LegalZoom Reports First Quarter 2024 Financial Results
LegalZoom reported strong financial results for the first quarter of 2024, with a revenue of $174.2 million, up 5% year-over-year. The company has $228.1 million in cash and cash equivalents with no outstanding debt as of March 31, 2024. LegalZoom's CEO highlighted the momentum seen in their ecosystem, driven by new compliance offerings and technology platform innovations. Despite a weaker macro environment, the company exceeded revenue and adjusted EBITDA expectations, achieving 28% growth year-over-year.
Revenue increased by 5% year-over-year to $174.2 million
Subscription revenue grew by 10% year-over-year to $107.9 million
No debt outstanding with $228.1 million in cash and cash equivalents as of March 31, 2024
Adjusted EBITDA exceeded expectations, growing 28% year-over-year
Net income improved to $4.7 million compared to a net loss in the same period in 2023
Transaction revenue decreased by 3% year-over-year to $66.3 million
Net income margin was 3%, down from 1% in the same period in 2023
Business formations declined by 18% year-over-year
Insights
LegalZoom's reported revenue for Q1 2024 indicates a steady year-over-year growth of 5%, with a particularly strong performance in subscription revenue which saw a 10% increase. This suggests that the company is effectively expanding its recurring revenue streams, a positive indicator of stability. The company's strategy to pivot toward subscription models is in line with broader industry trends that value predictable, recurring income.
However, the transactional segment did experience a 3% decline in revenue, despite a 9% increase in transaction units. This could point to a decrease in average transaction value or increased competition affecting pricing. Investors should monitor this area closely, particularly as it suggests a shift in how customers are engaging with LegalZoom's services.
Net income has improved significantly from a net loss to a net gain of $4.7 million. The substantial 301% increase in net income and a 292% increase in net income margin reflect well on the company's profitability. The 16% adjusted EBITDA margin, up from 13% last year, provides further evidence of operational efficiency and cost management.
LegalZoom's cash position is robust, with $228.1 million in cash and no debt, which offers flexibility and resilience. The share repurchase program indicates confidence from management in the company's valuation and a shareholder-friendly capital allocation policy.
While the gross margin has experienced a slight contraction of 4%, this is not uncommon for companies investing in growth initiatives. Careful consideration of how these investments translate to long-term profitability is important for investors.
Overall, the financial health of LegalZoom appears solid, with growth in key areas and a strong balance sheet. Yet, the transaction revenue decline and gross margin contraction are areas to watch.
LegalZoom's introduction of new services, such as the mobile optimized experience and the attorney-drafted Prenuptial agreement offering, reflects a strategic effort to diversify and enrich their product offerings. These service expansions are aligned with consumer needs and could potentially increase customer lifetime value.
The refresh of Estate Plan offerings taps into complimentary markets such as tax planning and business succession, showing LegalZoom's awareness of cross-selling opportunities. Their focus on creating a modern technology platform is a forward-looking move that may cater to evolving customer expectations for digital legal services.
An important metric is the increase in Average Revenue per Subscription Unit (ARPU) by 5%, indicating the company's ability to extract more value from its customers, which can be a lever for future revenue growth.
Given the mixed results in different revenue streams, monitoring the company's execution of its product and technology strategy will be vital. Successful innovation could lead to market share gains, while failure to resonate with customers could pose risks.
LegalZoom's commitment to innovation is evident in their new mobile experience and simplified formations flow. As the number one choice in online small business formations, staying at the forefront of technology is essential to maintaining competitive advantage. The move towards a more tech-driven platform could drive customer engagement and satisfaction.
The performance improvements in their platform's technology are not just about customer convenience but also about operational scalability and efficiency. A modernized platform can lead to reduced costs over time and improved margins, though it often requires upfront investment.
LegalZoom's strategic initiatives in technology development should be seen as laying the groundwork for future scalability. Investors should consider both the immediate impacts on financials and the long-term potential these tech advancements bring.
