CS Disco, Inc.LAW
CS Disco, Inc. Stock Compensation Disclosure
Stock-Based Compensation
Equity Incentive Plans
In December 2013, the Company adopted the Long-Term Incentive Plan (“2013 Plan”). The 2013 Plan was terminated in July 2021 in connection with the adoption of the 2021 Equity Incentive Plan (“2021 Plan”), which became effective on July 20, 2021, and no further awards will be granted under the 2013 Plan. The 2021 Plan provides for the grant of incentive stock options (“ISOs”), within the meaning of Section 422 of the Code to employees, including employees of any parent or subsidiary, and for the grant of nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock awards (“RSAs”), performance-based restricted stock units (“PSUs”), restricted stock units (“RSUs”) and other forms of awards to the Company’s employees, directors and consultants, including employees and consultants of the Company’s affiliates. As of December 31, 2024, 7.0 million shares remained available for future issuance under the 2021 Plan. The Company recognized
total stock-based compensation expense related to equity incentive awards of $22.3 million and $16.2 million for the years ended December 31, 2024 and 2023, respectively.
Stock Options
Prior to becoming a public company in 2021, the Company granted options to employees, directors and consultants. The Company ceased granting options after its initial public offering in July 2021. Options were granted with an exercise price equal to the fair value of the shares on the date of grant. The maximum term of options granted under the plan is 10 years from the date of grant. Options generally vest according to a four-year vesting schedule, with 25% of the shares vesting on the first anniversary of the vesting commencement date and the remainder of the shares vesting in equal monthly vesting installments thereafter.
The following table summarizes the stock option activity under the 2013 Plan and 2021 Plan (in thousands, except for per share amounts and years):
| Number of shares | Weighted- average exercise price per share | Weighted- average remaining contractual life (years) | Aggregate intrinsic value | ||||||||||||||||||||
Options outstanding as of December 31, 2022 | 1,272 | $ | 6.98 | 4.96 | $ | 2,626 | |||||||||||||||||
| Granted | — | — | |||||||||||||||||||||
| Exercised | (312) | 1.74 | |||||||||||||||||||||
| Forfeited and cancelled | (436) | 10.14 | |||||||||||||||||||||
Options outstanding as of December 31, 2023 | 524 | $ | 7.47 | 4.49 | $ | 1,383 | |||||||||||||||||
| Granted | — | — | |||||||||||||||||||||
| Exercised | (104) | 0.77 | |||||||||||||||||||||
| Forfeited and cancelled | (133) | 13.21 | |||||||||||||||||||||
Options outstanding as of December 31, 2024 | 287 | $ | 7.24 | 3.58 | $ | 375 | |||||||||||||||||
Options vested and exercisable as of December 31, 2024 | 285 | $ | 7.16 | 3.57 | $ | 375 | |||||||||||||||||
Aggregate intrinsic value represents the difference between the Company’s fair value of its common stock and the exercise price of outstanding options. The aggregate intrinsic value of stock options exercised was $0.5 million and $1.6 million during the years ended December 31, 2024 and 2023, respectively.
As of December 31, 2024, unrecognized stock-based compensation expense related to outstanding unvested stock options that are expected to vest was nominal and expected to be recognized over a weighted-average period of 0.24 years. As of December 31, 2023, unrecognized stock-based compensation expense related to outstanding unvested stock options that were expected to vest was $0.3 million and was expected to be recognized over a weighted-average period of 1.08 years.
Restricted Stock Awards
Prior to becoming a public company, the Company granted RSAs to certain senior employees and consultants. The Company ceased granting RSAs after its initial public offering in July 2021. The fair value of RSAs is determined using the fair value of the Company’s common stock on the date of grant. No RSAs were granted during the years ended December 31, 2024 and 2023. During the years ended December 31, 2024 and 2023, 50,000 RSAs vested and were released from the Company’s right to repurchase. During the year ended December 31, 2024, no RSAs were cancelled. During the year ended December 31, 2023, 12,500 RSAs were cancelled. There were 50,000 and 100,000 RSAs outstanding as of December 31, 2024 and 2023, respectively.
