Core Viewpoint - LegalZoom.com, Inc. has appointed Pratik Savai as the new Chief Technology Officer to enhance its technology ecosystem and leverage emerging technologies like generative AI to simplify legal processes for users [1][2]. Company Overview - LegalZoom is a leading online platform that transforms how individuals and small businesses navigate the legal system by combining intuitive technology with access to experienced attorneys [4]. - The company has served millions of customers over two decades, providing tools and guidance for various legal needs, including business formation, compliance, and estate planning [5]. Leadership and Expertise - Pratik Savai is recognized as an innovative leader with extensive technical expertise, having previously served as CTO at Elation Health, where he led teams to create transformative solutions for small businesses and large health providers [2]. - His prior experience includes a 16-year tenure at Cornerstone OnDemand, where he focused on workforce agility and contributed to building businesses with over $840 million in recurring subscription revenues [2]. Vision and Goals - Pratik Savai expressed excitement about joining LegalZoom at a pivotal time, emphasizing the company's role in reshaping access to legal services and creating opportunities for businesses and individuals [3]. - He aims to collaborate with the technology team to drive innovation and enhance efficiency, accessibility, and customer experience in the legal industry [3].

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Financial Data and Key Metrics Changes - The company achieved fourth quarter revenue of $162 million, marking a 2% year-over-year increase, with subscription revenue also growing by 2% due to stronger compliance-related subscriptions [12][39] - Adjusted EBITDA for Q4 was $44 million, representing a 27% margin, which is a 32% year-over-year increase compared to $33 million in the same period last year [16][44] - Full-year adjusted EBITDA was $148 million, reflecting a 25% year-over-year growth, with adjusted EBITDA margins increasing by 380 basis points to 22% [35][36] Business Line Data and Key Metrics Changes - Subscription revenue reached $109 million in Q4, up 2% year-over-year, while transaction revenue was $53 million, also up 2% [39][37] - The company recorded 241,000 transaction units in Q4, a 12% increase, but business formations declined by 15% to 96,000 units [38][39] - Average order value decreased by 9% to $220, driven by a higher mix of lower-priced transactions [40] Market Data and Key Metrics Changes - The company noted a decline in formations faster than the overall US business formations, indicating a strategic shift towards attracting higher-value customers [13] - The average revenue per user (ARPU) was $263 for Q4, down 5% due to pricing changes in compliance-related subscriptions [40] Company Strategy and Development Direction - The company is focusing on optimizing its subscription business, reorienting its go-to-market strategy, and leveraging AI to enhance service delivery [8][9] - A new marketing campaign is set to launch in spring 2025, emphasizing the company's premium positioning in the legal services market [22] - The acquisition of Formation Nation is expected to enhance customer service, expand offerings, and strengthen market position [30][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a 5% year-over-year revenue growth in 2025, with expectations of reaccelerating subscription revenue growth [15][50] - The company anticipates challenges from the beneficial ownership filing requirement and the discontinuation of new customer acquisition related to its tax offering, which may impact revenue growth [51][52] - Management emphasized a focus on quality over quantity in customer acquisition, aiming to build a more sustainable business model [121][122] Other Important Information - The company ended Q4 with cash and cash equivalents of $142 million and remains debt-free [46] - Free cash flow for Q4 was $36 million, significantly exceeding expectations, attributed to improved adjusted EBITDA and working capital changes [45][71] Q&A Session Summary Question: Update on registered agent price change and differentiation - Management highlighted the positive impact of raising the registered agent price from $199 to $249, emphasizing the strength of their service and technology compared to competitors [61][66] Question: Comments on Q4 free cash flow performance - Management noted strong Q4 free cash flow performance due to exceeding adjusted EBITDA expectations and favorable working capital changes, with expectations for continued strong conversion in 2025 [71][75] Question: Details on Formation Nation acquisition impact - Management confirmed that Q1 and full-year guidance includes the impact of Formation Nation, with plans to integrate and shift their business model towards subscriptions [80][82] Question: Subscription net unit adds and drivers - Management attributed strong subscription net unit adds to bundling strategies and improved compliance offerings, with expectations for continued growth in 2025 [100][104] Question: Strategy for partnerships and future growth - Management discussed the importance of diversifying go-to-market strategies and leveraging partnerships to enhance customer acquisition and service offerings [111][115] Question: Market share focus and Formation Nation's role - Management clarified the shift towards quality share over market share, with expectations that Formation Nation will contribute positively to business formation counts [117][124] Question: Long-term vision for AI capabilities - Management outlined plans to leverage AI to augment expertise and improve operational efficiencies, enhancing customer service and product offerings [130][135] Question: Marketing strategy and brand spend - Management detailed a shift in marketing strategy to increase brand spend and focus on education, moving away from a heavy reliance on search marketing [139][142]

Michael Wiggins De Oliveira is an inflection investor. This means buying into cheap companies at the moment when their narrative is changing and the business is on a path toward becoming significantly more profitable over the next year.With a focus on tech and “the Great Energy Transition (including uranium)”, Michael runs a concentrated portfolio with approximately 15 to 20 stocks and an average holding period of 18 months. Through his 10+ years analyzing countless companies, Michael has accumulated outsta ...

