CS Disco Inc
NYSE:LAW
Earnings Call Analysis
Q4-2023 Analysis
CS Disco Inc
Looking back at 2023, the company saw total revenue climb by 2% to $138.1 million, while the fourth quarter revenue jumped 10% to $35.7 million year-over-year. This uptick was bolstered by a 5% growth in software revenues during the final quarter, amounting to $29.3 million. The number of customers increased by 9%, with nearly 300 generating over $100,000, marking a similar growth percentage. Additionally, customers generating over $1 million expanded, and multiproduct attachments improved to 15% by year's end. Despite these gains, the company underscored the potential for additional growth within its existing customer base.
Operational challenges were evident as Q4 adjusted EBITDA hit negative $1 million, concluding a year with an overall negative adjusted EBITDA of $25.9 million. The company closed the year with $160 million in cash, reflecting a continued emphasis on strengthening their financial position amid a focus on software business growth at the year's close.
The company launched key functionalities and integrations in Q4, aimed at enhancing customer experiences and operations. Product innovation continued to be a priority, with new AI-driven solutions like Cecilia Q&A poised to revolutionize legal work and further solidify the company's market position.
Financial indicators showed improvements, with operating loss and net losses decreasing year-over-year in Q4. A net loss per share of $0.38 in FY 2023 was reported, better than the $0.80 loss per share in the previous year. The company ended Q4 with ample cash reserves and no debt.
In the pursuit of reaccelerating growth and improving efficiency, the company has been focusing on enhancing its customer relationship management, security and control capabilities, and developing improved quote-to-cash and back-office processes.
The company plans to invest in rectifying previous missteps, optimistic that these measures combined with a revenue growth surge will chart a sustainable profitability course by 2025.
The outlook for Q1 2024 suggests total revenue guidance between $34.5 million and $36.5 million, with software revenue expected between $29.5 million and $30.5 million. Adjusted EBITDA is projected to remain negative, ranging between $8 million and $6 million. For the entire fiscal year 2024, total revenue is predicted to be between $143 million and $255 million, while software revenue is forecasted to be in the $120 million to $127 million range, with adjusted EBITDA foreseen to be negative at $26 million to $19 million, indicative of the company's investment strategy.
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Ladies and gentlemen, thank you for standing by, and welcome to CS Disco's Fourth Quarter and Fiscal Year 2023 Conference Call. [Operator Instructions]
I would now like to hand the conference over to your first speaker today, Head of Investor Relations, Aleksey Lakchakov.
Good afternoon, and thank you for joining us on today's conference call to discuss the financial results for Disco's fourth quarter and fiscal year 2023. With me on today's call are Scott Hill, Disco's Chief Executive Officer; and Michael Lafair, Disco's Chief Financial Officer.
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 our future performance, our future capital expenditures, market opportunity, market position, product strategy and growth opportunities 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.csdisco.com.
Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Forward-looking statements represent our management's beliefs and assumptions only as of the date made. Information on factors that could affect the company's financial results is included in its filings with the SEC from time to time, including the section titled Risk Factors and the company's quarterly report on Form 10-Q for the quarter ended September 30, 2023, filed with the SEC on November 9, 2023, and the company's upcoming annual report on Form 10-K for the year ended December 31, 2023.
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 with GAAP. Reconciliation between GAAP and non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures versus their closest GAAP equivalents is available in our earnings release.
With that, I'd like to turn the call over to Scott.
