitive, proprietary, or personal information) that we input into a third-party generative AI / machine learning, or ML, platform could be leaked or disclosed to others, including if sensitive information is used to train the third parties’ AI/ML model. Additionally, where an AI/ML model ingests personal information and makes inferences using such data, those technologies may reveal other personal or sensitive information generated by the model. Moreover, AI/ML models may create flawed, incomplete, or inaccurate outputs, some of which may appear correct. This may happen if the inputs that the model relied on were inaccurate, incomplete or flawed (including if a bad actor “poisons” the AI/ML with bad inputs or logic), or if the logic of the AI/ML is flawed (a so-called “hallucination”). We may use AI/ML outputs to make certain decisions. Due to these potential inaccuracies or flaws, the model could be biased and could lead us to make decisions that could bias certain individuals (or classes of individuals), and adversely impact their rights, employment, and ability to obtain certain pricing, products, services, or benefits.

Our employees and personnel use generative AI technologies to perform their work, and the disclosure and use of personal information in generative AI technologies is subject to various privacy laws and other privacy obligations. Governments have passed and are likely to pass additional laws regulating generativeAI AI.technologies. Our use of this technology could result in additional compliance costs, regulatory investigations and actions, and lawsuits. If we are unable to use generative AI, it could make our business less efficient and result in competitive disadvantages.

The development and use of AI/ML technologies presents various privacy and security risks that may impact our business. AI/ML technologies are subject to privacy, data protection and information security laws, as well as increasing regulation and scrutiny. Further, countries and states are applying their data and consumer protection laws to AI technologies, and particularly generative AI and interactive chatbots. Several jurisdictions around the globe, including Europe and certain U.S. states, have proposed, enacted, or are considering laws governing the development and use of AI/ML, technologies, such as the EU’s AI Act.Act, the Colorado Artificial Intelligence Act, California Bot Disclosure Law, the Utah Artificial Intelligence Policy Act, and the CCPA regulations on automated decision-making technology. We expect other jurisdictions will adopt similar laws. Additionally, certain privacy laws extend rights to consumers (such as the right to delete certain personal information) and regulate automated decision making, which may be incompatible with our use of AI/ML. technologies. These obligations may make it harder for us to conduct our business using AI/ML, technologies, lead to regulatory fines or penalties, require us to change our business practices, retrain our AI/ML, technologies, or prevent or limit our use of AI/ML. technologies. For example, the FTC has required other companies to turn over (or disgorge) valuable insights or trainings generated through the use of AI/ML technologies where they allege the company has violated privacy and consumer protection laws. If we cannot use AI/ML technologies or that use is restricted, our business may be less efficient, or we may be at a competitive disadvantage.

We make numerous statements online and in our marketing materials describing our use and integration of generativeAI AItechnologies in our products and services. Although we endeavor to be accurate with our public statements and documentation, we may at times fail to do so or be alleged to have failed to do so. Our statements regarding our AI-supported features and use of generativeAI AItechnologies can subject us to potential government or legal action if they are found to be deceptive, unfair, or misrepresentative of our actual practices. Should any of these statements prove to be untrue or be perceived as untrue, even though circumstances beyond our reasonable control, we may face litigation, disputes, claims, investigations, inquiries or other proceedings which could adversely affect our business, reputation, results of operations and financial condition.

We have experienced substantial growth in our business, including significant growth in headcount, our number of customers, usage, and amount of data delivered across our product offerings, since inception. For example, our revenue was $144.8 million and $138.1 million for the years ended December 31, 2024 and 2023, respectively. You should not rely on the revenue growth reflected by any prior quarterly or annual period as an indication of our future performance. Although our revenues have increased year over year, our rate of revenue growth has declined from prior periods and our quarterly revenue within individual product offerings has fluctuated. Our revenue growth rate may continue to decline, and our revenue may decline, in the future as a result of a variety of factors, including the maturation of our business, increased competition, negative media or industry or financial analyst commentary regarding us or our product offerings, changes in personnel, changes to technology, a decrease or periodic fluctuations in the growth of our overall market, changes in the volume of legal matters and other organizational changes affecting our customer base and resulting in litigation, or our failure, for any reason, to continue to take advantage of growth opportunities. Overall growth of our revenue depends on a number of factors, including our ability to:

•continueexpand to develop newthe functionality within our product offerings and successfully further optimize our product offerings, including continued innovation of our artificial intelligenceAI system for legal documents;

•product development, including investments in our development team and the development of new product offerings and functionality for our existing product offerings and in the protection of our intellectual property rights related to our product development;

These investments may not be successful on the timeline we anticipate or at all and may not result in increased revenue growth. If we are unable to maintain or increase our revenue at a rate sufficient to offset the expected increase in our costs, our business, financial position and results of operations will be harmed, and we may not be able to achieve or maintain profitability over the long term. Additionally, we have encountered, and may in the future encounter, risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as unforeseen operating expenses, difficulties, complications, delays and other known or unknown factors that may result in losses in future periods. If our revenue growth does not meet our expectations in future periods, particularly relative to expected increases in our operating expenses, our business, financial position and results of operations may be harmed, and we may not achieve or maintain profitability in the future.

Our business depends on customers increasing their useusage of our product offerings and any loss of customers or decline in their use of our product offerings could harm our business.