FEBRUARY 2025 Investor Presentation Forward-looking statements disclaimer This presentation 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 presentation may be forward-looking statements. In some cases, you can identify ...

Core Insights - LegalZoom reported revenue of $161.71 million for the quarter ended December 2024, reflecting a year-over-year increase of 1.9% and an EPS of $0.19 compared to $0.13 a year ago, with no surprise against the Zacks Consensus Estimate of $161.7 million [1] - The company achieved an EPS surprise of +18.75%, with the consensus EPS estimate being $0.16 [1] Performance Metrics - Average revenue per subscription unit (ARPU) was $0.26 million, slightly below the average estimate of $0.27 million [4] - The number of subscription units reached 1,766, exceeding the average estimate of 1,723 [4] - Average Order Value was $220, surpassing the average estimate of $211.02 [4] - The number of transaction units was 241, compared to the average estimate of 235 [4] - The number of business formations was 96, below the average estimate of 107 [4] - Subscription revenue totaled $108.75 million, slightly below the average estimate of $110.78 million, representing a year-over-year change of +1.9% [4] - Transaction revenue was $52.96 million, exceeding the average estimate of $49.48 million, with a year-over-year change of +2% [4] Stock Performance - LegalZoom shares returned -2.7% over the past month, compared to the Zacks S&P 500 composite's -2.3% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Insights - LegalZoom reported quarterly earnings of $0.19 per share, exceeding the Zacks Consensus Estimate of $0.16 per share, and up from $0.13 per share a year ago, representing an earnings surprise of 18.75% [1] - The company posted revenues of $161.71 million for the quarter ended December 2024, matching the Zacks Consensus Estimate and showing an increase from $158.66 million year-over-year [2] - LegalZoom's shares have increased approximately 19.8% since the beginning of the year, significantly outperforming the S&P 500's gain of 1.3% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.12 on revenues of $173.01 million, and for the current fiscal year, it is $0.60 on revenues of $693.85 million [7] - The estimate revisions trend for LegalZoom is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Industrial Services industry, to which LegalZoom belongs, is currently ranked in the bottom 38% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact LegalZoom's stock performance [5]

Subscription Business - The company aims to optimize its subscription business, focusing on customer lifetime value and accelerating subscription revenue growth over the long term[28]. - As of December 31, 2024, the company had approximately 1.8 million subscription units outstanding, with a mix of annual and monthly terms[35]. - The recent acquisition of Formation Nation is expected to enhance cross-sell opportunities and attract higher value customers, positioning the company as a premium brand[29]. Technology and Customer Experience - The company plans to leverage artificial intelligence to improve customer experience and drive growth and efficiencies in its business[32]. - The company has invested significantly in its technology platform to process thousands of customer orders daily and enhance customer interactions[41]. - The company has a strong focus on customer care, providing support through multiple channels and monitoring service levels to maintain high customer satisfaction[52]. Customer Acquisition and Market Strategy - The company has a diverse customer acquisition strategy, testing various marketing channels to expand its reach beyond business formations[29]. - The company has registered agent locations covering all 50 states, providing critical business document management for small businesses[35]. Workforce and Culture - The company employs 964 employees and engages approximately 600 contractors globally, with a strong emphasis on a pay-for-performance culture[59]. Regulatory Environment - The company operates in a complex legal and regulatory environment, subject to various state and federal laws related to internet activities and consumer protection[66]. - The regulatory environment in the U.S. is evolving slowly, with only a few states approving regulatory reform for non-lawyers to co-own law firms[67]. - The company is subject to numerous foreign and domestic laws regarding privacy and data security, which are continuously developing[69]. - Compliance with applicable government laws and regulations is not expected to materially affect the company's earnings or competitive position[70]. Financial Performance - As of December 31, 2024, the company had cash and cash equivalents of $142.1 million, down from $225.7 million in 2023[347]. - The