LegalZoom Reports Second Quarter 2024 Financial Results
LegalZoom (Nasdaq: LZ) reported its Q2 2024 financial results, highlighting a 5% year-over-year revenue increase to $177.4 million. Subscription revenue grew 6% to $108.8 million, while transaction revenue rose 4% to $68.5 million. The company announced three execution priorities to reaccelerate growth and enhance margins, including a focus on accelerating subscriptions and a broader go-to-market strategy. LegalZoom also revealed a restructuring plan, reducing its global workforce by 15% and expecting $25 million in annualized savings. Despite these changes, the company is reiterating its full-year revenue outlook of $675-$685 million and adjusted EBITDA of $135-$145 million.
LegalZoom (Nasdaq: LZ) ha riportato i risultati finanziari del secondo trimestre del 2024, evidenziando un aumento del 5% dei ricavi annuali a 177,4 milioni di dollari. I ricavi da abbonamento sono cresciuti del 6% a 108,8 milioni di dollari, mentre i ricavi da transazioni sono aumentati del 4% a 68,5 milioni di dollari. L'azienda ha annunciato tre priorità operative per riaccelerare la crescita e migliorare i margini, inclusa l'attenzione sull'accelerazione degli abbonamenti e una strategia di go-to-market più ampia. LegalZoom ha anche rivelato un piano di ristrutturazione, riducendo la propria forza lavoro globale del 15% e prevedendo savings annualizzati di 25 milioni di dollari. Nonostante questi cambiamenti, l'azienda conferma la sua previsione di fatturato per l'intero anno, compresa tra 675 e 685 milioni di dollari, e un EBITDA rettificato tra 135 e 145 milioni di dollari.
LegalZoom (Nasdaq: LZ) reportó sus resultados financieros del segundo trimestre de 2024, destacando un incremento del 5% en los ingresos interanuales a 177,4 millones de dólares. Los ingresos por suscripción crecieron un 6% a 108,8 millones de dólares, mientras que los ingresos por transacciones aumentaron un 4% a 68,5 millones de dólares. La empresa anunció tres prioridades estratégicas para reimpulsar el crecimiento y mejorar los márgenes, incluidas la aceleración de suscripciones y una estrategia de entrada al mercado más amplia. LegalZoom también reveló un plan de reestructuración, reduciendo su fuerza laboral global en un 15% y esperando ahorros anualizados de 25 millones de dólares. A pesar de estos cambios, la empresa reafirma su previsión de ingresos para todo el año, que se sitúa entre 675 y 685 millones de dólares, y un EBITDA ajustado de entre 135 y 145 millones de dólares.
LegalZoom (Nasdaq: LZ)는 2024년 2분기 재무 결과를 발표하며 전년 대비 5%의 수익 증가를 기록하여 1억 7,740만 달러에 달했다고 밝혔습니다. 구독 수익은 6% 증가하여 1억 8백만 달러에 이르렀으며, 거래 수익은 4% 증가하여 6,850만 달러에 달했습니다. 회사는 성장 재가속화와 마진 강화를 위한 세 가지 실행 우선 사항을 발표했으며, 구독 가속화 및 더 광범위한 시장 진입 전략에 초점을 맞추고 있습니다. LegalZoom는 또한 구조 조정 계획을 발표하여 전 세계 인력을 15% 줄이고 연간 2,500만 달러의 절감 효과를 기대하고 있습니다. 이러한 변화에도 불구하고, 회사는 연간 수익 예상치를 6억 7,500만~6억 8,500만 달러, 조정된 EBITDA를 1억 3,500만~1억 4,500만 달러로 재확인하고 있습니다.