Thanks, Aleksey. I would like to start with a few comments on a strong end to 2023 before turning to our objectives for 2024. Fourth quarter total revenue increased 10% versus last year to $35.7 million. Full year 2023 total revenue was $138.1 million, up 2% from the prior year. Software revenues, which include revenues from eDiscovery and other software product offerings, grew 5% to $29.3 million in the fourth quarter. For the full year, software revenue grew 3% to $112.3 million. We had 1,441 customers as of December 31, 2023, which is 9% more than a year ago. Importantly, we had nearly 300 customers that generated more than $100,000 in revenues in 2023, up 9% compared to 2022. The number of customers who generated more than $1 million in revenue also expanded to $26 million during 2023. Finally, we saw multiproduct attach rates improved to 15% at the end of 2023, up from 11% at the end of 2022. We have more customers spending more money and buying more of our products. We believe there is meaningful room for additional expansion in our existing customer base. Services revenues, which include revenues from Disco review and professional services, were $6.5 million in the fourth quarter. Full year services revenue was $25.8 million, flat from the prior year. Q4 2023 adjusted EBITDA was negative $1 million. Fiscal year 2023 adjusted EBITDA was negative $25.9 million.
We ended the year with just under $160 million in cash on our balance sheet. 2023 was a year of change for Disco, but we're pleased with the return to growth we saw within our software business exiting the year. As we turn to 2024, we're focused on continuing to reaccelerate our revenue growth, investing to enhance our software product offerings, including advancing our innovative facility capabilities and strengthening our operating framework to improve our efficiency and profitability. And importantly, under the strong leadership of our Chief Human Resources Officer, Karen Herckis, we're building a stronger cultural foundation that we believe will be critical to sustaining our success. Let's start with continuing to reaccelerate revenue. We struggled with a number of distractions during 2023, but I'm proud of how the team executed and delivered a solid end of the year. And importantly, I'm very confident that we have the leadership and team in place focused and motivated to build on that momentum.
Of particular note, we're fortunate that Andrea Popovecz agreed to step in as our Senior Vice President of Global Sales. Andrea brings over 30 years of experience in the legal industry across all segments, having led sales teams for over 20 years at Lexus Nexus and over 7 years at Epic. She hit the ground at full sprint and has already improved and accelerated a number of our key initiatives. The great news is that we have always had a large addressable market, a growing customer base and industry-leading products. I believe we are now developing and deploying the right sales approach to capture a greater portion of that significant opportunity. Entering 2024, we have taken a number of steps to improve our sales execution and drive our software dollar-based net retention back above 100% from 97% exiting 2023. We have bifurcated our customers into specific profiles and are developing sales motions that better reflect the nature of those distinct groups. We have reorganized our sales team to reflect these groupings and their needs.
We've enhanced our sales plan, committed to a more constructive channel partnership and refined our pricing strategy. We have also combined our services and customer success functions under Melanie Antoon's leadership as our Chief Customer Officer, to reposition customers at the center of what we do. We believe these initiatives will improve our customer satisfaction and NPS scores and enable consistent revenue growth across both existing and new customers.
In support of these sales and customer initiatives, we are refining our investments in lead generation, marketing and brand awareness, and we are already seeing signs of progress. Since the launch of the Lady J campaign last year, we have seen organic searches for Disco triple, and we have received over 10 million views and 32.8 million impressions across various platforms. A third-party survey of over 1,000 U.S.-based legal professionals indicated that we are now the most cited e-discovery technology platform among all of our competitors. It's very common for us to hear new leads and customers mention the Lady Jay campaign as they first begin their Disco journey. We must now do a better job in 2024 of converting this increased awareness into revenue growth. Our product and engineering teams are also doing a great job of supporting our sales efforts by continuing to enhance our industry-leading e-discovery offering at an unprecedented pace, while also further developing our market-leading Cecilia AI capabilities and our innovative legal platforms, including case builder, hold and requests.
With Cecilia Q&A now generally available in the U.S., we were able to sign our first several customers. The customers were a combination of law firms and large corporate users, and we are already hearing some great feedback. It was exciting to hear the founding partner of a leading Houston-based law firm explained to us the benefits they were receiving from Cecilia. He mentioned they are using Cecilia on a very large database with over 1.4 million documents in a very tight deadline. They demonstrated their end client that Cecilia could ultimately save them hundreds of working hours and help accelerate the speed and quality of the work at the same time. This partner also told us how he himself is able to use Cecilia to find answers to very specific questions with only a couple of clicks, while his team finds it far easier to get started and execute reviews with Cecilia. The early success we are seeing with Cecilia isn't expected to be a large contributor to our 2024 revenue, but it is certainly opening doors to new and existing customers and is laying the foundation for future growth by extending our lead in innovation in the legal industry. It also demonstrates why we believe it is imperative that we continue to invest to enhance our eDiscovery offering, including advancing our innovative Cecilia capabilities.