company recognized a foreign currency transaction loss of $0.6 million for the year ended December 31, 2024[349]. - A 10% adverse change in foreign exchange rates would have resulted in a $0.5 million increase in reported foreign currency loss for the year ended December 31, 2024[349]. - The company has no outstanding debt subject to interest rate risk as of December 31, 2024 and 2023[348]. - The company does not currently believe that inflation has had a material effect on its business, but future inflationary pressures could impact operations[350]. - The company operates both within the U.S. and the U.K., exposing it to market risks including interest rate fluctuations and foreign currency exchange risks[346].

Transaction Details - The Stock Purchase Agreement was executed on February 10, 2025, between LegalZoom.com, Inc. and Formation Nation, Inc. for the purchase of all outstanding shares of Company Common Stock[11]. - The Closing of the transaction will occur virtually on the same date as the Agreement, at 11:59 p.m. Pacific Time[17]. - The Buyer will deliver the Closing Cash Consideration via wire transfer to accounts designated by each Seller prior to the Closing[22]. - The Transactions are intended to be a taxable sale of the Seller Company Shares for U.S. federal Income Tax purposes in exchange for Cash Consideration and Additional Consideration[23]. - The Company and Sellers are required to deliver stock certificates representing all shares of Company Common Stock at or prior to the Closing[18]. - The Sellers must provide executed payoff letters for any Indebtedness related to the Company, ensuring full satisfaction as of the Closing Date[18]. - The Company must deliver a certificate of good standing from the Secretary of State of Nevada dated no earlier than ten days prior to the Closing Date[18]. - The Agreement includes provisions for Key Employee Offer Letters and Restrictive Covenant Agreements to be executed as inducements for the Buyer[13]. - The Sellers are required to provide evidence of termination of any agreements set forth on Schedule 1.3(a)(xv) in a form acceptable to the Buyer[20]. - The Agreement outlines the necessary login credentials and information required to access the Company's systems to be delivered at or prior to the Closing[21]. - Buyer will deliver cash consideration to each seller as per the allocation schedule at closing[26]. - Additional consideration payable to Zenith will be in the form of shares of Buyer Common Stock valued at the Buyer Common Stock Price[28]. - Rowley will receive 50% of the additional consideration in cash within five business days after the first and second anniversaries of the closing[29]. - A cash holdback amount will be retained by Buyer for twelve months following the closing date[31]. - The holdback amount will accrue interest at a rate of 5% per annum, compounded annually[35]. - The estimated closing working capital adjustment amount and other financial metrics will be calculated prior to closing[39]. - Buyer will deliver a post-closing statement within ninety days after the closing date detailing the final calculations[40]. - Any disputes regarding the post-closing statement will be resolved by an independent accountant[41]. - The final closing statement will be determined based on specific conditions outlined in the agreement[42]. Company Structure and Equity - The Company has 25,000,000 authorized shares of common stock, with 910 shares issued and outstanding[56]. - The authorized equity interests of its wholly owned subsidiary, Corporate Service Center, Inc., consist of 25,000 shares, with 1,000 shares issued and outstanding[56]. - The authorized equity interests of another wholly owned subsidiary, Nevada Corporate Headquarters, Inc., consist of 25,000 shares, with 1,000 shares issued and outstanding[56]. - The Company has not declared or paid any dividends on its common stock since the Lookback Date[56]. - There are no outstanding equity interests in the Group Companies other than those specified in the Disclosure Schedule[57]. - The Company has made available complete copies of its formation documents and those of its subsidiaries, all of which are in full force and effect[53]. - The Group Companies have no current or prospective obligations to form or participate in any other entities[51]. - The Company is duly organized and in good standing under the laws of the State of Nevada[49]. - The execution of the Agreement has been duly authorized by all necessary corporate action on the part of the Group Companies[63]. - No consent or approval from any governmental entity is required for the execution and delivery of the Agreement, except as may be required under Antitrust Laws[64]. Financial Statements and Liabilities - The Group Companies delivered consolidated unaudited