Our ability to grow and generate incremental revenue depends, in part, on our ability to maintain and grow our relationships with existing customers and to have them increase their usage of our product offerings. Customers are charged in part based on their usage of our product offerings. If our customers do not increase their usage of our product offerings, our revenue may decline and our results of operations may be harmed. Most of our customers do not have long-term contractual financial commitments to us and, therefore, most of our customers may reduce or cease their use of our product offerings at any time. Customers may terminate or reduce their use of our product offerings for any number of reasons, including the settlement or other resolution of legal matters, reductions in the volume of major legal matters experienced, including as a result of reduced levels of enforcement by certain federal agencies under President Trump, delays in the advancement of ongoing litigation in the Federal courts as a result of the recent or future shutdowns of the U.S. government, customer budget constraints, customer satisfaction or negative perceptions as to the reliability of our product offerings relative to traditional methods of performing legal services, changes in our customers’ underlying businesses and financial conditions, pricing changes, legal industry trends away from litigation toward alternative forms of dispute resolution, negative media or industry or financial analyst commentary regarding us or our product offerings, changes in personnel, competitive conditions and general economic conditions. The loss of customers or reductions in their usage of our product offerings may each have a negative impact on our business, results of operations and financial condition. In addition, even if our customers expand their usage of our product offerings, we cannot guarantee that they will maintain those usage levels for any meaningful period of time.

Customers under usage-based contracts can cancel their contracts or reduce their usage at any time. The loss of customers or reductions in their usage of our product offerings may each have a negative impact on our business, results of operations and financial condition. Because awe significantderive majoritysubstantially all of our revenue is directly correlated withfrom our customers’ usage of our product offerings, which in turn is dependent on the timing of and activity driven by litigation, investigations and other legal matters for which our product offerings are used, our operating results have fluctuated significantly in the past in connection with the inception and conclusion of large legal matters, and we expect such fluctuations to continue for the foreseeable future. In particular, usage of DISCO Review, our AI-powered document review offering, decreases and increases more significantly with the completion and inceptioninception, respectively, of litigation, investigations and other legal matters than with our other offerings, and as a result can have a material impact on our quarter-to-quarter revenue fluctuations, even though revenues from such offering currently constitute a small proportion of our overall annual revenues.

•our customers’ development of their own proprietary solutions; and

•our inability to release enhanced versions of our product offerings on a timely basis.basis;

Customers may find our product offerings to be complicated to use and it may not be easy to maximize the value of our product offerings without proper training. Moreover, we have designed our platform to allow for use by law firms and legal services providers who are not direct customers. If our customers or such third-partiesthird parties perceive that our product offerings are too complex or time-consuming to learn and use, customer perceptions of our company and our product offerings may be impaired, our reputation and brand may suffer and customers may choose not to use our product offerings or increase their purchases of our offerings. Further, incorrect or improper use of our product offerings by our customers or their external legal services providers may result in negative legal outcomes and potentially subject such parties to claims of malpractice, which would adversely affect our reputation and customer confidence in our product offerings.

We generate substantially all of our revenue from our customers’ actual usage of our product offerings. Customers generally do not commit to purchase a specific amount of usage on our product offerings and their usage can fluctuate based on the number and nature of legal matters they have at any particular time. As a result, our revenue and other financial results can fluctuate from period to period given the inherent unpredictability of the timing, duration and scope of legal casework. We also offer our customers the option to enter into subscriptions based on committed minimum usage on an annual or multi-year basis, which represented 9% and 11% of our revenue in each of the years ended December 31, 20242025 and 2023.2024, respectively. In addition, we generate revenue from a range of professional services aimed at accelerating the time-to-value for our customers.

Our customers include a diverse set of enterprises across a broad set of industries, as well as law firms, legal services providers of all sizes and government organizations. While we serve customers across many different industries, the way in which lawyers and legal professionals use our product offerings is similar regardless of the specific industry in which each customer operates. This commonality has created efficiencies in our sales and marketing and research and development activities because we do not need to tailor our sales and marketing activities to a wide range of different customer use cases. We define a customer as an entity that we have a contract with and from whom we have recognized revenue during the preceding month. Legal departments that use our product offerings and use many law firms across their legal matters, as well as law firms and service providers that use our product offerings for multiple clients, are generally treated as one customer. However, in some cases where they have separate billing terms, we may count these as multiple customers. As of December 31, 2024,2025, we had 1,4781,549 customers, increasing from 1,4631,478 customers as of December 31, 2023.2024. As of December 31, 20242025 we had 315330 large customers, defined as customers with revenue in excess of $100,000 over the previous 12-month period, increasing from 289315 large customers as of December 31, 2023.2024. Large customers accounted for approximately 76%, and 75%76% of our revenue for each of the years ended December 31, 20242025 and 2023, respectively.2024.

As of December 31, 2024,2025, we had $52.8$19.7 million of cash and cash equivalents and $76.4$94.9 million of short-term investments. We generated revenue of $144.8$156.8 million and $138.1$144.8 million in the years ended December 31, 20242025 and 2023,2024, respectively, representing a period-over-period growth of 5%.8%. Our net loss was $55.8$44.4 million and $42.2$55.8 million for the years ended December 31, 20242025 and 2023,2024, respectively. We generated Adjusted EBITDA of $(18.710.2) million and $(25.918.7) million for the years ended December 31, 20242025 and 2023,2024, respectively. See the section titled “—Non-GAAP Financial Measure” for the definition of Adjusted EBITDA, as well as a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure stated in accordance with GAAP.

