Group 1 - Morgan Stanley's report highlights the mixed performance of GoDaddy, the improvement in Wix.com, and the continued deterioration of LegalZoom's data in April's internet traffic trends [1][2] - GoDaddy acknowledges pressure on its customer base related to economic outlook but emphasizes stable channel trends and historical resilience during macroeconomic headwinds [2] - LegalZoom faces increased pressure on new business formation, with management now expecting a decline in new business formation for fiscal year 2025, despite noting that dissolution rates have not increased [2] Group 2 - April traffic trends indicate that GoDaddy's homepage traffic accelerated while login page traffic declined, reflecting a mixed trend [3] - Wix.com shows an upward trend despite high baseline comparisons, building confidence in the demand for its portfolio ahead of its Q1 earnings report [3] - LegalZoom's month-over-month comparative trend has further deteriorated, although the baseline comparison remains relatively lenient [3] Group 3 - Morgan Stanley maintains a cautious outlook on the potential for downward adjustments in booking guidance for fiscal year 2025, which could negate acceleration expectations for the second half of the year [2] - The strong performance of the tech portfolio and the acceleration of future innovations create a compelling narrative for investors, despite the ongoing search for sustained improvement in network traffic [2] - Recruitment trends across the three companies remain weak, with hiring levels hovering near historical lows, below pre-pandemic trends [2]

FINANCIAL INFORMATION [Condensed Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents LegalZoom.com, Inc.'s unaudited condensed consolidated financial statements as of March 31, 2025, and for the three months then ended, compared to prior periods [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of March 31, 2025, shows a significant increase in total assets to $532.7 million from $373.9 million at the end of 2024, primarily driven by a substantial rise in goodwill to $141.1 million from $63.3 million, resulting from the Formation Nation acquisition, while total liabilities also increased to $345.5 million from $280.6 million, mainly due to higher deferred revenue and accrued expenses Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $209,973 | $142,064 | | Goodwill | $141,131 | $63,318 | | **Total assets** | **$532,666** | **$373,883** | | **Liabilities & Equity** | | | | Deferred revenue (Current) | $211,094 | $174,643 | | **Total liabilities** | **$345,454** | **$280,626** | | **Total stockholders' equity** | **$187,212** | **$93,257** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended March 31, 2025, revenue increased 5% to $183.1 million, gross profit grew 10% to $116.5 million, and net income rose to $5.1 million, with diluted EPS increasing to $0.03, significantly impacted by a $14.3 million gain on asset sale Condensed Consolidated Statement of Operations (in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Revenue | $183,110 | $174,214 | | Gross Profit | $116,550 | $105,830 | | Income from operations | $8,966 | $5,055 | | Gain on sale of assets held for sale | ($14,337) | — | | Net income | $5,127 | $4,744 | | Net income per share — diluted | $0.03 | $0.02 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2025, net cash from operating activities increased to $50.7 million, investing activities used $20.5 million primarily for the Formation Nation acquisition offset by an asset sale, and financing activities provided $37.6 million, leading to a $67.9 million increase in cash and cash equivalents Condensed Consolidated Statement of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $50,703 | $34,194 | | Net cash used in investing activities | ($20,450) | ($9,477) | | Net cash provided by (used in) financing activities | $37,604 | ($22,271) | | **Net increase in cash and cash equivalents** | **$67,909** | **$2,410** | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the $83.2 million Formation Nation acquisition, the $37.1 million Austin property sale with a $14.3 million gain, revenue breakdown into transaction and subscription streams, and the status of the stock repurchase program - On February 10, 2025, the company acquired Formation Nation, Inc. for a total consideration of **$83.2 million**, consisting of cash and equity. The acquisition added **$77.8 million** to goodwill[64](index=64&type=chunk)[68](index=68&type=chunk)[72](index=72&type=chunk) - The company sold its Austin, Texas property on March 31, 2025, for net cash proceeds of approximately **$37.1 million**, resulting in a recognized gain of **$14.3 million**[62](index=62&type=chunk)[63](index=63&type=chunk) Revenue by Source (in thousands) | Revenue Type | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Transaction | $66,853 | $66,317 | | Subscription | $116,257 | $107,897 | | **Total revenue** | **$183,110** | **$174,214** | - No common stock was repurchased during Q1 2025. As of March 31, 2025, approximately **$50.0 million** remained available under the stock repurchase program. The program was subsequently increased by **$100.0 million** in May 2025[86](index=86&type=chunk)[104](index=104&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 performance, financial condition, and key business metrics, highlighting a 5% revenue growth to $183.1 million, a 20% increase in subscription units, and the impact of the Formation Nation acquisition and a $14.3 million asset sale gain [Key Business Metrics](index=24&type=section&id=Key%20Business%20Metrics) In Q1 2025, business formations decreased 