As of December 31, 2024, the Company had $0.8 million of unrecognized stock-based compensation related to RSAs with a weighted average remaining requisite service period of 1.00 year. As of December 31, 2023, the Company had $1.6 million of unrecognized stock-based compensation related to RSAs with a weighted average remaining requisite service period of 2.00 years.
Restricted Stock Units and Performance-Based Restricted Stock Units
The fair value of RSUs and PSUs is determined using the closing market price of the Company’s common stock on the date of grant. The RSUs vest over the requisite service period, generally one year, three years or four years, subject to the continuous service of the individual.
In February 2024 and 2023, the Company granted PSUs for 0.4 million shares and 0.9 million shares of common stock, respectively. The PSUs vest on the satisfaction of both service-based and performance-based conditions. The PSUs have a one year performance period based on revenue and Adjusted EBITDA targets as well as non-quantitative business-related performance criteria that will determine the total vestable shares. After the applicable performance period, one-third of the vestable shares will vest upon the Compensation Committee’s certification of the degree of achievement of the applicable goals, and the remaining vestable shares will vest over a two-year service period. Subsequent to December 31, 2024, it was determined that the Company partially met the performance goals for the PSUs granted in 2024, and accordingly, these PSUs will vest at approximately 73% attainment. In February 2024, it was determined that the Company partially met the performance goals for the PSUs granted in 2023, and accordingly, these PSUs are vesting at approximately 60% attainment. As of December 31, 2024, none of the PSUs granted in 2024 had vested or settled and 0.1 million of the PSUs granted in 2024 were cancelled. As of December 31, 2024, 0.1 million of the PSUs granted in 2023 had vested or settled and 0.8 million of the PSUs granted in 2023 were cancelled.
The following table summarizes the RSU and PSU activity under the 2021 Plan (in thousands, except for per share amounts):
| Number of shares | Weighted-average fair value | Aggregate intrinsic value | |||||||||||||||
| Unvested and outstanding balance as of December 31, 2022 | 2,985 | $ | 25.39 | $ | 18,864 | ||||||||||||
| Granted | 2,996 | 8.29 | — | ||||||||||||||
| Exercised | (1,328) | 16.22 | — | ||||||||||||||
| Forfeited and cancelled | (2,115) | 19.93 | — | ||||||||||||||
Unvested and outstanding as of December 31, 2023 | 2,538 | $ | 14.56 | $ | 19,264 | ||||||||||||
| Granted | 5,979 | 7.52 | — | ||||||||||||||
| Vested | (1,748) | 11.48 | — | ||||||||||||||
| Forfeited and cancelled | (1,674) | 10.01 | — | ||||||||||||||
Unvested and outstanding as of December 31, 2024 | 5,095 | $ | 8.85 | $ | 25,424 | ||||||||||||
As of December 31, 2024 and 2023, there was an estimated $38.3 million and $28.9 million of total unrecognized stock-based compensation expense related to RSUs and PSUs. The weighted average remaining requisite service period was 2.21 years and 0.81 years, respectively.
