LegalZoom Reports Fourth Quarter and Full Year 2024 Financial Results; Announces 2025 Guidance of 5% Revenue Growth and Expanding Margins

• Continued strong execution with Q4 and full year 2024 financial results at high end of outlook range
• Ongoing progress towards initiatives to grow subscription business; full-year subscription revenue of $436.2 million up 6% year-over-year
• Full-year net income of $30.0 million, up 115% year-over-year, and net income margin of 4%
• Full year Adjusted EBITDA of $148.1 million, up 25% year-over-year, and Adjusted EBITDA margin of 22%, reflecting approximately 380 basis point expansion in Adjusted EBITDA margin
• $142.1 million of cash and cash equivalents and no debt outstanding as of December 31, 2024
• Subsequent to year end, announced the acquisition of Formation Nation to support growth strategy

MOUNTAIN VIEW, Calif., Feb. 26, 2025 (GLOBE NEWSWIRE) -- LegalZoom.com, Inc. (Nasdaq: LZ), a leading online platform for legal services, today announced results for its fourth quarter and year ended December 31, 2024.

"We are making solid progress against our goal to position LegalZoom for long-term, sustainable growth,” said Jeff Stibel, Chairman and Chief Executive Officer of LegalZoom. "Our execution in 2025 includes a narrowed focus on our core legal and compliance competencies, quality customer acquisition, and a continued emphasis on prioritizing recurring subscription revenue. Our efforts will be supported by driving greater brand awareness, providing best-in-class service, weaving expertise through our products, and pricing for the value we provide.”

Noel Watson, LegalZoom's Chief Operating Officer and Chief Financial Officer said, "LegalZoom demonstrated strong execution in the fourth quarter with results at or above the high-end of our outlook. In 2025, we remain committed to accelerating subscription revenue growth and expect to exit the year with a double-digit increase in subscription revenue while driving continued operating efficiencies and delivering a strong margin profile.”

Fourth Quarter 2024 Highlights

• Revenue was $161.7 million for the quarter, up 2% year-over-year.
  • Transaction revenue was $53.0 million for the quarter, compared to $51.9 million in the same period in 2023, up 2% year-over-year.
  • Subscription revenue was $108.7 million for the quarter, compared to $106.7 million in the same period in 2023, up 2% year-over-year. The increase was driven by the addition of 0.2 million net new subscription units during the trailing twelve months.
• Gross margin was 67% for the quarter compared to 65% in the same period in 2023.
• Net income was $12.9 million for the quarter, or 8% of revenue, compared to $7.4 million, or 5% of revenue, in the same period in 2023.
• Adjusted EBITDA was $44.2 million for the quarter, or 27% of revenue, compared to $33.4 million, or 21% of revenue, for the same period in 2023.
• Non-GAAP net income was $32.6 million for the quarter compared to $24.1 million in the same period in 2023.
• Cash and cash equivalents were $142.1 million as of December 31, 2024 compared to $225.7 million as of December 31, 2023.
• Cash flows provided by operating activities were $42.6 million for the quarter ended December 31, 2024 compared to $22.5 million in the same period in 2023.
• Free cash flow was $35.9 million for the quarter ended December 31, 2024 compared to $14.1 million in the same period in 2023.
• Basic and diluted net income per share was $0.07 for the quarter compared to a basic and diluted net income per share of $0.04 for the same period in 2023. Basic and diluted Non-GAAP net income per share was $0.19 for the quarter in 2024 compared to basic and diluted Non-GAAP net income per share of $0.13 for the same period in 2023.
• Subsequent to the end of the quarter, on February 10, 2025, LegalZoom announced the acquisition of Formation Nation, Inc., a small business services company. The acquisition supports LegalZoom's growth initiatives and, inclusive of synergies, is expected to positively contribute to Adjusted EBITDA and be accretive to Non-GAAP net income per share in the first year of the acquisition.

Key Business Metrics and Non-GAAP Financial Measures

(Unaudited, in thousands except AOV, ARPU and percentages)

Financial Guidance and Outlook

Our guidance for the first quarter ending March 31, 2025 is as follows:

• Revenue is expected to be in the range of $175 million to $179 million
• Adjusted EBITDA is expected to be in the range of $33 million to $36 million

Our guidance for the full year ending December 31, 2025 is as follows:

• Revenue growth of approximately 5% year-over-year
• Adjusted EBITDA margin of approximately 23%

Webcast and Conference Call Information

A webcast and conference call to discuss fourth quarter and full year 2024 results is scheduled for today, February 26, 2025, 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; 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 or uncertainty on our business; 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; our ability to effectively integrate Formation Nation, Inc. into our existing operations; risks and costs associated with complex and evolving laws and regulations; our ability to maintain effective in our internal control over financial reporting; and any factors discussed in the section titled "Risk Factors” included in our Quarterly Report on Form 10-Q for the three months ended September 30, 2024 filed with the Securities and Exchange Commission, or SEC, on November 6, 2024, as well as any 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 other equity securities, impairment of long-lived assets, 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 as Non-GAAP net income (loss) divided by basic and diluted weighted-averag