LegalZoom (Nasdaq: LZ) a publié ses résultats financiers pour le deuxième trimestre de 2024, mettant en avant une augmentation de 5% des revenus par rapport à l'année précédente, atteignant 177,4 millions de dollars. Les revenus d'abonnement ont augmenté de 6%, s'élevant à 108,8 millions de dollars, tandis que les revenus de transaction ont progressé de 4%, totalisant 68,5 millions de dollars. L'entreprise a annoncé trois priorités opérationnelles pour réaccélérer la croissance et améliorer les marges, notamment un accent sur l'accélération des abonnements et une stratégie d'accès au marché plus large. LegalZoom a également révélé un plan de restructuration, réduisant sa main-d'œuvre mondiale de 15% et prévoyant des économies annuelles de 25 millions de dollars. Malgré ces changements, l'entreprise réitère ses prévisions de revenus pour l'année entière, entre 675 et 685 millions de dollars, et un EBITDA ajusté entre 135 et 145 millions de dollars.
LegalZoom (Nasdaq: LZ) hat seine Finanzergebnisse für das zweite Quartal 2024 veröffentlicht und dabei einen Umsatzanstieg von 5% im Jahresvergleich auf 177,4 Millionen Dollar hervorgehoben. Die Abonnementeinnahmen stiegen um 6% auf 108,8 Millionen Dollar, während die Transaktionseinnahmen um 4% auf 68,5 Millionen Dollar zunahmen. Das Unternehmen gab drei Prioritäten zur Beschleunigung des Wachstums und Verbesserung der Margen bekannt, darunter einen Fokus auf die Beschleunigung von Abonnements und eine breitere Markteintrittsstrategie. LegalZoom gab zudem einen Restrukturierungsplan bekannt, der die Reduzierung der globalen Belegschaft um 15% vorsieht, mit der Erwartung von jährlichen Einsparungen von 25 Millionen Dollar. Trotz dieser Veränderungen bekräftigt das Unternehmen seine Umsatzprognose für das Gesamtjahr von 675 bis 685 Millionen Dollar und ein bereinigtes EBITDA von 135 bis 145 Millionen Dollar.
- Revenue increased 5% year-over-year to $177.4 million
- Subscription revenue grew 6% to $108.8 million
- Transaction revenue rose 4% to $68.5 million
- Adjusted EBITDA was $28.9 million, or 16% of revenue
- Expected $25 million in annualized savings from restructuring efforts
- Net income decreased 6% year-over-year to $1.3 million
- Adjusted EBITDA margin decreased from 18% to 16% year-over-year
- Free cash flow declined 54% to $17.4 million
- Business formations decreased 17% year-over-year
- Announced 15% reduction in global workforce
Insights
LegalZoom's Q2 2024 results show mixed performance. While revenue grew
The announced restructuring, including a
LegalZoom's performance reflects broader market challenges in the small business sector. The
The shift towards legal expert solutions combining human and machine expertise could differentiate LegalZoom in a competitive market. This strategy, along with a broader go-to-market approach, may help offset the slowdown in new business formations. Investors should watch for signs of success in these initiatives, as they could be important for long-term growth in a challenging economic environment.
LegalZoom's pivot towards a product lineup emphasizing both human and machine expertise is a strategic move in the legal tech space. This hybrid approach could potentially enhance customer value and differentiate the company from purely automated solutions. The focus on accelerating subscriptions aligns with industry trends towards recurring revenue models in SaaS.
However, the company's tech investment and innovation pace will be important to watch, especially given the cost-cutting measures. The
- Second quarter subscription revenue of
$108.8 million for the quarter, an increase of6% year-over-year - Announces three execution priorities designed to reaccelerate growth and enhance margins
- Announces restructuring and approximately
$25 million of annualized savings
MOUNTAIN VIEW, Calif., Aug. 07, 2024 (GLOBE NEWSWIRE) -- LegalZoom.com, Inc. (Nasdaq: LZ), the No. 1 choice in online small business formations, today announced results for its second quarter ended June 30, 2024.
