Liquidity risks are intensifying as free cash flow swung to a negative $12.4 million in 2026Q1, exacerbated by a $9.0 million outflow in working capital.
| Cash from Operations | -16.12M | -14.94M | -8.75M | -25.53M | -46.01M | -21.64M | -22.71M | -27.3M |
| Operating CF Margin % | - | -9.52% | -6.04% | -18.49% | -34.04% | -18.93% | -33.18% | -56.22% |
| Operating CF Growth % | -558.45% | -70.72% | 65.73% | 44.51% | -112.61% | 4.71% | 16.8% | - |
| Net Income | -42.6M | -44.37M | -55.77M | -42.15M | -70.77M | -24.34M | -22.87M | -29.83M |
| Depreciation & Amortization | 5.37M | 214K | 3.93M | 4.16M | 2.97M | 1.67M | 1.62M | 803K |
| Stock-Based Compensation | 18.59M | 24.46M | 22.27M | 16.16M | 21.74M | 5.6M | 1.99M | 4.12M |
| Deferred Taxes | 0 | 0 | 0 | 0 | 0 | 832K | 0 | 0 |
| Other Non-Cash Items | 20.5M | 3.96M | 18.38M | 4.65M | 4.41M | 1.23M | 1.86M | 406K |
| Working Capital Changes | -17.97M | 798K | 2.45M | -8.35M | -4.37M | -6.63M | -5.32M | -2.8M |
| Change in Receivables | -15.58M | -12.43M | 1.76M | -6.71M | -3.27M | -8.66M | -6M | -4.56M |
| Change in Inventory | 0 | 0 | 0 | 2.26M | 0 | 405K | 0 | 0 |
| Change in Payables | -2.89M | 137K | -849K | -4.09M | 3.19M | 1.09M | -397K | 2.28M |
| Cash from Investing | -949K | -18.2M | -78.03M | -20.04M | -9.69M | -3.11M | -1.9M | -3.33M |
| Capital Expenditures | -3.23M | -3.05M | -2.78M | -4.86M | -4.38M | -3.11M | -1.9M | -3.33M |
| CapEx % of Revenue | 1.99% | 1.95% | 1.92% | 3.52% | 3.24% | 2.72% | 2.78% | 6.85% |
| Acquisitions | 8K | 8K | 4K | -1.18M | -5.31M | 0 | 0 | 0 |
| Investments | - | - | - | - | - | - | - | - |
| Other Investing | 2K | 0 | 0 | -14M | 0 | 0 | 0 | 0 |
| Cash from Financing | 185K | 16K | -20M | 1.87M | 3.47M | 221.66M | 59.96M | 44.1M |
| Debt Issued (Net) | -43K | -42K | -41K | -40K | -42K | -112K | -106K | -5.78M |
| Equity Issued (Net) | 40K | 354K | -20.18M | -89K | -548K | 219.34M | 59.8M | 49.77M |
| Dividends Paid | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Share Repurchases | -213K | -105K | -20.18M | -89K | -548K | -476K | -138K | 0 |
| Other Financing | 188K | -296K | 224K | 2M | 4.06M | 2.43M | 271K | 123K |
| Net Change in Cash | -16.89M | -33.12M | -106.78M | -43.69M | -52.23M | 196.91M | 35.34M | 13.48M |
| Free Cash Flow | -19.35M | -17.99M | -11.53M | -44.39M | -50.39M | -24.75M | -24.62M | -30.62M |
| FCF Margin % | -11.94% | -11.47% | -7.96% | -32.15% | -37.27% | -21.64% | -35.97% | -63.07% |
| FCF Growth % | -33.13% | -56.02% | 74.03% | 11.91% | -103.61% | -0.54% | 19.62% | - |
| FCF per Share | -0.30 | -0.29 | -0.19 | -0.74 | -0.86 | -0.43 | -0.43 | -0.54 |
| FCF Conversion (FCF/Net Income) | 0.45x | 0.34x | 0.16x | 0.61x | 0.65x | 0.89x | 0.99x | 0.92x |
| Interest Paid | 0 | 0 | 0 | 0 | 0 | 105K | 365K | 85K |
| Taxes Paid | 772K | 0 | 896K | 766K | 397K | 97K | 87K | 36K |
Liquidity and cash burn
Based on reported financial statements, LAW exhibits a persistent disconnect between net income and operating cash flow, with the OCF/NI ratio reaching 1.21 in 2026Q1, indicating that non-cash expenses and working capital fluctuations are significantly distorting the company's underlying cash-generating capability relative to its reported losses.
The frequent divergence between net income and operating cash flow suggests that GAAP earnings are not a reliable proxy for the company's actual cash burn. Investors should monitor whether this volatility is driven by recurring accruals or if it reflects fundamental instability in the timing of customer payments.
As reported in recent quarterly filings, LAW's free cash flow trajectory remains highly erratic, swinging from a positive $255,000 in 2025Q4 to a negative $12.4 million in 2026Q1, which highlights the company's inability to sustain positive cash generation despite its high-margin software-as-a-service business model.
This inconsistency in free cash flow suggests that the business model is highly sensitive to the timing of large litigation matters and associated usage-based revenue. The inability to maintain positive FCF margins indicates that the company remains in a capital-intensive growth phase that is currently outpacing its internal cash generation.
According to historical cash flow data, LAW experienced a significant working capital outflow of $9.0 million in 2026Q1, a sharp reversal from the $5.2 million inflow seen in 2025Q3, illustrating how fluctuations in accounts receivable and deferred revenue directly impact the company's immediate liquidity position.
The reliance on working capital shifts to bridge the gap between revenue recognition and cash collection suggests a potential vulnerability in the company's billing cycles. Analysts should investigate whether these swings are indicative of longer payment terms being granted to enterprise clients to secure market share.
Based on the provided cash flow statements, LAW consistently utilizes stock-based compensation, with quarterly figures averaging over $5 million, which effectively obscures the true extent of the company's cash-based operating losses and complicates the assessment of its long-term path toward sustainable, self-funded growth for potential investors.
While SBC is a non-cash expense, its consistent use to attract and retain talent represents a real economic cost that dilutes existing shareholders. The reliance on equity-based incentives suggests that the company may be unable to compete for specialized AI talent using cash compensation alone, further pressuring the balance sheet.
Quick answers to the most common questions about buying LAW stock.
CS Disco, Inc. (LAW) generated $-14.9M in net cash from operating activities in 2025. This reflects the cash generated directly from core business operations.
CS Disco, Inc. (LAW) reported negative free cash flow of $18.0M in 2025, indicating capital requirements exceeded cash from operations.
CS Disco, Inc. (LAW) spent $3.1M on capital expenditures in 2025. CapEx represents the cash invested in physical assets like property, plant, and equipment to maintain or grow the business.
In 2025, CS Disco, Inc. (LAW) spent $0.1M on share repurchases. This shows the company's commitment to returning capital to its equity investors.