During 2023, our product and engineering teams worked together to release major AI innovations, including Cecilia Q&A, which increases the efficacy and efficiency with which lawyers review documents and Cecilia time lines and tagging, which enhance the way lawyers prepare cases. Our product and engineering teams have also been hard at work on Cecilia auto review, which is now in private testing and has the capability to significantly automate and improve the accuracy and quality of large tedious document reviews. As we pivot to 2024, we expect the rate and pace of innovation to continue as we add additional skills to our Cecilia AI platform.
We announced the launch of Cecilia deposition summaries at LivoWeek in January. This generative AI-driven solution enables legal professionals to automatically create deposition summaries, which have traditionally been a tedious and time-consuming task. Our team is also working to integrate the primary law asset, which we licensed in late 2023 in the Cecilia, which will marry facts with law on a single technology platform for the first time. We anticipate launching primary law capabilities later this year. And while we're excited about Cecilia, the key to our success in 2024 remains our core eDiscovery software and services offerings. During the fourth quarter, we continued to deliver key functionalities that our customers need, including deeper integration capabilities between time lines and eDiscovery, new capability to track user activity and last access user information, production sharing, which allows lawyers to securely and easily send legal productions to a third party and work product permissions, which allows users to keep work confidential from document viewers such as expert witnesses. In January, our team delivered the ability to sort on a custom field, which is one of the most asked for enhancements on our road map.
Our product and engineering teams are extremely talented and dedicated, and I'm confident that 2024 will be another banner year in product development that will delight our customers, enable revenue growth and strengthen the foundation of our future success. We are investing in local and globalized talent to supplement capacity while we continue to build a comprehensive litigation platform, which we believe will truly transform the way legal work gets done. We believe we are positioned to return to meaningful growth with a much more precise focus on serving our customers. We will invest to solidify our technology footprint, enhance our core offerings and build our lead in product innovation. We intend to do all of this while also vigilantly focusing on the strength of our balance sheet and cash generation. In order to do that, we must strengthen our operating framework to improve our efficiency and profitability by developing the processes, systems and infrastructure necessary to scale efficiently and profitably. One important initiative that we will continue is expanding our presence in India to enable additional future efficiencies.
In 2023, we grew our employee headcount in India from 0 to over 100 employees. We anticipate approximately 20% of our workforce will be based in India by the end of this year. We are also working to enhance our CRM processes and systems and rebuild our customer success and sales ops functions. We will enhance our security and control capabilities and develop an improved quote-to-cash process as well as enhancing other key back office processes and systems. These are critical initiatives that will enable our future ability to scale. Finally, while the Board continues to evaluate a strong set of candidates to be Disco's next leader, I remain fully engaged as CEO, and I'm very excited about 2024. As I enter my sixth month in the role, I want to reiterate some of the things I mentioned on the last earnings call over 3 months ago. I remain convinced in the amazing talent, the industry-leading products, the sizable market opportunity and the strategic road map we have at Disco. I now believe we have also made significant and necessary improvements to our culture and our go-to-market approach. But something else became clear in the time that I've spent in this role. We had stopped investing in our people.
We cut key sales functions and fuel capacity to save money without having a cohesive go-to-market strategy. We reduced R&D capacity to the detriment of our product road map. We asked our G&A resources to work harder without addressing key system and process gaps. Those actions pushed us closer to profitability, but not in a sustainable way. As I've said in my remarks this afternoon, we are going to invest in correcting those missteps. We believe these investments, combined with reaccelerating revenue growth will put us on a sustainable path to profitability during 2025. The opportunity is there. Now we have to execute.