“I am excited to be taking an active and direct role in executing LegalZoom’s growth strategy,” said Jeff Stibel, Chairman and Chief Executive Officer of LegalZoom. “Moving forward, we are focused on driving more resilient recurring revenue by reorienting our priorities to focus on accelerating subscriptions, a broader go-to-market strategy, and a product line-up of legal expert solutions that emphasizes human and machine expertise. We are confident these three areas of executional focus will drive sustainable long-term growth alongside increasing margins.”
Noel Watson, LegalZoom’s Chief Financial Officer said, “We exceeded the high-end of our second quarter outlook due to stronger than expected fulfillment. We are reiterating our full-year revenue outlook reflecting a lower macro expectation for small business formations and near-term changes to our execution priorities. In response to these factors, we have realigned our business and cost structure. We have also made the difficult decision to restructure our organization, including a reduction of our global workforce by
Second Quarter 2024 Highlights
- Revenue was
$177.4 million for the quarter, up5% year-over-year:- Transaction units increased
3% year-over-year; transaction revenue of$68.5 million increased4% year-over-year. - Subscription units increased
4% year-over-year; subscription revenue of$108.8 million grew6% year-over-year.
- Transaction units increased
- Net income was
$1.3 million for the quarter, or1% of revenue, compared to net income of$1.4 million , or1% of revenue, for the same period in 2023. - Non-GAAP net income was
$18.8 million for the quarter compared to Non-GAAP net income of$19.0 million in the same period in 2023. - Adjusted EBITDA was
$28.9 million for the quarter, or16% of revenue, compared to$29.6 million , or18% of revenue, for the same period in 2023. - Cash flow provided by operating activities was
$27.2 million for the quarter compared to$45.2 million for the same period in 2023. - Free cash flow was
$17.4 million for the quarter compared to$37.4 million for the same period in 2023. - Repurchased 13.9 million shares of common stock for a total cost of
$125.2 million , at an average price of$8.99 per share. - Cash and cash equivalents were
$118.8 million as of June 30, 2024 compared to$225.7 million as of December 31, 2023.
Recent Developments
- On July 9, 2024 LegalZoom announced the appointment of Jeff Stibel, current Chair of the Board, to serve as Chief Executive Officer, effective immediately.
- On August 7, 2024 LegalZoom announced restructuring efforts resulting in a
15% reduction of its global workforce. LegalZoom expects to incur approximately$5 million in severance expenses in the full year ended December 31, 2024 related to the restructuring. LegalZoom has also reduced and realigned its hiring efforts in line with its three execution priorities. LegalZoom expects the combination of these efforts to drive approximately$12 million in savings in the full year ending December 31, 2024, and annualized savings of approximately$25 million .
Second Quarter 2024 Key Business Metrics and Non-GAAP Financial Measures
(unaudited, in thousands except AOV, ARPU and percentages)
| % Growth | % Growth | ||||||||||||||||||||
| Three Months Ended June 30, | (Decline) | Six Months Ended June 30, | (Decline) | ||||||||||||||||||