- Revenue of
$174.2 million for the quarter, an increase of5% year-over-year - Subscription revenue of
$107.9 million for the quarter, an increase of10% year-over-year $228.1 million of cash and cash equivalents and no debt outstanding as of March 31, 2024
MOUNTAIN VIEW, Calif., May 07, 2024 (GLOBE NEWSWIRE) -- LegalZoom.com, Inc. (Nasdaq: LZ), the No. 1 choice in online small business formations, today announced results for its first quarter ended March 31, 2024.
“I am excited by the momentum we are seeing across our ecosystem. We began the year with strong demand for our new compliance offering, continued to enhance our formations experience, and are innovating towards creating a modern technology platform that provides a simple and affordable experience for legal and financial services,” said Dan Wernikoff, LegalZoom’s Chief Executive Officer.
Noel Watson, LegalZoom’s Chief Financial Officer added, “Our solid execution enabled us to achieve our revenue expectations despite a weaker than expected macro environment. Adjusted EBITDA exceeded our expectations, growing
First Quarter 2024 Highlights
- Revenue was
$174.2 million for the quarter, up5% year-over-year:
- Transaction units increased
9% year-over-year; transaction revenue of$66.3 million decreased3% year-over-year. - Subscription units increased
7% year-over-year; subscription revenue of$107.9 million grew10% year-over-year.
- Transaction units increased
- Net income was
$4.7 million for the quarter, or3% of revenue, compared to net loss of$2.4 million , or1% of revenue, for the same period in 2023. Non-GAAP net income was$18.3 million for the quarter compared to Non-GAAP net income of$14.0 million in the same period in 2023. - Adjusted EBITDA was
$27.9 million for the quarter, or16% of revenue, compared to$21.9 million , or13% of revenue, for the same period in 2023. - Cash flow provided by operating activities was
$34.2 million for the quarter compared to$29.2 million for the same period in 2023. - Free cash flow was
$24.7 million for the quarter compared to$21.8 million for the same period in 2023. - Repurchased 1.2 million shares of common stock for a total cost of
$12.8 million , at an average price of$10.91 per share. - Cash and cash equivalents were
$228.1 million as of March 31, 2024 compared to$225.7 million as of December 31, 2023. - During the quarter, LegalZoom:
- Deployed a new mobile optimized experience and simplified formations flow
- Refreshed its Estate Plan offerings, a complimentary need for small business owners in regards to tax planning or business succession, as well as the broader consumer market
- Expanded its presence in attorney services with the launch of an attorney-drafted Prenuptial agreement offering, a simplified, cost effective service hosted on LegalZoom’s proprietary platform
| First Quarter 2024 Key Business Metrics and Non-GAAP Financial Measures (unaudited, in thousands except AOV, ARPU and percentages) | ||||||||||
| Three Months Ended | % Growth | |||||||||
| March 31, | (Decline) | |||||||||
| 2024 | 2023 | YOY | ||||||||
| Total revenue | $ | 174,214 | $ | 165,936 | 5 | % | ||||
| Transaction revenue | $ | 66,317 | $ | 68,027 | (3) | % | ||||
| Subscription revenue | $ | 107,897 | $ | 97,909 | 10 | % | ||||
| Gross Profit | 105,830 | 105,541 | — | % | ||||||
| Gross Margin | 61 | % | 64 | % | (4) | % | ||||
| Net Income (loss) | $ | 4,744 | $ | (2,358 | ) | 301 | % | |||
| Net income (loss) margin | 3 | % | (1) | % | 292 | % | ||||
| Net Income (loss) per share — basic: | $ | 0.03 | $ | (0.01 | ) | 304 | % | |||
| Net Income (loss) per share — diluted: | $ | 0.02 | $ | (0.01 | ) | 299 | % | |||
| Net cash provided by operating activities | $ | 34,194 | $ | 29,208 | 17 | % | ||||
| Non-GAAP Financial Measures | ||||||||||
| Non GAAP net income | $ | 18,344 | $ | 13,998 | 31 | % | ||||
| Non GAAP net income per share — basic: | $ | 0.10 | $ | 0.07 | 33 | % | ||||
| Non GAAP net income per share — diluted: | $ | 0.09 | $ | 0.07 | 30 | % | ||||
| Adjusted EBITDA | $ | 27,902 | $ | 21,868 | 28 | % | ||||
| Adjusted EBITDA margin | 16 | % | 13 | % | 22 | % | ||||
| Free cash flow | $ | 24,717 | $ | 21,780 | 13 | % | ||||
| Key Business Metrics | ||||||||||
| Transaction units | 336 | 308 | 9 | % | ||||||
| Business formations | 139 | 170 | (18) | % | ||||||
| Average order value (AOV) | $ | 198 | $ | 221 | (10) | % | ||||
| Subscription units at period end | 1,605 | 1,501 | 7 | % | ||||||