With that, I'll turn it over to Michael.
Thank you, Scott. In Q4 2023, total revenues were $35.7 million, up 10% year-over-year. Software revenues, which includes revenues from eDiscovery and other software product solutions were $29.3 million, up 5% year-over-year. Services revenues, which include discount managed review and professional services, were $6.5 million, up 37% year-over-year. Full year 2023 revenues were $138.1 million, up 2% year-over-year.
Software revenues were $112.3 million, up 3% from prior year. Services revenues were $25.8 million, flat versus last year. Growth in our professional services was offset by a year-over-year decline in revenues from our review product offering, which resulted in flat performance. Total dollar-based net retention as of 2023 at year-end was 92%. As Scott mentioned, software dollar-based net retention was 97%. In discussing the remainder of the income statement, please note that unless otherwise specified, all references to our gross margin, operating expenses and net loss are on a non-GAAP basis. Adjusted EBITDA is also a non-GAAP financial measure. Our gross margin in Q4 was 76% and gross margin for fiscal year 2023 was 75%, in line with Q4 and fiscal year 2022. 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. Sales and marketing expense for Q4 was $13.0 million or 36% of revenue compared to 52% of revenue in Q4 of the prior year. For fiscal year 2023, sales and marketing expense was $62.1 million or 45% of revenue compared to 51% of revenue for fiscal year 2022, a decrease of over $6.5 million year-on-year. The decrease was primarily driven by a decrease in sales and marketing personnel costs.
Research and development expense for Q4 was $8.7 million or 24% of revenue compared to 41% of revenue in Q4 of the prior year. For fiscal year 2023, research and development expenses were $42.3 million or 31% of revenue compared to 38% of revenue in fiscal year 2022, a decrease of over $8.8 million year-on-year. This decrease was primarily driven by a reduction in research and development personnel and a decrease in per employee cost as a result of globalization efforts. General and administrative expense in Q4 was $7.8 million or 22% of revenue compared to 20% of revenue in Q4 of the prior year. For fiscal year 2023, general and administrative expenses were $30.2 million or 22% of revenue, consistent with general and administrative expenses as a percent of revenue in fiscal year 2022. General and administrative expenses were just about flat year-on-year.
Operating loss in Q4 was $2.2 million, representing an operating margin of negative 6% compared to negative 37% in Q4 of the prior year. Operating loss for fiscal year 2023 was $30.5 million, representing a margin of negative 22% compared to negative 36% in 2022. Adjusted EBITDA was negative $1.0 million in Q4, representing an adjusted EBITDA margin of negative 3% compared to an adjusted EBITDA margin of negative 34% in Q4 of the prior year. Adjusted EBITDA in fiscal year 2023 was negative $25.9 million, a margin of negative 19% compared to a margin of negative 33% in 2022. Net loss in Q4 was $0.3 million or negative 1% of revenue compared to a net loss of $10.8 million or negative 33% of revenue in Q4 of the prior year. Net loss in fiscal year 2023 was $22.8 million or negative 17% of revenue compared to net loss of $47.0 million or negative 35% of revenue in 2022.
Net loss per share for fiscal year 2023 was $0.38 per share compared to $0.80 per share for fiscal year 2022. Turning to the balance sheet and cash flow statement. We ended Q4 with $159.6 million in cash and cash equivalents and no debt. Operating cash flow in fiscal year 2023 was negative $25.5 million compared to negative $46.0 million in fiscal year 2022. Now turning to the outlook. For Q1 2024, we are providing total revenue guidance in the range of $34.5 million to $36.5 million and software revenue guidance in the range of $29.5 million to $30.5 million. We expect adjusted EBITDA to be in the range of negative $8 million to negative $6 million. For fiscal year 2024, we are providing total revenue guidance in the range of $143 million, $255 million and software revenue guidance in the range of $120 million to $127 million. We expect adjusted EBITDA to be in the range of negative $26 million to negative $19 million, reflecting the investments Scott previously discussed.