| 2024 | 2023 | YOY | 2024 | 2023 | YOY | ||||||||||||||||
| Total revenue | $ | 177,362 | $ | 168,854 | 5 | % | $ | 351,576 | $ | 334,790 | 5 | % | |||||||||
| Transaction revenue | $ | 68,537 | $ | 65,863 | 4 | % | $ | 134,854 | $ | 133,890 | 1 | % | |||||||||
| Subscription revenue | $ | 108,825 | $ | 102,991 | 6 | % | $ | 216,722 | $ | 200,900 | 8 | % | |||||||||
| Gross profit | $ | 113,753 | $ | 105,106 | 8 | % | $ | 219,583 | $ | 210,647 | 4 | % | |||||||||
| Gross margin | 64 | % | 62 | % | 3 | % | 62 | % | 63 | % | (2 | %) | |||||||||
| Net Income (loss) | $ | 1,314 | $ | 1,395 | (6 | %) | $ | 6,058 | $ | (963 | ) | 729 | % | ||||||||
| Net income (loss) margin | 1 | % | 1 | % | — | % | 2 | % | — | % | n/m | ||||||||||
| Net Income (loss) per share — basic: | $ | 0.01 | $ | 0.01 | — | % | $ | 0.03 | $ | (0.01 | ) | 400 | % | ||||||||
| Net Income (loss) per share — diluted: | $ | 0.01 | $ | 0.01 | — | % | $ | 0.03 | $ | (0.01 | ) | 400 | % | ||||||||
| Net cash provided by operating activities | $ | 27,245 | $ | 45,165 | (40 | %) | $ | 61,440 | $ | 74,373 | (17 | %) | |||||||||
| Non-GAAP Financial Measures | |||||||||||||||||||||
| Non-GAAP net income | $ | 18,810 | $ | 19,035 | (1 | %) | $ | 37,154 | $ | 33,033 | 12 | % | |||||||||
| Non-GAAP net income per share — basic: | $ | 0.10 | $ | 0.10 | — | % | $ | 0.20 | $ | 0.17 | 18 | % | |||||||||
| Non-GAAP net income per share — diluted: | $ | 0.10 | $ | 0.10 | — | % | $ | 0.20 | $ | 0.17 | 18 | % | |||||||||
| Adjusted EBITDA | $ | 28,912 | $ | 29,645 | (2 | %) | $ | 56,814 | $ | 51,513 | 10 | % | |||||||||
| Adjusted EBITDA margin | 16 | % | 18 | % | (11 | %) | 16 | % | 15 | % | 7 | % | |||||||||
| Free cash flow | $ | 17,372 | $ | 37,366 | (54 | %) | $ | 42,089 | $ | 59,146 | (29 | %) | |||||||||
| Key Business Metrics | |||||||||||||||||||||
| Transaction units | 292 | 283 | 3 | % | 628 | 591 | 6 | % | |||||||||||||
| Business formations | 134 | 161 | (17 | %) | 273 | 331 | (18 | %) | |||||||||||||
| Average order value (AOV) | $ | 234 | $ | 233 | — | % | $ | 215 | $ | 226 | (5 | %) | |||||||||
| Subscription units at period end | 1,609 | 1,553 | 4 | % | 1,609 | 1,553 | 4 | % | |||||||||||||
| Average revenue per subscription unit (ARPU) at period end | $ | 271 | $ | 261 | 4 | % | $ | 271 | $ | 261 | 4 | % | |||||||||
| Certain percentages may not recalculate due to rounding. | |||||||||||||||||||||
Financial Outlook
For the third quarter ending September 30, 2024, LegalZoom currently expects:
- Revenue in the range of
$165 million to$169 million - Adjusted EBITDA in the range of
$39 million to$41 million
For the full year ending December 31, 2024, LegalZoom is reiterating its guidance originally provided on July 9, 2024 as follows:
- Revenue is expected to be in the range of
$675 million to$685 million - Adjusted EBITDA is expected to be in the range of
$135 million to$145 million - Free cash flow in the range of
$75 million to$85 million
Webcast and Conference Call Information
A webcast and conference call to discuss second quarter 2024 results is scheduled for today, August 7, 2024, at 4:30 p.m. Eastern time/1:30 p.m. Pacific time. To access the live call by telephone please dial (800) 715-9871 (USA and Canada) or (646) 307-1963 (International) and provide the Conference ID 4382883.