| Average revenue per subscription unit (ARPU) at period end | $ | 272 | $ | 260 | 5 | % | ||||
| Certain percentages may not recalculate due to rounding. | ||||||||||
Financial Outlook
For the second quarter ending June 30, 2024, LegalZoom currently expects:
- Revenue in the range of
$172 million to$176 million - Adjusted EBITDA in the range of
$25 million to$27 million
For the full year ending December 31, 2024, LegalZoom is reiterating its guidance as follows:
- Revenue is expected to be in the range of
$700 million to$720 million - Adjusted EBITDA is expected to be in the range of
$135 million to$145 million
LegalZoom also expects free cash flow to be in the range of
Webcast and Conference Call Information
A webcast and conference call to discuss first quarter 2024 results is scheduled for today, May 7, 2024, at 4:30 p.m. Eastern time/1:30 p.m. Pacific time. Those interested in participating in the conference call are invited to register Here.
A live audio webcast of the event will be available on the LegalZoom Investor Relations website: https://investors.legalzoom.com. An archived replay of the webcast also will be available shortly after the live event.
Forward-Looking Statements
This press release contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts contained in this press release may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this press release include, but are not limited to, statements regarding our quarterly and annual guidance.
The forward-looking statements in this press release are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including but not limited to the following: our dependence on business formations and fluctuations or declines in the number of business formations may adversely affect our business; our dependence on customers expanding the use of our platform, including converting our transactional customers to subscribers and our subscribers renewing their subscriptions with us; the impact of macroeconomic challenges on our business, including as a result of inflation, global conflict, supply chain issues and recessionary concerns; our ability to sustain our revenue growth rate and remain profitable in the future; our ability to provide high-quality products and services, customer care and customer experience; our ability to continue to innovate and provide a platform that is useful to our customers and that meets our customers’ expectations; the competitive legal solutions market; our dependence on our brand and reputation; our ability to maintain and expand strategic relationships with third parties; our ability to hire and retain top talent and motivate our employees; risks and costs associated with complex and evolving laws and regulations; our ability to maintain effective internal control over financial reporting; and other factors discussed in the section titled “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission, or SEC, on February 29, 2024, as well as those factors in our subsequent filings with the SEC. The forward-looking statements in this press release are based upon information available to us as of the date of this press release, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should read this press release with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this press release, whether as a result of any new information, future events or otherwise.
About Non-GAAP Financial Measures
This press release includes non-GAAP financial measures including Adjusted EBITDA, Adjusted EBITDA margin, Non-GAAP net income, Non-GAAP net income margin, Non-GAAP net income per share and Free cash flow. To supplement our unaudited condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States, or GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may be different from similarly titled measures used by other companies, are presented to enhance investors’ overall understanding of our financial performance and liquidity and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. We believe that these non-GAAP financial measures provide useful information about our financial performance and liquidity, enhance the overall understanding of our past performance and future prospects and allow for greater transparency with respect to important measures used by our management for financial and operational decision-making. We are presenting these non-GAAP measures to assist investors in seeing our financial performance using a management view and because we believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.