Now I'd like to turn the call over to the operator to open up the line for Q&A.
[Operator Instructions] Your first question comes from Scott Berg with Needham & Company.
This is Rob Morelli on for Scott Berg. As you guys touched on January, the departure of Luke McNeal CRO, can you just touch on how, if at all, this has impacted your 2024 outlook at your go-to-market motion for the year?
Rob, it's Scott. Thanks for the question. We were disappointed to have Luke depart, but I have to tell you that Andrea Popovecz, who stepped in his place got on board remarkably fast. I placed a phone call to her literally a week before I kick off a couple of weeks before legal week, and you wouldn't know that she had just stepped into the role. I think the fact that she's been in our industry for 30 years, 20 years at LexisNexis and 7 at Epic really gave her a lot of forward momentum as she stepped into the role.
And frankly, she picked up some of the good work that Luke had started with the broader sales team and has really helped us refine and enhance it. Not only do I feel like we haven't lost a step, I think we have a little bit more forward momentum as we move into the year. Make no mistake, a lot of the things that we've talked about in the call are things that we are just starting to deploy. So we had a good fourth quarter, a nice way to end the year. You can see that our guidance is that we think we'll have a similarly good start to the year but those things aren't really driven by the initiatives that we're launching and deploying right now. I have the utmost confidence in Andrea and her leadership team and our team out in the field and inside sales across the board to go and do the things that are necessary to deliver revenue in the range that we provided for the year.
Then regarding Cecilia, great to hear some of the positive feedback to date. Any update on the monetization strategy there? And when it comes to the guide, is there any sort of uplift or incremental adds there baked in?
Yes. As I mentioned in my prepared remarks, there's not a significant dependency on Cecilia revenue in 2024 per se. But as I noted, she is definitely opening doors to not only existing customers who are looking at ways to extend their partnership with us, but also customers that maybe we've had before and are now open to coming back, new customers with whom we haven't spoken before. And so the impact on 2024, I think is we're once again demonstrating what Disco started with, which is the leading innovator in the space. So customers want to talk to us about what we're doing and while we're in the room, of course, we can talk to them about buying our eDiscovery platform in the next case. We can talk to them about deploying case builder across the case. We can talk to them about our hold and our request offering. So that's really the impact that Cecilia is having now. As I said, we do have some customers that are using Cecilia right now on cases and who are paying us for that and so I'm excited that, that process has begun, but there are a number of different ways Cecilia, think of her as a thing, but it's really the skills that matter.
You think about time lines, which are released and live and a part of our case builder Q&A, which is being used by paying customers today, but you've also got auto review or tagging coming down the line, which will, I think, greatly enhance our customers' doing review. You've got the deposition summary that we announced at Legal, but that's not even fully launched to our customers yet that should be launched in the near future. So a number of different skills that enhance existing products, enhance existing workflows, and I think provide a number of different opportunities for us to package bundle and price in a way that our customers will find really attractive. So contribution this year is door opening. The contribution as we move into '25 and '26 is even more revenue growth opportunity because frankly, we need that acceleration to continue to make the investments to innovate for our customers.
Congratulations on the quarter.
Your next question comes from Mark Schappel with Loop Capital.
This is [ Tim Grieve ] on for Mark. One for me. With respect to your overall demand environment, could you provide an update on whether you're seeing any changes with your customers, like over the past 90 days in terms of buying patterns, sales cycles or any like additional sign-offs on deals closed?
I wouldn't say that I've noticed any notable difference. As I mentioned, we had a good end of the year. We've had a good start to a really good January and moving into February, I think a good start to the quarter. So no, I don't know any particular change in terms of buying patterns. But again, what I am noticing, and I just spent I guess it's now been 2 or 3 weeks ago, a little bit of time for the first time at legal week, but our booth was buzzing. Again, I think it goes back to some of the innovative offerings that we're talking about. So what I'm seeing is an additional engagement or reengagement across existing and new customers that I'm excited about. Again, that aren't necessarily yielding right into January and February, but I think certainly will allow us to accelerate as we move through the year.