Macroeconomic and Industry Considerations

Unfavorable conditions in the economy, both in the United States and abroad, may negatively affect the growth of our business and our results of operations. For example, negative conditions in the general economy both in the United States and abroad, including conditions resulting from fluctuations in inflation and interest rates, the potential imposition of tariffs in the United States and abroad, and the Russia-Ukraine war and conflict in the Middle East, have led to economic uncertainty globally. Historically, during periods of economic uncertainty and downturns, businesses may slow spending on information technology, which may impact our business and our customers’ businesses.

The effect of macroeconomic and legal industry conditions may not be fully reflected in our results of operations until future periods. If, however, economic uncertainty increases orincreases, the global economy worsens,worsens or unfavorable conditions in the legal industry persist or worsen, our business, financial condition and results of operations may be harmed. For further discussion of the potential impacts of macroeconomic events and legal industry conditions on our business, financial condition, and operating results, see the section titled “Risk Factors”.

Our success depends in part on our ability to maintain and advance our innovation and brand. We have a strong history of innovation, demonstrated by our DISCO Hold, DISCO Request, DISCO Ediscovery, DISCO Review and DISCO Case Builder offerings, and have built a research and development process that reliably produces features for these product offerings. We intend to continue combining our deep legal domain expertise and commitment to world-class software engineering to continue delivering features and introducing new product offerings to address more areas of legal work, such as our ediscovery chatbot, Cecilia, which was released in the fourth quarter of 2023 in the United States and in the third quarter of 2024 in Europe.Cecilia. Our future success is dependent on our ability to successfully develop, market and sell our product offerings to both new and existing customers.

We believe that our technology, and especially our approach to automation and AI, is applicable to a wider range of legal processes outside of our current core offerings. We intend to leverage our technology to introduce further offerings that increase lawyer productivity across more and more areas of legal work over time. We may expend significant resources in the development of additional offerings.offerings, Forsuch example,as our ediscovery chatbot, Cecilia, which was released in the fourth quarter of 2023 in the United States and in the third quarter of 2024 in Europe.Cecilia. Our ability to successfully develop, market and sell new offerings will depend on a number of factors, including the availability of capital to invest in innovation, our customers’ satisfaction with such offerings, competition, pricing and overall changes in our customers’ spending levels.

Our market is global and we believe there is a significant opportunity to expand our international customer base, particularly in the United Kingdom, and further expand our operations internationally, particularly in India. In the year ended 2024,December 31, 2025, less than 10% of our revenue was generated by customers outside of the United States. Operationally, we expect to continue to expand our global employee headcount in India.

In each of the years ended December 31, 20242025 and 2023,2024, usage-based revenue represented 91% and 89% of total revenuerevenue, respectively, and subscription revenue fees represented 9% and 11% of total revenue.revenue, respectively.

Research and development expenses consist primarily of personnel-related costs for our development team, including salaries, benefits, bonuses, stock-based compensation expenses and allocated overhead costs. Research and development expenses also include contractor or professional services fees and third-party cloud infrastructure expenses incurred in developing our product offerings. In the near term, weWe expect that our research and development expenses will increase in absolute dollars but may fluctuate as a percentage of our revenue over time. In addition, research and development expenses that qualify as capitalized software development costs are capitalized, the amount of which may fluctuate significantly from period to period.

Sales and marketing expenses consist primarily of personnel-related costs directly associated with our sales and marketing staff, including salaries, benefits, bonuses, commissions, stock-based compensation and allocated overhead costs. Sales and marketing expenses also include advertising costs and other expenses associated with our marketing and business development programs. In addition, sales and marketing expenses consist of travel-related expenses, software services dedicated for use by our sales and marketing organizations and outside services contracted for sales and marketing purposes. We expect that our sales and marketing expenses will increase in absolute dollars and will continue to be our largest operating expense for the foreseeable future as we grow our business. Our sales and marketing expenses may fluctuate as a percentage of our revenue over time.

General and administrative expenses consist of personnel-related costs associated with our finance, legal, human resources and administrative personnel, including salaries, benefits, bonuses, stock-based compensation and allocated overhead costs. General and administrative expenses also include external legal, accounting and other professional services fees, software services dedicated for use by our general and administrative functions, insurance and other corporate expenses. InExcluding the nearimpact term,of the stockholder litigation, we expect that our general and administrative expenses will remain relatively consistentincrease in absolute dollars but may fluctuate as a percentage of total revenue from period to period.

Impairment of intangible asset and capitalized development consists of a one-time non-cash full impairment charge of our primary law intangible asset and the related capitalized software development costs in 2024 as it iswas no longer probable of being completed.

Interest and Other Income (Expense),Income, Net

OtherInterest incomeand (expense),other income, net consists primarily of interest income, income related to non-operating activities, interest expense, gains and losses from foreign currency transactions and remeasurements of foreign currency-denominated monetary assets and liabilities to the U.S. dollar.

Total revenue increased by $6.8$12.0 million, or 5%,8%, for the year ended December 31, 20242025 compared to the same period in 2023.2024. Revenue related to new customers added since December 31, 20232024 contributed $11.3$13.7 million, which was partially offset by a $4.6$1.7 million decrease in revenue from customers that existed as of December 31, 2023.2024. The change in revenue from existing customers was driven by decreasesa $3.0 million decrease in usage of our product offeringsofferings, partially offset by severalcontingent revenue recognized of $1.3 million as one of our existingcustomers customers.under a contingent arrangement experienced a favorable resolution to their legal matter.