6% to 131,000, subscription units grew 20% to 1.92 million, and Average Revenue Per Subscription Unit (ARPU) declined 7% to $252, influenced by macroeconomic factors and product bundling Key Business Metrics Comparison | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Number of business formations (thousands) | 131 | 139 | (6%) | | Number of transactions (thousands) | 341 | 336 | 1% | | Average order value | $196 | $198 | (1%) | | Number of subscription units (thousands) | 1,924 | 1,605 | 20% | | Average revenue per subscription unit (ARPU) | $252 | $272 | (7%) | - The annual small business retention rate was approximately **60%** as of March 31, 2025, impacted by the anniversarying of non-renewing bundled subscriptions[126](index=126&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Total revenue increased 5% to $183.1 million in Q1 2025, driven by 8% subscription revenue growth, while gross profit rose 10%, and operating expenses increased significantly due to higher stock-based compensation and acquisition costs, partially offset by a $14.3 million asset sale gain Revenue Comparison (in thousands) | Revenue Type | Q1 2025 | Q1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Transaction | $66,853 | $66,317 | $536 | 1% | | Subscription | $116,257 | $107,897 | $8,360 | 8% | | **Total revenue** | **$183,110** | **$174,214** | **$8,896** | **5%** | - General and administrative expenses increased by **$16.2 million** (70% YoY), mainly due to a **$14.7 million** increase in stock-based compensation and **$1.5 million** in acquisition-related costs for Formation Nation[159](index=159&type=chunk) - Technology and development expenses decreased by **11%** YoY due to reduced headcount in that department[158](index=158&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2025, cash and cash equivalents increased by $67.9 million to $210.0 million, driven by operating cash flow, stock option exercises, and an asset sale, partially offset by the Formation Nation acquisition, with a $150.0 million undrawn revolving credit facility and an increased stock repurchase program - Principal sources of liquidity at March 31, 2025, were cash and cash equivalents of **$210.0 million**[167](index=167&type=chunk) - The company has a **$150.0 million** revolving credit facility, with no borrowings outstanding as of March 31, 2025[171](index=171&type=chunk) - The stock repurchase program authorization was increased to **$315.0 million** in May 2025, with approximately **$150.0 million** available for future repurchases as of the filing date[170](index=170&type=chunk)[104](index=104&type=chunk) [Non-GAAP Financial Measures](index=35&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures like Adjusted EBITDA and Free Cash Flow to evaluate core performance, with Adjusted EBITDA increasing to $37.0 million (20% margin) and Free Cash Flow rising to $41.3 million in Q1 2025 Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net income | $5,127 | $4,744 | | Adjustments (Interest, Taxes, D&A, etc.) | $31,885 | $23,158 | | **Adjusted EBITDA** | **$37,012** | **$27,902** | | Adjusted EBITDA margin | 20% | 16% | Reconciliation of Net Cash to Free Cash Flow (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $50,703 | $34,194 | | Purchase of property and equipment | ($9,378) | ($9,477) | | **Free cash flow** | **$41,325** | **$24,717** | [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company identifies primary market risks as interest rate fluctuations, foreign currency exchange risk (principally GBP), and inflation risk, noting minimal interest rate exposure due to no outstanding debt, immaterial foreign currency impact, and no material inflation effect to date - Interest Rate Risk: The company had no outstanding debt as of March 31, 2025, minimizing exposure to interest rate fluctuations, though risk would arise if they draw down on their **$150.0 million** revolving credit facility[200](index=200&type=chunk) - Foreign Currency Risk: Exposure is primarily to the British Pound (GBP), with a **10%** adverse change in foreign exchange rates having an immaterial impact for the quarter[201](index=201&type=chunk)[202](index=202&type=chunk) - Inflation Risk: Inflation has not had a material effect to date, but sustained pressure could harm the small business sector, which could in turn harm LegalZoom's business[203](index=203&type=chunk) [Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting identified during the quarter - Management concluded that disclosure controls and procedures were effective as of March 31, 2025[204](index=204&type=chunk) - No material changes in internal control over financial reporting were identified during the quarter ended March 31, 2025[205](index=205&type=chunk) OTHER INFORMATION [Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings and is unaware of any pending or threatened litigation that would materially adversely affect its financial condition or results of operations - The company is not currently a party to any material legal proceedings that would have a material adverse effect on its operations or financial condition[82](index=82&type=chunk)[207](index=207&type=chunk) [Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks including dependence on business formations, challenges in converting transactional customers to subscribers, managing growth and acquisitions like Formation Nation, competition, generative AI risks, reliance on marketing and third-party providers, potential litigation, data security breaches, and stock price fluctuations - The business is highly dependent on new business formations, which are subject to unpredictable