Your next question comes from David Hynes with Canaccord Genuity.
Scott, Michael, I need to ask about customer adds, right? I mean they were negative in Q4, you added 10 customers in the back half of the year. Just what's going on there? I mean it seems to be a market slowdown from what we saw in the first half of the year and I guess it begs the broader question of what's the best leading indicator that we should be paying attention to for the health of the business.
Yes, I think that's a really good question, and it's an important one because I think historically, we've talked about customers as if they're all equal, an equal opportunity, equal future ability to grow, equal interest in partnering, and that's not what I've seen in the 6 months that I've been here. I think there are certainly customers where we have deep, long-standing relationships, but there are also customers who do a small case, buy a small deal and then aren't with us 2 months later.
So I've really asked the team to focus a lot inside that 1,441 customers on who are the ones that we can grow with. Who are the ones that will partner with us? Who are the ones that look to us for the second case and the fourth case in the 6-K. Because historically, what we know is if we can get a customer to a fifth or a sixth case, that's a sticky customer. I've asked the team to look at the customers from a lens of who are the customers we can grow to 6 cases. It doesn't immediately go to 6, but who's the one we can sell a second to? And if that second one comes, can it lead to third? And can that put us on a pack to a 6.
So what that's going to mean is from quarter-to-quarter, I don't know that you look at the customer count is particularly meaningful. But it does matter year-over-year because we do need to grow customers. And so I take solace in the fact that we're entering 2024 with 9% more customers than we had in the prior year. We're entering the year with 9% more customers spending more than $100,000. We're entering the year with 26 customers, which is 10% or 12% from last year. It's up 3, but they're spending $1 million or more a year. That's the growth driver for us. The thing it does is it makes us a little bit less transactional because to the extent that we can embed ourselves in a customer and grow with that customer, it becomes far more annuity like. It's still transaction in nature but the relationship becomes more annuity because there's a point in time at which we get the call on the next case. It's not a hard sell to win that case.
So over the course of the year, growing our customer base absolutely important. Is it out in any particular quarter, particularly and this is really important, as we're for the first time ever as a company, segmenting our customers and looking at big law, distinct for mid-market law, distinct from corporate law and developing sales motions around that deploying our sales team across that, aligning our marketing spend with that, there's going to be some dynamics underneath the covers within that customer count.
So what I would encourage you to do is watch the year-over-year growth for the full year. Ask about the trends as we move through the year, but know that what I think is really important is the fact that we've segmented the customers, we're developing the sales motion. We're aligning [indiscernible] every bit of spend around customer to serve that. I think those are the more meaningful metrics. Then at the end of the day, the metric to watch is how is revenue trending.
Michael, one for you. Do you have software revenue for '21 and '22? It would be helpful to see how that's been trending as a percent of revenue, given it looks like it's going to be a new guidance metric.
Yes. The K includes software revenue for '22 or for '23, and I'll just tell you what it is on the call now, it's about $112 million, and that is in the K. You also have in the K the quarterly numbers for '23.
But nothing historically passed beyond that?
Nothing prior to '23.
[Operator Instructions] Your next question comes from Koji Ikeda with Bank of America.
Just a couple for me here. I think I heard that the or I guess it's safe to assume that the third quarter 2024 EBITDA profitability inflection target is now off the table. But I think you had mentioned something about 2025. So would that be EBITDA profitable for the full year 2025? Or is that a quarter in 2025 that would show that positive inflection?