Revenue generated from our software product offerings increased by $7.9$13.9 million, or 7%,12%, for the year ended December 31, 20242025 compared to the same period in 20232024 due to increases in usage of our software product offerings. Revenue generated from our services product offerings decreased $1.1$1.9 million, or 4%,8%, for the year ended December 31, 20242025 compared to the same period in 2023.2024. This change was driven by decreases in usage of our services product offerings by several of our existing customers, particularly within managedDISCO review.Review.

Total cost of revenue increased by $2.5$2.0 million, or 7%,5%, for the year ended December 31, 20242025 compared to the same period in 2023.2024. This change was primarily driven by a $1.5$2.2 million increase in costs for cloud hosting as a result of increased usage of our software product offerings and a $1.7$1.5 million increase in salary and benefits costs. ThisThese increasechanges waswere partially offset by a $0.9$2.0 million decrease in outsourced staffing vendor fees.

Research and development expenses decreasedincreased by $0.1$5.1 million, or less than 1%,10%, for the year ended December 31, 20242025 compared to the same period in 2023.2024. The change was primarily driven by aan decreaseincrease of $0.4$5.3 million in personnel costs, including stock-based compensation, as a result of the expansion of our operations to lower-cost international locations, and a $1.5 million decrease in nonrecurring restructuring charges related to our reductions in force in January and May 2023. These decreases were partially offset by a reduction$0.3 million increase in capitalized software development of $1.5 million and an increase in software costs of $0.5 million.development.

Sales and marketing expenses decreased by $6.8$1.3 million, or 10%,2%, for the year ended December 31, 20242025 compared to the same period in 2023.2024. The change was primarily related to a decrease of $4.2$0.9 million in marketing expenses and a $0.3 million decrease in professional services costs. In addition, personnel costs,costs decreased $0.2 million, including stock-based compensation and variable compensation, for our sales personnel. In addition, marketing expenses decreased $1.0 million and software related costs decreased $0.5 million. Further, $0.6 million of the decrease was also due to nonrecurring restructuring charges related to our reductions in force in January and May 2023.

General and administrative expenses increased by $7.8$7.9 million, or 24%,19%, for the year ended December 31, 20242025 compared to the same period in 2023.2024. This change was primarily attributable to aan $7.9increase of $7.4 million increase in personnel costs, including stock-based compensation, as a result of the $7.7 million reversal of stock-based compensation related to the 10-year performance award previously granted to our former CEO (the “CEO Performance Award”) that was cancelled in 2023. Additionally, professional services increasedcosts $1.3primarily million, of which $0.7 million was duerelated to legal fees relatedand toa legal loss contingency accrual for the stockholdersecurities litigation. In addition, personnel costs increased $2.1 million, including stock-based compensation. These increases were partially offset by a $0.6$0.8 million decrease in insurance expense and a $0.4$0.3 million decrease in nonrecurringacquisition restructuringrevaluation charges related to our reductions in force in January and May 2023.expense.

During the fourth quarter of the year ended December 31, 2024, we identified a triggering event related to our primary law intangible asset,asset and the capitalized software development costs associated with the integration of our primary law intangible asset into our product offeringsofferings, as it was no longer probable of being completed. As the fair value of the primary law intangible asset and its related capitalized development was determined to be zero given no future cash flows were identified, we recorded a full non-cash impairment charge on our primary law intangible asset of $14.0 million and also recorded a $1.2 million non-cash impairment charge related to all capitalized software development costs associated with the integration. We recorded no such impairment charges in the year ended December 31, 2023.

We report our financial results in accordance with generally accepted accounting principles, or GAAP. However, management believes that Adjusted EBITDA, a non-GAAP financial measure, provides investors with additional useful information in evaluating our performance. We define Adjusted EBITDA as net loss, adjusted to exclude: depreciation and amortization expense; income tax provision; interest and other, net; stock-based compensation expense; payroll tax expense on employee stock transactions; restructuring charges; acquisition revaluation expense; expenses associated with stockholder litigation; impairment of intangible asset and capitalized development; and other one-time, non-recurring items, when applicable.

Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Some of these limitations include that: (i) it does not properly reflect capital commitments to be paid in the future; (ii) although depreciation and amortization expense is a non-cash charge, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures; (iii) it does not consider the impact of stock-based compensation expense and payroll tax expense on employee stock transactions; (iv) it does not reflect other non-operating expenses, including interest expense; (v) it does not consider the impact of any contingent consideration liability valuation adjustmentsadjustment; (v) it does not reflect other non-operating expenses, including interest expense; (vi) it does not consider the impact of expenses associated with the stockholder litigation; (vii) it does not consider the impact of impairment charges; and (viviii) it does not reflect tax payments that may represent a reduction in cash available to us. In addition, our use of Adjusted EBITDA may not be comparable to similarly titled measures of other companies because they may not calculate Adjusted EBITDA in the same manner, limiting its usefulness as a comparative measure. Because of these limitations, when evaluating our performance, you should consider Adjusted EBITDA alongside other financial measures, including our net loss and other results stated in accordance with GAAP. We expect Adjusted EBITDA to improve over the long term as we achieve greater scale in our business and efficiencies in our operating expenses.