We define Adjusted EBITDA as Net income (loss) adjusted to exclude interest expense, interest income, provision for (benefit from) income taxes, depreciation and amortization, other expense (income), net, stock-based compensation, impairment of goodwill, long-lived and other assets, legal expenses, restructuring expenses, transaction-related expenses and certain other non-recurring income and expenses from time to time. Our Adjusted EBITDA financial measure differs from GAAP in that it excludes certain items of income and expense. We define Adjusted EBITDA margin as Adjusted EBITDA as a percentage of revenue.
Adjusted EBITDA is one of the primary performance measures used by our management and our board of directors to understand and evaluate our financial performance and operating trends, including period-to-period comparisons, prepare and approve our annual budget, develop short and long-term operational plans and determine appropriate compensation plans for our employees. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management team and board of directors. In assessing our performance, we exclude certain expenses that we believe are not comparable period over period or that we believe are not indicative of our underlying operating performance. Adjusted EBITDA should not be considered in isolation of, or as an alternative to, measures prepared and presented in accordance with GAAP. There are a number of limitations related to the use of Adjusted EBITDA rather than net income (loss), which is the nearest GAAP equivalent of Adjusted EBITDA. Some of these limitations include that the non-GAAP financial measure:
- may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure;
- does not reflect our capital expenditures, future requirements for capital expenditures or contractual commitments;
- excludes depreciation and amortization and, although these are non-cash expenses, the assets being depreciated may be replaced in the future;
- does not reflect changes in, or cash requirements for, our working capital needs;
- excludes stock-based compensation expense, which has been, and will continue to be, a significant recurring expense for our business and an important part of our compensation strategy; and
- does not reflect certain other expenses that we do not consider representative of our underlying operating performance, but that reduce cash available to us.
We define Non-GAAP net income as net income (loss) adjusted to exclude amortization of acquired intangible assets, stock-based compensation expense, certain transaction-related expenses, and certain other non-recurring income and expenses from time to time, net of related income tax impacts. Our Non-GAAP net income financial measure differs from GAAP in that it excludes certain items of income and expense. We define Net income (loss) margin as net loss as a percentage of revenue. We define Non-GAAP net income (loss) margin as Non-GAAP net income (loss) as a percentage of revenue. We define Non-GAAP net income (loss) per share attributable to common stockholders as Non-GAAP net income (loss) divided by basic and diluted weighted-average common stock. We believe Non-GAAP net income (loss) and Non-GAAP net income (loss) per share attributable to common stockholders are operating performance measures that provide investors and analysts with useful supplemental information about the financial performance of our business.
Free cash flow is a liquidity measure used by management in evaluating the cash generated by our operations after purchases of property and equipment including capitalized internal-use software. We consider Free cash flow to be an important measure because it provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic opportunities, including investing in our business and strengthening our balance sheet. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet and invest in future growth. The usefulness of Free cash flow as an analytical tool has limitations because it excludes certain items that are settled in cash, does not represent residual cash flow available for discretionary expenses, does not reflect our future contractual commitments, and may be calculated differently by other companies in our industry. Accordingly, it should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash used in or provided by operating activities.
We are not providing a reconciliation for our non-GAAP outlook on a forward-looking basis (including the information under “Financial Guidance and Outlook” above), as we are unable to provide a meaningful calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing or amount of various items that would impact the most directly comparable forward-looking GAAP financial measure that have not yet occurred, are out of LegalZoom’s control and/or cannot be reasonably predicted. Forward-looking non-GAAP financial measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.
The tables in this press release contain more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.