declines due to economic conditions, competition, and regulatory changes[209](index=209&type=chunk) - Future success relies on converting transactional customers to subscribers and retaining them, noting a deceleration in subscription revenue growth rate[210](index=210&type=chunk) - The recent acquisition of Formation Nation presents integration challenges and risks, including diverting management attention and potential difficulties in realizing synergies[212](index=212&type=chunk)[244](index=244&type=chunk) - The incorporation of generative AI into offerings presents compliance, reputational, and legal liability risks, including potential for inaccuracies or being deemed the unauthorized practice of law[228](index=228&type=chunk) - The company is vulnerable to security breaches and cyberattacks, which could lead to significant liabilities, reputational harm, and loss of customers[292](index=292&type=chunk)[293](index=293&type=chunk) [Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=60&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company did not repurchase common stock in Q1 2025, with $50.0 million remaining under authorization, which was subsequently increased by $100.0 million in May 2025, bringing the total authorization to $315.0 million - No shares of common stock were repurchased in the three months ended March 31, 2025[322](index=322&type=chunk) - As of March 31, 2025, approximately **$50.0 million** remained available for future repurchases under the existing program[322](index=322&type=chunk) - In May 2025, the board increased the stock repurchase program authorization by an additional **$100.0 million**, bringing the total authorized amount to **$315.0 million**[323](index=323&type=chunk) [Other Information Items](index=60&type=section&id=Other%20Items) This section covers standard SEC filing requirements, reporting no defaults upon senior securities, no mine safety disclosures, and no other information requiring disclosure under Item 5, with Item 6 listing the exhibits filed - Item 3, Defaults Upon Senior Securities: None[324](index=324&type=chunk) - Item 4, Mine Safety Disclosures: Not applicable[324](index=324&type=chunk) - Item 5, Other Information: None[324](index=324&type=chunk)

Core Insights - LegalZoom reported revenue of $183.11 million for the quarter ended March 2025, reflecting a 5.1% increase year-over-year and surpassing the Zacks Consensus Estimate of $176.51 million by 3.74% [1] - Earnings per share (EPS) for the quarter was $0.13, consistent with the consensus estimate, compared to $0.09 in the same quarter last year [1] Financial Performance Metrics - Average revenue per subscription unit (ARPU) was $0.25 million, slightly below the average estimate of $0.26 million [4] - Subscription units at period end totaled 1,924, exceeding the average estimate of 1,788 [4] - Average order value (AOV) was $196, lower than the average estimate of $205.58 [4] - Transaction units reached 341, surpassing the average estimate of 317 [4] - Business formations were reported at 131, matching the average estimate [4] - Subscription revenue amounted to $116.26 million, exceeding the average estimate of $112.16 million, representing a year-over-year increase of 7.8% [4] - Transaction revenue was $66.85 million, above the average estimate of $64.13 million, with a year-over-year change of 0.8% [4] Stock Performance - LegalZoom's shares have returned -0.6% over the past month, contrasting with the Zacks S&P 500 composite's increase of 10.6% [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Company Performance - LegalZoom reported quarterly earnings of $0.13 per share, matching the Zacks Consensus Estimate, and an increase from $0.09 per share a year ago [1] - The company posted revenues of $183.11 million for the quarter ended March 2025, exceeding the Zacks Consensus Estimate by 3.74% and up from $174.21 million year-over-year [2] - LegalZoom has surpassed consensus EPS estimates three times over the last four quarters [1][2] Market Outlook - LegalZoom shares have declined approximately 3.2% since the beginning of the year, compared to a 4.7% decline in the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is $0.15 on revenues of $180.1 million, and for the current fiscal year, it is $0.66 on revenues of $710.65 million [7] Industry Context - The Industrial Services industry, to which LegalZoom belongs, is currently ranked in the bottom 37% of over 250 Zacks industries, indicating potential challenges ahead [8] - The performance of LegalZoom's stock may be influenced by the overall outlook for the industry [8]

Financial Data and Key Metrics Changes - First quarter revenue was $183 million, reflecting a 5% year-over-year increase [6][26] - Adjusted EBITDA for the first quarter was $37 million, representing a 33% year-over-year increase, with an adjusted EBITDA margin of 20% [8][33] - Free cash flow increased to $41 million, up 67% compared to $25 million for the same period in 2024 [34][35] Business Line Data and Key Metrics Changes - Subscription revenue grew by 8% year-over-year to $116 million, driven by compliance pricing initiatives and increased virtual mail subscriptions [28] - Transaction revenue increased by 1% to $67 million, aided by the acquisition of Formation Nation [26] - The number of subscription units rose by 20% to approximately 1.9 million, primarily due to bundling of lower-priced products [29] Market Data and Key Metrics Changes - Business formations decreased by 6% year-over-year, attributed to a softer macroeconomic environment and a 5% decline in Census EIN applications [7][27] - Average order value was $196, down 1% compared