Yes, Koji, it's Scott. It's a good question and not an unexpected one. What I said precisely in my remarks is that it will put us on a sustainable and that's an important word to me, a sustainable path to profitability as we move through 2025. I didn't pick a quarter, I didn't pick the year. What I'm telling you is that I believe a combination of the investments we're making this year the acceleration in revenue we're seeing this year and then an additional acceleration as we move out into '25 and beyond, are the things that put us on track for a sustainable path to profitability during 2025.
Again, I'm not going to pick the mark but again, just in case I need to say it on the record, we have to get to profitability. We're committed to get there. I just, as I said, did not want to put off our ability to grow revenues and to balance the path to profitability, and that's what we're doing. So as we move into 2025, I think the investments we're making this year, combined with accelerating revenue growth will put us on a sustainable path as we move through the year next year.
Looking at the guidance, it assumes services revenue, which is Disco review, is roughly flat for 2024. I guess maybe walk us through why it would be flat? And is services revenue going to be a drag on the business going forward? Then the second part of that question is, how is review price? Because I was looking through prior transcripts, and it sounded like it's priced on how many documents are ingested in the platform. So just wondering why it was being put into a different category going forward?
Yes. So it's a good question. I think the way to think about it is within services, you have what I'll call the get you up and running in our eDiscovery platform services and then you have our review services, which leverage our technology. The attach rate of I get you up and running services, our professional services is what we call them things like ingest and forensics. Those things tend to have a pretty consistent attach rate on our software revenue. I say that, and you could fairly imply that what that means is underneath the covers revenue is growing in services and down a little bit in review. That's an accurate directional conclusion for you to reach.
The important thing though is it's not because the review is going to be I think you used the word a drag on the business overall, but review has tended historically to be more episodic, and it's tended to correlate much more significantly with larger deals. While our services correlate with our software revenue. It doesn't matter, small deal, big deal. The attach rate is more consistent. One of the reasons we broke out the 2 numbers is we wanted to give our investors a lot more clarity around the underlying strength of the thing that is key to our business, which is the software. But we will absolutely continue to offer our review services to clients who want that. Again, tends to be on the larger deal. I think a really important point, though. A lot of the costs associated with our review business are variable. There's very little fixed cost to our business from that.
And so we love the big reviews when they come. We fundamentally believe that we can do them more efficiently, leveraging our software. We think it's an important offering into a very large addressable market. But again, it's right now, the attach rate relates more to the larger deals.
As we move up the stack as we develop our sales motion around large laws, we were big law as we develop our sales motion around corporates, I believe our ability to win those larger deals will improve. And as it does, I think the review attach rate will start to look a little more consistent like our professional services. But as of now, we effectively didn't want to lean into the year on whether that would or wouldn't happen quickly. But again, a key point for you to understand not a lot of fixed and I mean like $1 million to $2 million of fixed fees around that business. So not a lot of fixed costs to continue to provide that service where our customers want it.
Your next question comes from Brent Thill with Jefferies.
Thank you, Scott, and Michael -- this is Luv Sodha on for Brent Thill. I wanted to ask one. So obviously, dollar retention has declined quite a bit to 92% versus 106% last year. What are the key vectors to drive that back to above 100%? And could you maybe break that down between, say, the volume of cases versus driving up multiproduct adoption?
Yes. Look, I think for me, the fact that we're coming off a 97% software year, it is the lowest hanging fruit we've got. Historically, our D&R has been 115%, 120% in the software business. In order to hit the guide, we've got to push that back to, call it, 103% to 105% this year, which isn't the goal. The goal is to get back where we've been historically, where we know we can be.
But it's just got to be a modest push and the way that's going to happen is a far greater focused on our existing customer base. And that's why I say that inside that 1,441 it's not one large everybody is the same kind of customer. There are a lot of big law customers in there. They're corporates in there. They are mid-market firms in there. And I think our ability to go and find the right motion in those segments is critically important. And another, I think, really important thing is we went from having a really strong customer success function a couple of years ago to having no customer success function. And Melanie Antoon and on her team, Justin, the 2 of them are working well together have already reestablished that team. And so as I talk about the alignment of go-to-market in the field, in marketing, sales ops wise, a big part and an important part of that team is the customer success function, the client experience. And so we've got to get back to understanding who our customers are, what their needs are and looking, as you said, what's the next product they could buy from us?