LegalZoom
LegalZoom is a leading online platform for business formation in the United States, or U.S. Our unique position at business inception allows us to become a trusted business advisor, supporting the evolving needs of a new business throughout its lifecycle, and we have expanded our platform to include professional expertise and other products, both legal and non-legal, to better meet the needs of small businesses. Driven by a mission to unleash entrepreneurship, we deliver comprehensive legal, tax, accounting and compliance products and expertise to millions of small business owners and their families through easy-to-use technology. We operate across all 50 states and in over 3,000 counties in the U.S., with over two decades of experience in simplifying the legal and compliance process for our customers and empowering entrepreneurs with services that help to make their dream a reality. For more information, please visit www.legalzoom.com.
Contact
Investor Relations
investor@legalzoom.com
| LegalZoom.com, Inc. Unaudited Condensed Consolidated Balance Sheets (In thousands, except par values) | |||||||
| March 31, 2024 | December 31, 2023 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 228,129 | $ | 225,719 | |||
| Accounts receivable, net | 15,726 | 11,738 | |||||
| Prepaid expenses and other current assets | 17,914 | 15,159 | |||||
| Current assets held for sale | 22,722 | 22,722 | |||||
| Total current assets | 284,491 | 275,338 | |||||
| Property and equipment, net | 53,154 | 48,232 | |||||
| Goodwill | 63,318 | 63,318 | |||||
| Intangible assets, net | 12,465 | 13,735 | |||||
| Operating lease right-of-use assets | 7,895 | 8,518 | |||||
| Deferred income taxes | 28,855 | 29,015 | |||||
| Available-for-sale debt securities | 1,160 | 1,159 | |||||
| Other assets | 8,407 | 8,503 | |||||
| Total assets | $ | 459,745 | $ | 447,818 | |||
| Liabilities and stockholders’ equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 34,150 | $ | 32,282 | |||
| Accrued expenses and other current liabilities | 52,569 | 61,678 | |||||
| Deferred revenue | 187,547 | 167,951 | |||||
| Operating lease liabilities | 1,831 | 2,052 | |||||
| Total current liabilities | 276,097 | 263,963 | |||||
| Operating lease liabilities, non-current | 6,645 | 6,966 | |||||
| Deferred revenue | 486 | 490 | |||||
| Other liabilities | 8,611 | 7,565 | |||||
| Total liabilities | 291,839 | 278,984 | |||||
| Commitments and contingencies | |||||||
| Stockholders’ equity: | |||||||
| Preferred stock, | — | — | |||||
| Common stock, | 190 | 189 | |||||
| Additional paid-in capital | 1,108,263 | 1,101,474 | |||||
| Accumulated deficit | (941,075 | ) | (933,061 | ) | |||
| Accumulated other comprehensive income | 528 | 232 | |||||
| Total stockholders’ equity | 167,906 | 168,834 | |||||
| Total liabilities and stockholders’ equity | $ | 459,745 | $ | 447,818 | |||
| LegalZoom.com, Inc. Unaudited Condensed Consolidated Statements of Operations (In thousands, except per share amounts) | ||||||||
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue | $ | 174,214 | $ | 165,936 | ||||
| Cost of revenue | 68,384 | 60,395 | ||||||
| Gross profit | 105,830 | 105,541 | ||||||
| Operating expenses: | ||||||||
| Sales and marketing | 53,753 | 60,150 | ||||||
| Technology and development | 23,957 | 19,683 | ||||||
| General and administrative | 23,065 | 26,504 | ||||||
| Total operating expenses | 100,775 | 106,337 | ||||||
| Income (loss) from operations | 5,055 | (796 | ) | |||||
| Interest expense | (61 | ) | (84 | ) | ||||
| Interest income | 2,887 | 1,665 | ||||||
| Other (expense) income, net | 93 | 694 | ||||||
| Income before income taxes | 7,974 | 1,479 | ||||||