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 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 filed with the Securities and Exchange Commission, or SEC, on May 7, 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) | |||||||
| June 30, 2024 | December 31, 2023 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 118,795 | $ | 225,719 | |||
| Accounts receivable, net | 15,347 | 11,738 | |||||
| Prepaid expenses and other current assets | 22,414 | 15,159 | |||||
| Current assets held for sale | 22,722 | 22,722 | |||||
| Total current assets | 179,278 | 275,338 | |||||
| Property and equipment, net | 57,136 | 48,232 | |||||
| Goodwill | 63,318 | 63,318 | |||||
| Intangible assets, net | 11,194 | 13,735 | |||||
| Operating lease right-of-use assets | 7,212 | 8,518 | |||||
| Deferred income taxes | 31,396 | 29,015 | |||||
| Available-for-sale debt securities | 1,374 | 1,159 | |||||
| Other assets | 8,607 | 8,503 | |||||
| Total assets | $ | 359,515 | $ | 447,818 | |||
| Liabilities and stockholders’ equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 34,247 | $ | 32,282 | |||
| Accrued expenses and other current liabilities | 58,020 | 61,678 | |||||
| Deferred revenue | 189,146 | 167,951 | |||||
| Operating lease liabilities | 1,630 | 2,052 | |||||
| Total current liabilities | 283,043 | 263,963 | |||||
| Operating lease liabilities, non-current | 6,255 | 6,966 | |||||
| Deferred revenue | 452 | 490 | |||||
| Other liabilities | 9,003 | 7,565 | |||||
| Total liabilities | 298,753 | 278,984 | |||||
| Commitments and contingencies | |||||||
| Stockholders’ equity: | |||||||
| Preferred stock, | — | — | |||||
| Common stock, | 177 | 189 | |||||
| Additional paid-in capital | 1,125,942 | 1,101,474 | |||||
| Accumulated deficit | (1,066,035 | ) | (933,061 | ) | |||
| Accumulated other comprehensive income | 678 | 232 | |||||
| Total stockholders’ equity | 60,762 | 168,834 | |||||
| Total liabilities and stockholders’ equity | $ | 359,515 | $ | 447,818 | |||
| LegalZoom.com, Inc. Unaudited Condensed Consolidated Statements of Operations (In thousands, except per share amounts) | ||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | 177,362 | $ | 168,854 | $ | 351,576 | $ | 334,790 | ||||||||
| Cost of revenue | 63,609 | 63,748 | 131,993 | 124,143 | ||||||||||||
| Gross profit | 113,753 | 105,106 | 219,583 | 210,647 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing | 60,130 | 53,525 | 113,883 | 113,675 | ||||||||||||
| Technology and development | 25,798 | 19,900 | 49,755 | 39,583 | ||||||||||||
| General and administrative | 26,679 | 26,936 | 49,744 | 53,440 | ||||||||||||
| Total operating expenses | 112,607 | 100,361 | 213,382 | 206,698 | ||||||||||||
| Income from operations | 1,146 | 4,745 | 6,201 | 3,949 | ||||||||||||
| Interest expense | (112 | ) | (87 | ) | (173 | ) | (171 | ) | ||||||||
| Interest income | 2,315 | 2,240 | 5,202 | 3,905 | ||||||||||||
| Other (expense) income, net | 11 | 624 | 104 | 1,318 | ||||||||||||
| Income before income taxes | 3,360 | 7,522 | 11,334 | 9,001 | ||||||||||||
| Provision for income taxes | 2,046 | 6,127 | 5,276 | 9,964 | ||||||||||||
| Net income (loss) | $ | 1,314 | $ | 1,395 | $ | 6,058 | $ | (963 | ) | |||||||
| Net income (loss) per share — basic: | $ | 0.01 | $ | 0.01 | $ | 0.03 | $ | (0.01 | ) | |||||||
| Net income (loss) per share — diluted: | $ | 0.01 | $ | 0.01 | $ | 0.03 | $ | (0.01 | ) | |||||||