We have financed operations primarily through customer payments and net proceeds from sales of equity securities, including our IPO in July 2021. As of December 31, 2024,2025, our principal sources of liquidity were cash and cash equivalents and short-term investments, totaling $52.8$19.7 million and $76.4$94.9 million, respectively. Cash equivalents include highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less. Short-term investments consist of highly-rated U.S. Treasury securities and corporate debt securities with maturities of more than three months but less than one year at the date of purchase. We believe our existing cash and cash equivalents and short-term investments will be sufficient to fund anticipated cash requirements for the next 12 months. We believe we will meet our longer-term expected future cash requirements primarily from a combination of cash flow from operating activities and available cash and cash equivalents and short-term investments. We may also engage in equity or debt financings to secure additional funds.

Our future capital requirements will depend on many factors, including our revenue growth rate, usage of our product offerings, billing frequency, the timing and extent of spending to support further sales and marketing and research and development efforts, and the continuing market acceptance of our product offerings. Although fluctuations in general macroeconomic and industry conditions, including conditions resulting from fluctuations in inflation and interest rates, the potential imposition of tariffs in the United States and abroad, the recent U.S. government shutdown, the executive orders issued by President Trump, and the effects of global events, such as the Russia-Ukraine war and conflict in the Middle East, have not materially impacted our liquidity to date, we plan to continue to evaluate aspects of our spending, including capital expenditures, discretionary spending,spending and strategic investments throughout 2025.2026. We have considered the impacts of these factors on our liquidity and capital resources to date, and we do not currently expect them to impact our ability to meet future liquidity needs.

Net cash used in operating activities for the year ended December 31, 20242025 was $8.7$14.9 million, aan decreaseincrease of $16.8$6.2 million from net cash used in operating activities of $25.5$8.7 million for the year ended December 31, 2023.2024. The change in cash flow used in operations was primarily due to ana increasedecrease in net loss of $13.6 millionloss, offset by an impairment charge ofin $15.2 million related to our primary law intangible asset2024 and theworking capitalizedcapital software development costs associated with the integration of such asset into our product offerings. Additional offsets include the change in stock-based compensation which increased $6.1 millioncharges, primarily related to theaccounts cancellationreceivable due to timing of thecollection CEOfrom Performanceour Awardcustomers, inaccrued 2023legal loss, and the changeinsurance in accountsrecoverable receivable which increased $8.5 million related to increasedthe collectionsaccrued fromlegal customers.loss.

Net cash used in investing activities for the year ended December 31, 20242025 was $78.0$18.2 million, ana increasedecrease of $58.0$59.8 million from net cash used in investing activities of $20.0$78.0 million for the year ended December 31, 2023.2024. The change in cash used in investing activities was primarily related to purchases of short-term investments of $87.9 million. Thisan increase in cash used was partially offset by maturities of short-term investments of $12.7$178.3 million andduring athe reductionyear ofended purchasesDecember in31, property, equipment, and capitalized development costs of $2.1 million.2025. This was furtherpartially offset by cashan paidincrease of $118.2 million in 2023purchases forof short-term investments during the primaryyear lawended intangibleDecember asset31, of $14.0 million and $1.2 million for the acquisition of legal workflow products from Congruity360, LLC (“Congruity”).2025.

Net cash usedprovided inby financing activities for the year ended December 31, 20242025 was $20.0 million,nominal, a change of $21.9$20.0 million from net cash providedused byin financing activities of $1.9$20.0 million for the year ended December 31, 2023.2024. TheThis change in cash flows was primarily related to cash paid for the 2024 share repurchase program of $20.1 million, as well as $0.5 million in cash paid in 2024 for the acquisition of legal workflow products from Congruity. Additionally, there was a decrease in proceeds from exercises of stock options of $0.5 million due to a decrease in option exercise activity, and a decrease in net proceeds received from the issuance of common stock under the ESPP of $0.9 million.

Recent Accounting Pronouncements Adopted During the Current Year

See Recently“Accounting Pronouncements Adopted AccountingDuring Pronouncementsthe Current Year” in Note 2, “Summary of Significant Accounting Policies,” in our consolidated financial statements of this Annual Report on Form 10-K for more information.

The EU GDPR and UK GDPR are wide-ranging in scope and impose numerous requirements, including requiring that consent of individuals to whom the personal information relates is obtained in certain circumstances, requiring additional disclosures to individuals regarding data processing activities, requiring that appropriate safeguards are implemented to protect the security and confidentiality of personal information, creating mandatory data breach notification requirements in certain circumstances and requiring that certain measures (including contractual requirements) are put in place when engaging third-party data processors. The EU GDPR and UK GDPR,GDPR permit data protection authorities to impose large penalties for violations of the regulation,regulations, including potential fines of up to €20 million under the EU GDPR, £17.5 million under the UK GDPR or, in each case, 4% of annual global revenue, whichever is greater; or private litigation related to processing of personal information brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests. The EU GDPR and UK GDPR also provide individuals with various rights in respect of their personal information, including rights of access, erasure, portability, rectification, restriction and objection and confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities (including group actions), seek judicial remedies and obtain compensation for damages resulting from violations of the EU GDPR and UK GDPR. The EU GDPR requirements may apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries, including employee information.