| Provision for income taxes | 3,230 | 3,837 | ||||||
| Net income (loss) | $ | 4,744 | $ | (2,358 | ) | |||
| Net income (loss) per share — basic: | $ | 0.03 | $ | (0.01 | ) | |||
| Net income (loss) per share — diluted: | $ | 0.02 | $ | (0.01 | ) | |||
| Weighted-average shares used to compute net income (loss) per share — basic: | 188,618 | 191,293 | ||||||
| Weighted-average shares used to compute net income (loss) per share — diluted: | 193,397 | 191,293 | ||||||
| LegalZoom.com, Inc. Unaudited Condensed Consolidated Statements of Cash Flows (In thousands) | ||||||||
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) | $ | 4,744 | $ | (2,358 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 7,670 | 5,569 | ||||||
| Amortization of right-of-use assets | 687 | 687 | ||||||
| Amortization of debt issuance costs | 57 | 56 | ||||||
| Stock-based compensation | 14,856 | 16,467 | ||||||
| Deferred income taxes | 1,263 | 2,763 | ||||||
| Change in fair value of contingent consideration | — | (631 | ) | |||||
| Unrealized foreign exchange (gain) loss | 346 | (579 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (3,989 | ) | (2,588 | ) | ||||
| Prepaid expenses and other current assets | (2,758 | ) | (2,869 | ) | ||||
| Other assets | 44 | 348 | ||||||
| Accounts payable | 1,428 | 936 | ||||||
| Accrued expenses and other liabilities | (9,086 | ) | (4,947 | ) | ||||
| Operating lease liabilities | (606 | ) | (572 | ) | ||||
| Income tax payable | (55 | ) | 7 | |||||
| Deferred revenue | 19,593 | 16,918 | ||||||
| Net cash provided by operating activities | 34,194 | 29,208 | ||||||
| Cash flows from investing activities | ||||||||
| Purchase of property and equipment | (9,477 | ) | (7,428 | ) | ||||
| Net cash used in investing activities | (9,477 | ) | (7,428 | ) | ||||
| Cash flows from financing activities | ||||||||
| Repayment of capital lease obligations | (6 | ) | (9 | ) | ||||
| Repurchase of common stock | (12,783 | ) | (6,768 | ) | ||||
| Shares surrendered for settlement of minimum statutory tax withholding | (9,564 | ) | — | |||||
| Proceeds from issuance of stock under employee stock plans | 82 | 22 | ||||||
| Net cash used in financing activities | (22,271 | ) | (6,755 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (36 | ) | 19 | |||||
| Net increase in cash and cash equivalents | 2,410 | 15,044 | ||||||
| Cash and cash equivalents, at beginning of the period | 225,719 | 189,082 | ||||||
| Cash and cash equivalents, at end of the period | $ | 228,129 | $ | 204,126 | ||||
Adjusted EBITDA and Adjusted EBITDA Margin
The following table presents a reconciliation of net income (loss) to Adjusted EBITDA for each of the periods indicated (unaudited):
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (in thousands, except percentages) | ||||||||
| Reconciliation of net income (loss) to Adjusted EBITDA | ||||||||
| Net income (loss) | $ | 4,744 | $ | (2,358 | ) | |||
| Interest expense | 61 | 84 | ||||||
| Interest income | (2,887 | ) | (1,665 | ) | ||||
| Provision for income taxes | 3,230 | 3,837 | ||||||
| Depreciation and amortization | 7,670 | 5,569 | ||||||
| Other (income) expense, net | (93 | ) | (693 | ) | ||||
| Stock-based compensation | 14,856 | 16,467 | ||||||
| Restructuring costs(1) | 321 | 627 | ||||||
| Adjusted EBITDA | $ | 27,902 | $ | 21,868 | ||||
| Net income (loss) margin | 3 | % | (1 | %) | ||||
| Adjusted EBITDA margin | 16 | % | 13 | % | ||||
| (1) | For 2024, restructuring expenses related to the reduction of our U.S. headcount. For 2023, restructuring expenses related to the reduction of our U.K. headcount, which was substantially complete by December 31, 2023. |