financial statements for the years ended December 31, 2022, 2023, and 2024, which comply with applicable accounting requirements and fairly present the financial condition[68]. - As of December 31, 2024, the Group Companies have no material liabilities other than those reflected in the balance sheets, incurred in the ordinary course of business, or related to the execution of the agreement[70]. - The Group Companies have established a system of internal accounting controls sufficient to provide reasonable assurances regarding the accuracy of financial reporting and compliance with applicable laws[72]. - Since the balance sheet date, the Group Companies have conducted their business in the ordinary course without any material adverse effects[73]. - Each of the Group Companies has timely filed all required tax returns and paid all taxes due, with no outstanding tax deficiencies[76]. - As of the balance sheet date, there are no liabilities for unpaid taxes that have not been accrued or reserved on the current balance sheets[81]. - The Group Companies have made available complete copies of all material tax returns filed for all open taxable periods[82]. - There are no liens on the assets of the Group Companies relating to taxes, other than those not yet due and payable[83]. - The Group Companies have not been subject to any tax audits or examinations that remain unresolved[80]. - The financial statements were prepared in accordance with GAAP, except for the absence of footnotes in the unaudited financials[69]. - None of the Group Companies has participated in any reportable transaction or tax shelter transaction, ensuring compliance with IRS regulations[85]. - Each Group Company has been classified as a corporation under Subchapter C of the Code for U.S. federal Income Tax purposes, maintaining compliance with applicable tax laws[90]. - All transactions between the Company and its Affiliates have been made on arm's length terms, ensuring compliance with transfer pricing laws[94]. - Each Group Company has collected and reported all required sales, use, and similar taxes to the appropriate Taxing Authority[95]. Operations and Business Development - The Company does not own any real property, relying on leased real property for its operations[100]. - The Group Companies have maintained all tangible assets in good operating condition, ensuring they are adequate for business use[105]. - The Company intends to market new products and services within the next twelve months, indicating ongoing development efforts[108]. - The Group Companies have not deferred any payroll taxes or claimed employee retention credits under the CARES Act[98]. - There are no current contracts that materially restrict the Group Companies' business activities or ability to operate in any geography[99]. - Each Group Company has good title to or valid leasehold interest in all its properties, free and clear of all liens except permitted liens[104]. - The company reported a significant increase in revenue, achieving $1.5 billion for the fiscal year ended December 31, 2023, representing a 20% growth compared to the previous year[122]. - User data showed a 15% increase in active users, reaching 10 million by the end of Q4 2023[122]. - The company provided guidance for the next fiscal year, projecting revenue growth of 25% to $1.875 billion[122]. - New product launches are expected to contribute an additional $300 million in revenue in 2024, driven by innovative features and market demand[122]. - The company is expanding its market presence in Europe, targeting a 30% increase in market share by the end of 2024[122]. - Research and development expenses increased by 10% to $200 million, focusing on new technologies and product enhancements[122]. - The company is exploring strategic acquisitions to enhance its product portfolio, with a budget of $500 million allocated for potential deals in 2024[122]. - The company reported a 5% decrease in operational costs, achieving $800 million in total expenses for the fiscal year[122]. - Customer satisfaction ratings improved by 12%, reflecting the success of recent service enhancements[122]. - The company plans to invest $100 million in sustainability initiatives over the next three years to improve its environmental impact[122]. Compliance and Legal Matters - The Group Companies have complied with all applicable Information Privacy and Security Laws since the Lookback Date[145]. - No Group Company is subject to any action or order by any Governmental Entity that restricts its Processing of Protected Information[146]. - As of the Closing Date, there are no pending requests from individuals to exercise their rights under Information Privacy and Security Laws[147]. - The Systems owned or used by the Group Companies are reasonably sufficient for the current operation