If we, or the third parties with whom we work, experience a security incident or are perceived to have experienced a security incident, we may experience material adverse consequences, which could include: government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; breach of our customer contracts, restrictions on processing information (including personal information); litigation (including class action claims); indemnification obligations; negative publicity; reputational harm; loss of customers; monetary fund diversions; diversion of management attention; restrictrestriction of our ability to engage with new customers; interruptions in or the cessation of our operations (including availability of data); financial loss; competitive disadvantage; and other similar harms. Security incidents and material attendant consequences may prevent or cause customers to stop using our services, deter new customers from using our services, and negatively impact our ability to grow and operate our business. We could be required to fundamentally change our business activities and practices or modify our product offerings and/or platform capabilities, which could have an adverse effect on our business. Additionally, there can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages and in some cases our customer agreements do not limit our remediation costs or liability with respect to data breaches. We cannot be sure that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.

We make numerous statements online and in our marketing materials describing our use and integration of AI technologies in our products and services. Although we endeavor to be accurate with our public statements and documentation, we may at times fail to do so or be alleged to have failed to do so. Our statements regarding our AI-supported features and use of AI technologies can subject us to potential government or legal action if they are found to be deceptive, unfair, or misrepresentative of our actual practices. Should any of these statements prove to be untrue or be perceived as untrue, even thoughif due to circumstances beyond our reasonable control, we may face litigation, disputes, claims, investigations, inquiries or other proceedings which could adversely affect our business, reputation, results of operations and financial condition.

Our ability to grow and generate incremental revenue depends, in part, on our ability to maintain and grow our relationships with existing customers and to have them increase their usage of our product offerings. If our customers do not increase their usage of our product offerings, our revenue may decline and our results of operations may be harmed. Most of our customers do not have long-term contractual financial commitments to us and, therefore, may reduce or cease their use of our product offerings at any time. Customers may terminate or reduce their use of our product offerings for any number of reasons, including the settlement or other resolution of legal matters, reductions in the volume of major legal matters experienced,matters, including as a result of reduced levels of enforcement by certain federal agencies under President Trump, delays in the advancement of ongoing litigation in the federal courts as a result of the recent or future shutdowns of the U.S. government, customer budget constraints, customer satisfaction or negative perceptions as to the reliability of our product offerings relative to traditional methods of performing legal services, changes in our customers’ underlying businesses and financial conditions, pricing changes, legal industry trends away from litigation toward alternative forms of dispute resolution, negative media or industry or financial analyst commentary regarding us or our product offerings, changes in personnel, competitive conditions and general economic conditions. The loss of customers or reductions in their usage of our product offerings may each have a negative impact on our business, results of operations and financial condition. In addition, even if our customers expand their usage of our product offerings, we cannot guarantee that they will maintain those usage levels for any meaningful period of time.

•the cyclical nature of the e-discoveryediscovery industry;

We derive a substantial portion of our revenue from sales to our top 10% of customers. As a result, our revenue could fluctuate materially and could be and has in the past been materially and disproportionately impacted by purchasing decisions of these customers or any other significant future customer. Because a significant majority of our revenue is directly correlated with our customers’ usage of our product offerings, which in turn is dependent on the timing of and activity driven by litigation, investigations and other legal matters for which our product offerings are used, our operating results have fluctuated significantly in the past in connection with the inception and conclusion of large legal matters, and we expect such fluctuations to continue for the foreseeable future. In particular, usage of DISCO Review, our AI-powered document review offering, decreases and increases more significantly with the completion and inceptioninception, respectively, of litigation, investigations and other legal matters than with our other offerings, and as a result can have a material impact on our quarter-to-quarter revenue fluctuations, even though revenues from such offering currently constitute a small proportion of our overall annual revenues. Any of our significant customers may decide to purchase less than they have in the past, may alter their purchasing patterns at any time with limited notice, may cease usage of our product offerings following the conclusion of a matter, or may decide not to continue to use our product offerings at all, any of which could cause our revenue to decline and adversely affect our financial condition and results of operations. If we do not further diversify our customer base, we will continue to be susceptible to risks associated with customer concentration.

We seek to grow our partner ecosystem as a way to grow our business. We plan to continue to establish and maintain similar strategic relationships with law firms and other legal services providers. Our relationshiprelationships with these entities are an important aspect of our business. Our future growth in revenue and ability to achieve and sustain profitability depends in part on our ability to identify, establish and retain successful strategic partner relationships in the United States and internationally, which requires significant time and resources and involves significant risk. In order to develop and expand our distribution channel, we must develop and improve our processes for partner introduction and training. If we do not succeed in identifying suitable strategic partners or maintain our relationships with such partners, our business, operating results and financial condition may be adversely affected.

New technology such as generic large language models (“LLMs”),models, generative AI and general-purpose agents are evolving rapidly and may significantly alter how technology is developed, distributed and consumed. In the future, we may face increased competition from these offerings evolving to address a broad range of business needs. As we attempt to sell our product offerings to new and existing customers, we may need to demonstrate that our product offerings are superior to other available solutions, including existing and any new competitors.

A component of our growth strategy involves the further expansion of our operations and customer base internationally, particularly in India and the United Kingdom, respectively. For the three months ended MarchJune 31,30, 2026, the percentage of revenue generated from customers outside the United States was 11%12% of our total revenue. We are continuing to adapt to and develop strategies to address international markets but there is no guarantee that such efforts will have the desired effect. In connection with such expansion, we may face difficulties, including costs associated with expansion, varying seasonality patterns, potential adverse movement of currency exchange rates, longer payment cycle difficulties in collecting accounts receivable in some countries, increased management, travel, infrastructure and legal compliance costs associated with having operations and developing our business in multiple jurisdictions, different technical standards, existing or future regulatory and certification requirements and required features and functionality, political and economic conditions and uncertainty in each country or region in which we operate and general economic and political conditions and uncertainty around the world, tariffs and trade barriers, a variety of regulatory or contractual limitations on our ability to operate, adverse tax events, reduced protection of intellectual property rights in some countries and a geographically and culturally diverse workforce and customer base. In addition, our product offerings have been developed with a focus on the practice of law in the United States and the rules and regulations applicable domestically in the United States and we may be required to expend substantial time and resources to update our product offerings or develop new applications to address alternative systems of legal resolution in other jurisdictions. Furthermore, in certain jurisdictions in which we seek to enter, the rules and regulations governing the practice of law and e-discovery may impose additional obligations or restrictions on our operations. Failure to overcome any of these difficulties could harm our business.