| Weighted-average shares used to compute net income (loss) per share — basic: | 184,257 | 191,342 | 186,438 | 191,318 | ||||||||||||
| Weighted-average shares used to compute net income (loss) per share — diluted: | 186,456 | 194,826 | 189,926 | 191,318 | ||||||||||||
| LegalZoom.com, Inc. Unaudited Condensed Consolidated Statements of Cash Flows (In thousands) | ||||||||
| Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) | $ | 6,058 | $ | (963 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 16,096 | 11,406 | ||||||
| Amortization of right-of-use assets | 1,369 | 1,336 | ||||||
| Amortization of debt issuance costs | 113 | 112 | ||||||
| Stock-based compensation | 33,771 | 35,423 | ||||||
| Deferred income taxes | (879 | ) | 7,614 | |||||
| Change in fair value of contingent consideration | — | (695 | ) | |||||
| Unrealized foreign exchange (gain) loss | 338 | (1,104 | ) | |||||
| Other | — | (1 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (3,436 | ) | (316 | ) | ||||
| Prepaid expenses and other current assets | (7,265 | ) | 3,407 | |||||
| Other assets | (254 | ) | 4 | |||||
| Accounts payable | 1,935 | 8,319 | ||||||
| Accrued expenses and other liabilities | (6,309 | ) | (4,082 | ) | ||||
| Operating lease liabilities | (1,196 | ) | (1,132 | ) | ||||
| Income tax payable | (59 | ) | 8 | |||||
| Deferred revenue | 21,158 | 15,037 | ||||||
| Net cash provided by operating activities | 61,440 | 74,373 | ||||||
| Cash flows from investing activities | ||||||||
| Purchase of property and equipment | (19,351 | ) | (15,227 | ) | ||||
| Net cash used in investing activities | (19,351 | ) | (15,227 | ) | ||||
| Cash flows from financing activities | ||||||||
| Repayment of capital lease obligations | (13 | ) | (18 | ) | ||||
| Repurchase of common stock | (136,450 | ) | (9,809 | ) | ||||
| Shares surrendered for settlement of minimum statutory tax withholding | (14,160 | ) | (2,469 | ) | ||||
| Proceeds from issuance of stock under employee stock plans | 1,642 | 2,973 | ||||||
| Net cash used in financing activities | (148,981 | ) | (9,323 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (32 | ) | 32 | |||||
| Net (decrease) increase in cash and cash equivalents | (106,924 | ) | 49,855 | |||||
| Cash and cash equivalents, at beginning of the period | 225,719 | 189,082 | ||||||
| Cash and cash equivalents, at end of the period | $ | 118,795 | $ | 238,937 | ||||
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 June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (in thousands, except percentages) | ||||||||||||||||
| Reconciliation of net income (loss) to Adjusted EBITDA | ||||||||||||||||
| Net income (loss) | $ | 1,314 | $ | 1,395 | $ | 6,058 | $ | (963 | ) | |||||||
| Interest expense | 112 | 87 | 173 | 171 | ||||||||||||
| Interest income | (2,315 | ) | (2,240 | ) | (5,202 | ) | (3,905 | ) | ||||||||
| Provision for income taxes | 2,046 | 6,127 | 5,276 | 9,964 | ||||||||||||
| Depreciation and amortization | 8,426 | 5,837 | 16,096 | 11,406 | ||||||||||||
| Other (income) expense, net | (11 | ) | (624 | ) | (104 | ) | (1,318 | ) | ||||||||
| Stock-based compensation | 18,915 | 18,956 | 33,771 | 35,423 | ||||||||||||
| Restructuring costs(1) | 425 | 107 | 746 | 735 | ||||||||||||
| Adjusted EBITDA | $ | 28,912 | $ | 29,645 | $ | 56,814 | $ | 51,513 | ||||||||
| Net income (loss) margin | 1 | % | 1 | % | 2 | % | — | % | ||||||||
| Adjusted EBITDA margin | 16 | % | 18 | % | 16 | % | 15 | % | ||||||||