CEO Performance Award
On May 20, 2022, the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) approved a grant to Kiwi Camara, the Company’s Co-Founder and who was then serving as Chief Executive Officer, for a 10-year CEO performance award (the “CEO Performance Award”), the vesting of which was tied solely to achieving stock price milestones (“Milestone Prices”), subject to the approval of the Company’s stockholders at the 2022 Annual Meeting of Stockholders. The CEO Performance Award consisted of a 10-year option to purchase an aggregate of 4,366,966 shares of the Company’s common stock, representing approximately 7.5% of the total outstanding shares of the Company’s common stock as of the grant date, and vested in six tranches. Each of the six tranches vested only if the Milestone Prices are met. The Milestone Prices were met when the average VWAP for any 90-calendar day period during the performance period was equal to or greater than such Milestone Price. “VWAP” means the quotient of (i) the sum of the Daily Total Dollar Volume for the designated period of trading days divided by (ii) the sum of the total trading volume of the Company’s common stock as reported on the primary U.S. exchange on which the Company’s common stock trades for the designated period of trading days, with trading days being the days on which the primary U.S. exchange on which the Company’s common stock trades is open for trading. “Daily Total Dollar Volume” means the product of (i) the closing sales price of the Company’s common stock on a given trading day multiplied by (ii) the corresponding day’s trading volume of the Company’s common stock, in each case as reported on the primary U.S. exchange on which the Company’s common stock trades. For the first tranche to vest, the Company must have achieved a Milestone Price of $150 per share, and the next five tranches would only vest if the Company
achieved higher Milestone Prices that increase in $150 per share increments up to a final Milestone Price of $900 per share. The exercise price per share subject to the CEO Performance Award was $32.00, which was the greater of (i) the IPO Price ($32.00 per share) and (ii) the closing sales price of the Company’s common stock on the grant date. The grant date of May 25, 2022 was the date on which two full trading sessions elapsed after the filing of the preliminary proxy statement with the SEC. The CEO Performance Award was approved by the Company’s stockholders at the Annual Meeting held on July 12, 2022.
Recognition of stock-based compensation expense of all the tranches commenced on the date of grant and was recognized ratably over the expected vesting period of each respective tranche. If the related Milestone Price was achieved earlier than its expected achievement period, then the stock-based compensation expense for that vesting tranche would have been accelerated and recorded in the period in which the associated Milestone Price is achieved. The Milestone Price requirement was considered a market condition under ASC 718. The Company estimated the grant date fair value of the CEO Performance Award using Monte Carlo simulations based on the key assumptions for estimating the fair value of the award at the date of grant including volatility of the Company’s common stock price, post-vesting exercise behavior and the derived service period.
On September 10, 2023, Mr. Camara resigned from his position as Chief Executive Officer and member of the Board of Directors, effective immediately. As no Milestone Prices were achieved as of September 10, 2023, the termination resulted in the cancellation of the CEO Performance Award. The Company previously recorded $7.7 million in stock-based compensation as of June 30, 2023. In accordance with ASC 718, the Company reversed the $7.7 million in previously recognized stock-based compensation expense in September 2023, which is the period the termination and cancellation occurred. No stock-based compensation expense was recorded related to the CEO Performance award for the year ended December 31, 2024.
Employee Stock Purchase Plan
In June 2022, the Compensation Committee approved the terms of the Company’s offerings under its 2021 Employee Stock Purchase Plan (“ESPP”). Under the terms of the offering, the Company’s employees can elect to have up to 15% of their annual compensation, up to a maximum of $25,000 per year, withheld to purchase shares of the Company’s common stock for a purchase price equal to 85% of the lesser of the closing fair market value per share of the Company’s common stock on (i) the commencement date of the six-month offering period, or (ii) the respective purchase date. The initial offering period commenced on August 1, 2022 and ended on January 31, 2023 with subsequent six-month offering periods commencing on February 1st and August 1st of each year. The Company recognized total stock-based compensation expense related to the ESPP of $0.3 million and $0.5 million during the years ended December 31, 2024 and 2023, respectively. The Company purchased and distributed 0.1 million and 0.2 million shares of the Company’s common stock during the years ended December 31, 2024 and 2023, respectively.
Share Repurchase Program
In March 2024, the Board of Directors authorized the repurchase of up to $20.0 million of the Company’s outstanding shares of common stock. These trades were completed through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, in accordance with applicable securities laws and other restrictions. As of June 30, 2024, the Company completed the repurchase, under which approximately 2.6 million shares of common stock were repurchased at a weighted average price of $7.66.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.