As of MarchJune 31,30, 2026, we had 1516 granted U.S. patents and 2021 pending U.S. patent applications related to our platform and its technology. We cannot assure you that any of our patent applications will result in the issuance of a patent or that the examination process will not require us to narrow our claims. Any patents that issue from any patent applications may not give us the protection that we seek or may be challenged, invalidated or circumvented. Any patents that may issue in the future from our pending or future patent applications may not provide sufficiently broad protection and may not be valid and enforceable in actions against alleged infringers. Any patents we have obtained or may obtain in the future may be found to be invalid or unenforceable in light of recent and future changes in the law, or because of technology developed prior to the inventions we have sought to patent or because of defects in our patent prosecution process.

Based on the number of shares outstanding as of MarchJune 31,30, 2026, our officers, directors and their associated investment funds collectively beneficially owned a significant proportion of our outstanding common stock. As a result, these stockholders are able to exercise significant influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or its assets. This concentration of ownership will limit the ability of other stockholders to influence corporate matters and may cause us to make strategic decisions that could involve risks to you or that may not be aligned with your interests. This control may adversely affect the market price of our common stock.

In addition, there were 0.2 million shares of common stock issuable upon the exercise of options and 8.27.7 million shares of common stock issuable upon the vesting and settlement of restricted stock units and performance-based restricted stock units outstanding as of MarchJune 31,30, 2026. We have registered all of the shares of common stock issuable upon the exercise of outstanding options or other equity incentives we may grant in the future, for public resale under the Securities Act. The shares of common stock will become eligible for sale in the public market to the extent such options are exercised.

Further, as of MarchJune 31,30, 2026, holders of a substantial number of shares of our capital stock had rights, subject to some conditions, to require us to file registration statements covering the sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.

We generate substantially all of our revenue from our customers’ actual usage of our product offerings. Customers generally do not commit to purchase a specific amount of usage on our product offerings and their usage can fluctuate based on the number and nature of legal matters they have at any particular time. As a result, our revenue and other financial results can fluctuate from period to period given the inherent unpredictability of the timing, duration and scope of legal casework. We also offer our customers the option to enter into subscriptions based on committed minimum usage on an annual or multi-year basis, which represented 9% and 10%8% of our revenue for each of the three and six months ended MarchJune 31,30, 20262026, and 10% and 11% for the three and six months ended June 30, 2025, respectively. In addition, we generate revenue from a range of professional services aimed at accelerating the time-to-value for our customers.

As of MarchJune 31,30, 2026, we had $17.6$10.9 million of cash and cash equivalents and $85.4$90.5 million of short-term investments. We generated revenue of $41.9$43.1 million and $36.7$38.1 million in the three months ended MarchJune 31,30, 2026 and 2025, respectively, representing aperiod-over-period growth of 13%. We generated revenue of $85.0 million and $74.8 million in the six months ended June 30, 2026 and 2025, respectively, representing period-over-period growth of 14%. Our net loss was $9.6$8.7 million and $11.4$10.8 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $18.3 million and $22.2 million for the six months ended June 30, 2026 and 2025, respectively.

We generated Adjusted EBITDA of $(3.53.4) million and $(5.12.7) million in the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $(6.9) million and $(7.8) million in the six months ended June 30, 2026 and 2025, respectively. See the section titled “—Non-GAAP Financial Measure” for the definition of Adjusted EBITDA, as well as a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure stated in accordance with GAAP.

Our market is global and we believe there is a significant opportunity to expand our international customer base, particularly in the United Kingdom, and further expand our operations internationally, particularly in India. In the three and six months ended MarchJune 31,30, 2026, 12% and 11% of our revenue was generated by customers outside of the United States.States, respectively. Operationally, we expect to continue to expand our global employee headcount in India.

For each of the three and six months ended June 30, 2026, usage-based revenue represented 92% of total revenue and subscription revenue fees represented 8% of total revenue. In the three and six months ended MarchJune 31, 2026 and30, 2025, usage-based revenue represented 91%90% and 90%89% of total revenue, respectively, and subscription revenue fees represented 9%10% and 10%11% of total revenue, respectively.

Research and development expenses consist primarily of personnel-related costs for our development team, including salaries, benefits, bonuses, stock-based compensation expenses and allocated overhead costs. Research and development expenses also include contractor or professional services fees and third-party cloud infrastructure expenses incurred in developing our product offerings. We expect that our research and development expenses will remainincrease relatively flatmodestly in absolute dollars but maywill fluctuatedecline as a percentage of our revenue over time. In addition, research and development expenses that qualify as capitalized software development costs are capitalized, the amount of which may fluctuate significantly from period to period.