| (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 June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||
| Reconciliation of Net income (loss) to Non-GAAP net income | ||||||||||||||||
| Net income (loss) | $ | 1,314 | $ | 1,395 | $ | 6,058 | $ | (963 | ) | |||||||
| Amortization of acquired intangible assets | 1,271 | 1,291 | 2,541 | 2,582 | ||||||||||||
| Stock-based compensation | 18,915 | 18,956 | 33,771 | 35,423 | ||||||||||||
| Restructuring costs(1) | 425 | 107 | 746 | 735 | ||||||||||||
| Income tax effects (2) | (3,115 | ) | (2,714 | ) | (5,962 | ) | (4,744 | ) | ||||||||
| Non-GAAP net income | $ | 18,810 | $ | 19,035 | $ | 37,154 | $ | 33,033 | ||||||||
| Net income (loss) margin | 1 | % | 1 | % | 2 | % | — | % | ||||||||
| Non-GAAP net income margin | 11 | % | 11 | % | 11 | % | 10 | % | ||||||||
| Net income (loss) per share — basic | $ | 0.01 | $ | 0.01 | $ | 0.03 | $ | (0.01 | ) | |||||||
| Net income (loss) per share — diluted | $ | 0.01 | $ | 0.01 | $ | 0.03 | $ | (0.01 | ) | |||||||
| Non-GAAP net income per share — basic | $ | 0.10 | $ | 0.10 | $ | 0.20 | $ | 0.17 | ||||||||
| Non-GAAP net income per share — diluted | $ | 0.10 | $ | 0.10 | $ | 0.20 | $ | 0.17 | ||||||||
| Weighted-average shares used to compute net income (loss) per share — basic | 184,257 | 191,342 | 186,438 | 191,318 | ||||||||||||
| Weighted-average shares used to compute net income (loss) per share — diluted | 186,456 | 194,826 | 189,926 | 191,318 | ||||||||||||
| Weighted-average shares used to compute Non-GAAP net income per share — basic | 184,257 | 191,342 | 186,438 | 191,318 | ||||||||||||
| Weighted-average shares used to compute Non-GAAP net income per share — diluted | 186,456 | 194,826 | 189,926 | 193,703 | ||||||||||||
| (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 June 30, | Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| (in thousands, except per share amounts) | ||||||||||||
| Non-GAAP net income and Non-GAAP net income per share: | ||||||||||||
| Non-GAAP net income | $ | 18,810 | $ | 19,035 | $ | 37,154 | $ | 33,033 | ||||
| Reconciliation of denominator for net income (loss) per share to Non-GAAP net income per share: | ||||||||||||
| Weighted-average shares used to compute net income (loss) per share — basic: | 184,257 | 191,342 | 186,438 | 191,318 | ||||||||
| Effect of potentially dilutive securities: | ||||||||||||
| Options to purchase common stock | 789 | 884 | 1,422 | 671 | ||||||||
| RSUs | 1,386 | 2,583 | 2,052 | 1,706 | ||||||||
| Employee stock purchase plan | 24 | 17 | 14 | 8 | ||||||||
| Weighted-average common stock used in computing Non-GAAP net income per share — diluted | 186,456 | 194,826 | 189,926 | 193,703 | ||||||||
| Non-GAAP net income per share — basic | $ | 0.10 | $ | 0.10 | $ | 0.20 | $ | 0.17 | ||||
| Non-GAAP net income per share — diluted | $ | 0.10 | $ | 0.10 | $ | 0.20 | $ | 0.17 | ||||
Free Cash Flow
The following table presents a reconciliation of net cash provided by operating activities to free cash flow (unaudited):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (in thousands) | ||||||||||||||||
| Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow | ||||||||||||||||
| Net cash provided by operating activities | $ | 27,245 | $ | 45,165 | $ | 61,440 | $ | 74,373 | ||||||||
| Purchase of property and equipment | (9,873 | ) | (7,799 | ) | (19,351 | ) | (15,227 | ) | ||||||||
| Free cash flow | $ | 17,372 | $ | 37,366 | $ | 42,089 | $ | 59,146 | ||||||||
FAQ
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