Non-GAAP Net Income, Non-GAAP Net Income Margin and diluted Non-GAAP Net Income Per Share
The following table presents a reconciliation of net income (loss) to Non-GAAP net income for each of the periods indicated (unaudited):
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (in thousands, except per share amounts) | ||||||||
| Reconciliation of Net income (loss) to Non-GAAP net income | ||||||||
| Net income (loss) | $ | 4,744 | $ | (2,358 | ) | |||
| Amortization of acquired intangible assets | 1,270 | 1,291 | ||||||
| Stock-based compensation | 14,856 | 16,467 | ||||||
| Restructuring expenses(1) | 321 | 628 | ||||||
| Income tax effects(2) | (2,847 | ) | (2,030 | ) | ||||
| Non-GAAP net income | $ | 18,344 | $ | 13,998 | ||||
| Net income (loss) margin | 3 | % | (1 | %) | ||||
| Non-GAAP net income margin | 11 | % | 8 | % | ||||
| Net income (loss) per share — basic | $ | 0.03 | $ | (0.01 | ) | |||
| Net income (loss) per share — diluted | $ | 0.02 | $ | (0.01 | ) | |||
| Non-GAAP net income per share — basic | $ | 0.10 | $ | 0.07 | ||||
| Non-GAAP net income per share — diluted | $ | 0.09 | $ | 0.07 | ||||
| Weighted-average shares used to compute net income (loss) per share — basic | 188,618 | 191,293 | ||||||
| Weighted-average shares used to compute net income (loss) per share — diluted | 193,397 | 191,293 | ||||||
| Weighted-average shares used to compute Non-GAAP net income per share — basic | 188,618 | 191,293 | ||||||
| Weighted-average shares used to compute Non-GAAP net income per share — diluted | 193,397 | 192,580 | ||||||
| (1) | For 2024, restructuring expenses related to the reduction of our U.S. headcount. For 2023, restructuring expenses related to the reduction of our U.K. headcount, which was substantially complete by December 31, 2023. |
| (2) | The estimated income tax effect of the non-GAAP pre-tax adjustments is determined by applying the statutory rate of the originating jurisdiction, if applicable. |
The following table shows the computation of basic and diluted Non-GAAP net income per share (unaudited):
| Three Months Ended March 31, | ||||||
| 2024 | 2023 | |||||
| (in thousands, except per share amounts) | ||||||
| Non-GAAP net income and Non-GAAP net income per share: | ||||||
| Non-GAAP net income | $ | 18,344 | $ | 13,998 | ||
| Reconciliation of denominator for net income (loss) per share to Non-GAAP net income per share: | ||||||
| Weighted-average shares used to compute Non-GAAP net income per share — basic: | 188,618 | 191,293 | ||||
| Effect of potentially dilutive securities: | ||||||
| Stock options | 2,055 | 457 | ||||
| Restricted stock units | 2,718 | 830 | ||||
| Employee stock purchase plan | 6 | — | ||||
| Weighted-average common stock used in computing Non-GAAP net income per share — diluted | 193,397 | 192,580 | ||||
| Non-GAAP net income per share — basic | $ | 0.10 | $ | 0.07 | ||
| Non-GAAP net income per share — diluted | $ | 0.09 | $ | 0.07 | ||
Free Cash Flow
The following table presents a reconciliation of net cash provided by operating activities to free cash flow (unaudited):
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow | ||||||||
| Net cash provided by operating activities | $ | 34,194 | $ | 29,208 | ||||
| Purchase of property and equipment | (9,477 | ) | (7,428 | ) | ||||
| Free cash flow | $ | 24,717 | $ | 21,780 | ||||
FAQ
What was LegalZoom's revenue for the first quarter of 2024?
Did LegalZoom have any outstanding debt as of March 31, 2024?
What was the growth in LegalZoom's subscription revenue year-over-year?
What was the net income for LegalZoom in the first quarter of 2024?
What was the adjusted EBITDA growth for LegalZoom in the first quarter of 2024?