Sales and marketing expenses consist primarily of personnel-related costs directly associated with our sales and marketing staff, including salaries, benefits, bonuses, commissions, stock-based compensation and allocated overhead costs. Sales and marketing expenses also include advertising costs and other expenses associated with our marketing and business development programs. In addition, sales and marketing expenses consist of travel-related expenses, software services dedicated for use by our sales and marketing organizations and outside services contracted for sales and marketing purposes. We expect that our sales and marketing expenses will remainincrease relatively flatmodestly in absolute dollars and will continue to be our largest operating expense for the foreseeable future as we grow our business. Our sales and marketing expenses mayare fluctuateexpected to decrease as a percentage of our revenue over time.

General and administrative expenses consist of personnel-related costs associated with our finance, legal, human resources and administrative personnel, including salaries, benefits, bonuses, stock-based compensation and allocated overhead costs. General and administrative expenses also include external legal, accounting and other professional services fees, software services dedicated for use by our general and administrative functions, insurance and other corporate expenses. We expect that our general and administrative expenses will remainincrease relatively flatmodestly in absolute dollars but maywill fluctuatedecrease as a percentage of total revenue fromover period to period.time.

Comparison of the Three Months Ended MarchJune 31,30, 2026 and 2025

Total revenue increased by $5.2$5.0 million, or 14%,13%, for the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. Revenue related to new customers added since MarchJune 31,30, 2025 contributed $6.8$5.9 million, which was partially offset by a $1.6$0.9 million decrease in revenue from customers that existed as of MarchJune 31,30, 2025. The change in revenue from existing customers was driven by decreases in usage of our service offerings by several of our existing customers.

Revenue generated from our software product offerings increased by $3.8$4.1 million, or 12%,13%, for the three months ended MarchJune 31,30, 2026 compared to the same period in 2025 due to increases in usage of our software product offerings. Revenue generated from our services product offerings increased by $1.5$0.9 million, or 25%,18%, for the three months ended MarchJune 31,30, 2026 compared to the same period in 2025 due to an increase in usage of our services product offerings.

Total cost of revenue increased by $1.3 million, or 14%, for the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. This change was primarily driven by a $0.7 million increase in costs for cloud hosting as a result of increased usage of our software product offerings andofferings, a $0.5$0.4 million increase in salary and benefits costs as a result of increased headcount.headcount, and an increase of $0.2 million in outsourced staffing vendor fees.

Research and development expenses increased by $0.4$1.0 million, or 3%,7%, for the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. The change was primarily driven by an increase of $0.5$0.7 million in personnelsoftware costs duepredominantly related to increasedadditional headcount,AI-powered partiallyproductivity offsetand bydevelopment tools as well as a $0.2$0.3 million increase in capitalizedpersonnel software development.costs.

Sales and marketing expenses increased by $1.6 million, or 11%, for the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. The change was primarily driven by an increase of $1.1$1.4 million in personnel costscosts, andincluding ancommissions increaseexpense offor $0.2our millionsales in marketing expense.personnel.

General and administrative expenses decreased by $0.6$1.5 million, or 5%,14%, for the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. This change was primarily attributable to a decrease of $1.6 million in legal costs related to the securities litigation and a decrease of $0.4 million in bad debt expense. These changes were partially offset by an increase in professional services costs associatedof with$0.8 company meetings and events.million.

We have financed operations primarily through customer payments and net proceeds from sales of equity securities, including our IPO in July 2021. As of MarchJune 31,30, 2026, our principal sources of liquidity were cash and cash equivalents and short-term investments, totaling $17.6$10.9 million and $85.4$90.5 million, respectively. Cash equivalents include highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less. Short-term investments consist of highly-rated U.S. Treasury securities and corporate debt securities with maturities of more than three months but less than one year at the date of purchase. We believe our existing cash and cash equivalents and short-term investments will be sufficient to fund anticipated cash requirements for the next 12 months. We believe we will meet our longer-term expected future cash requirements primarily from a combination of cash flow from operating activities and available cash and cash equivalents and short-term investments. We may also engage in equity or debt financings to secure additional funds.

Our principal cash requirements consist of obligations under our operating leases and purchase commitments to our cloud hosting providers and other vendors. There were no changes in our material cash requirements during the threesix months ended MarchJune 31,30, 2026 from the material cash requirements disclosed in our most recent Annual Report on Form 10-K.

Net cash used in operating activities for the threesix months ended MarchJune 31,30, 2026 was $11.7$12.8 million, ana increasedecrease of $1.2$2.0 million from net cash used in operating activities of $10.5$14.7 million for the threesix months ended MarchJune 31,30, 2025. The change in cash flow used in operations was primarily due to working capital charges, primarily related to accounts receivable due to timing of collection from our customers.charges.

Net cash provided by investing activities for the threesix months ended MarchJune 31,30, 2026 was $9.6$4.1 million, an increase of $17.2$20.4 million from net cash used in investing activities of $7.7$16.3 million for the threesix months ended MarchJune 31,30, 2025. The change in cash provided by (used in) investing activities was primarily related to an increase of $5.9 million in maturities of short-term investments and a decrease of $11.6 million in purchases of short-term investments during the three months ended March 31, 2026.investments.

Net cash providedused byin financing activities for the threesix months ended MarchJune 31,30, 2026 was $0.1 million, anconsistent increase of $0.2 million fromwith net cash used in financing activities of $0.1 million for the threesix months ended MarchJune 31,30, 2025. This change was primarily related to the final cash payment in 2025 for the acquisition of Congruity legal workflow products.