What's the next case where we should have the opportunity? Can they leverage the Cecilia skills that are in market? Do they need case builder to sit across all of their cases or one case in particular. The client success reps that we have talking to those customers every week, I think, will be critical to that success.
And so for me, the fact that we moved from 115 to 120 down to 97 is we frankly took our eye off the ball. And the ability to push it back above 100 and back towards historical levels, is basic blocking and tackling. I feel like we've taken the right steps. Again, I caution that we've just rebuilt that function over the last couple of months, and we're aligning now around our segmentation. But I fundamentally believe as we move through the year, that alignment and that function in particular, are going to be critical to our ability to really rebuild or refresh that D&R number.
Just a quick follow-up on the investments that you're planning to make, Scott, which parts of the business are getting this investment? Because obviously, you're getting some efficiency from the additional investments in India. So where are these investments going? And how will you track the efficiency of these investments?
Yes. It's multifaceted, as I said in my remarks. The first investment we made was in our people. Last year was a difficult year for Disco in any number of ways, but it was a year in which, once again, most of our people were simply asked to work harder with little to no reward. And so as we moved into this year, for the first time in 2 years, we had a consistent salary increase program.
It doesn't really impact our EBITDA numbers, but we also had an equity program that gave everyone in our company equity, which I think is the greatest thing in the world to align our employees' interest around what's best for the company. So that's the first and key thing for me is investing in our people. The second thing is, as I mentioned, we're rebuilding our client success team. We're rebuilding literally from 0, our sales ops team. We're adding about 20% capacity in the field going from, I think, around 30 reps to just under 40%, which will allow us to cover more customers as we segment, particularly around corporate and big law. We're making investments in R&D because the flat reality is that most of what R&D is doing today is what will allow us to grow tomorrow. It's not about 2024. It's about deposition summary. It's about the enhancement in our eDiscovery platform.
It's about the enhancement and case builder. And in a world where you cut that because it doesn't line up with the current year revenue, you're effectively cutting your nose off despite your face. And so it's investments in R&D that are in the future. And Michael, I know this is near and dear to his heart, as you try and scale a business, you can't depend simply on people working harder. You have to have systems, you have to have processes. You have to have controls, you have to have security and we must make the investments that are necessary to do that. The good news is the level of spend increase this year versus last year isn't something you need to go model in as we move forward. I think what we're doing is recovering from a little bit of an overcorrection last year, getting back to balance this year, and then we'll be able to support double-digit revenue growth with low single-digit expense growth and put ourselves on that sustainable path to profitability by doing that.
So it really is investment across the board, but all of those are in line with what I said in the script, which is finding our way towards sustainable double-digit revenue growth, modest forward-looking investment and an ability to get our business to profitable and positive cash flow. And by the way, the last thing I'll say on that, the way I look at it is if you take our guidance that roughly speaking, that's about 15% of the cash that we had on the balance sheet at the end of the year, which if we left it sitting in the bank would earn about 4%, I think the return on the investment we're making will be significantly greater than that.
There are no further questions at this time. I will now turn it back over to CEO, Scott Hill for closing remarks.
We appreciate everyone joining us today. 2023, as I just said, was a challenging year for Disco. I want to thank our employees for their resilience and our customers for their forbearance. We're excited about the opportunities we see in 2024. There will be bumps on the road, but our team is aligned and focused. We're committed to returning to consistent double-digit growth, committed to disciplined capital and expense management leading to sustainable profitability. We're committed to our customers and to each other, and I have to tell you, I'm excited and proud to be a part of it as we begin the next chapter for Disco. We look forward to updating you on the progress as we move into our next quarter, and I wish you all a nice evening.
This concludes today's conference call. Thank you for your participation. You may now disconnect.