of their business in all material respects[148]. - Each Group Company has implemented reasonable and appropriate disaster recovery and business continuity plans[150]. - There have been no actual or reasonably suspected attacks or breaches of the security of any Systems since the Lookback Date[152]. - The Group Companies have maintained and materially complied with plans and policies designed to prevent and respond to Security Incidents[153]. - The Systems are free from Contaminants and no vulnerabilities classified as "critical" or "high" have been identified[154]. - The Group Companies have not experienced any material disruption to their business due to deficiencies in any System since the Lookback Date[150]. - The Group Companies have obtained written agreements from individuals accessing Protected Information to comply with Privacy Requirements[151]. - The Company has made available true, correct, and complete copies of each Material Contract required to be disclosed[162]. - Each Group Company is in compliance in all material respects with all Company Authorizations required for its operations[167]. - There is no Legal Proceeding pending or threatened against any Group Company or its properties[168]. - The Company has maintained true, correct, and complete business records and financial books that reflect its business activities[172]. - Each Group Company is in compliance with all Environmental, Health and Safety Requirements[173]. - The Company has not incurred any Liability for brokerage or finders' fees related to this Agreement[174]. - Each Group Company has complied with all laws governing telemarketing and has not received notices of violations[176]. Employee and Labor Matters - The Company has made available complete copies of all documents related to each Company Employee Plan[178]. - Each Company Employee Plan has been established in compliance with applicable laws and has obtained necessary IRS determination letters[180]. - No Group Company has established or maintained any Pension Plan subject to Title IV of ERISA[181]. - The Group Companies have never maintained any self-insured plan providing benefits to employees[182]. - There are no post-employment obligations for providing retiree benefits except as required by COBRA or applicable statutes[185]. - The Group Companies are in compliance with all applicable labor and employment laws, including proper classification of workers[189]. - There are no legal proceedings or disputes pending against the Group Companies related to employment matters[191]. - The Group Companies have not incurred any liability for misclassification of employees or independent contractors[192]. - The Company has never been a party to any collective bargaining agreement with labor organizations[193]. - No actions have been taken that would require notice under the WARN Act prior to the Closing[195]. - There are no allegations of misconduct, discrimination, or harassment against any key employees[199]. - All current and former employees have provided appropriate documentation establishing their work authorization[200]. - The Group Companies have a complete list of current independent contractors and their compensation details[198].

Core Insights - LegalZoom.com, Inc. reported strong financial results for Q4 and the full year 2024, with a focus on sustainable growth and subscription revenue [2][4][5] Financial Performance - Q4 2024 revenue reached $161.7 million, a 2% increase year-over-year, while full-year revenue was $681.9 million, up 3% from 2023 [5][6] - Subscription revenue for the full year was $436.2 million, reflecting a 6% year-over-year growth, with Q4 subscription revenue at $108.7 million, also up 2% [4][5][6] - Net income for Q4 was $12.9 million, a 74% increase from $7.4 million in Q4 2023, resulting in a net income margin of 8% [5][6] - Full-year net income was $30.0 million, up 115% year-over-year, with an adjusted EBITDA of $148.1 million, a 25% increase [4][5][6] Key Business Metrics - Gross margin improved to 67% in Q4 2024 from 65% in Q4 2023 [5][6] - Cash and cash equivalents stood at $142.1 million as of December 31, 2024, with no debt outstanding [4][5] - Free cash flow for Q4 was $35.9 million, a significant increase from $14.1 million in the same period last year [5][6] Strategic Initiatives - The company announced the acquisition of Formation Nation, Inc. to enhance its growth strategy, expected to positively impact adjusted EBITDA and non-GAAP net income per share in the first year [5][6] - LegalZoom aims to accelerate subscription revenue growth in 2025, targeting a double-digit increase by year-end [2][4] Financial Guidance - For Q1 2025, revenue is projected to be between $175 million and $179 million, with an adjusted EBITDA expected in the range of $33 million to $36 million [8]