to the previous year [27] - Deferred revenue increased by $36 million from Q4, reflecting the benefits of subscription pricing initiatives [30] Company Strategy and Development Direction - The company is focused on driving subscription adoption and optimizing its go-to-market strategy, including a new brand campaign to position itself as a premier provider of online legal services [18][19] - The strategy includes decoupling from business formations and emphasizing higher-value subscriptions, with over 60% of revenue now subscription-based [11][24] - The integration of Formation Nation is aimed at shifting lower-end customers to a separate brand while focusing on higher-value offerings [51][54] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the unpredictable macroeconomic environment but expressed confidence in achieving a full-year revenue growth of 5% and an adjusted EBITDA margin of 23% [9][39] - The company is prepared for potential challenges and is focused on areas it can control, emphasizing long-term value for shareholders [13][41] - Management expects double-digit subscription revenue growth by the fourth quarter, supported by recent strategic initiatives [10][38] Other Important Information - The company has a strong cash position of $210 million and remains debt-free, allowing for flexibility in capital allocation [34][35] - The marketing budget has been reallocated to increase Formation Nation's marketing spend by over 30% [21] Q&A Session Summary Question: What contributed to the strong subscription unit growth? - Management highlighted a shift towards quality share, reorienting products and pricing to attract better customers, and bundling lower-priced subscriptions to drive engagement [43][44][47] Question: Can you discuss the integration of Formation Nation? - The integration aims to decouple free products from high-value offerings, allowing for better customer engagement and upselling opportunities [51][54] Question: Should we expect elevated overall marketing spend? - Management clarified that there will be a shift in marketing spend rather than an increase, focusing on efficiency and brand authority [60][64] Question: What is the expected contribution from Formation Nation going forward? - Management indicated that the contribution from Formation Nation will be integrated into overall business performance, with a focus on efficiency and profitability [67][70] Question: How is the company managing macroeconomic pressures? - Management is running various scenarios to adapt to changing conditions and has adjusted expectations for business formations accordingly [80][82] Question: What are the key inputs for achieving double-digit subscription growth? - Management emphasized the importance of attracting quality customers and improving the overall subscription experience to ensure sustainable growth [100][102]

Financial Data and Key Metrics Changes - First quarter revenue was $183 million, reflecting a 5% year-over-year increase [6][26] - Adjusted EBITDA for the first quarter was $37 million, representing a 33% year-over-year increase, with an adjusted EBITDA margin of 20% [8][32] - Free cash flow increased by 67% to $41 million compared to $25 million for the same period in 2024 [33][34] Business Line Data and Key Metrics Changes - Subscription revenue grew by 8% year-over-year to $116 million, driven by compliance pricing initiatives and increased virtual mail subscriptions [28][29] - Transaction revenue increased by 1% to $67 million, attributed to the acquisition of Formation Nation and higher revenue from Beneficial Ownership Information Report filings [26][27] - The number of subscription units rose by 20% to approximately 1.9 million, primarily due to bundling of lower-priced products [29][30] Market Data and Key Metrics Changes - Business formations decreased by 6% year-over-year, with 131,000 formations recorded in the first quarter [27] - Census EIN applications fell by 5% year-over-year, impacting overall business formation trends [7][8] - The average order value was $196, down 1% compared to the previous year [27] Company Strategy and Development Direction - The company is focused on driving subscription adoption and optimizing its go-to-market strategy, including a new brand campaign to enhance its market position [15][18] - LegalZoom aims to decouple from the business formations macro by emphasizing legal and compliance services and increasing subscription offerings [12][24] - The integration of Formation Nation is expected to enhance customer acquisition and improve service offerings, particularly in the lower-end market [55][56] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a full-year revenue growth of approximately 5% and an adjusted EBITDA margin of 23% despite macroeconomic uncertainties [37][39] - The company anticipates double-digit subscription revenue growth by the fourth quarter, supported by strategic pricing and product bundling initiatives [9][38] - Management acknowledged the challenges posed by a rapidly evolving macroeconomic environment but emphasized the company's resilience and adaptability [14][41] Other Important Information - The company ended the quarter with $210 million in cash and cash equivalents, remaining debt-free [33][34] - A $100 million increase to the share repurchase program was approved by the Board of Directors, with $150 million remaining under authorization [35][36] Q&A Session Summary Question: What contributed to the strong subscription unit growth? - Management highlighted a shift towards quality share, reorienting products and pricing to attract better customers, and implementing a bundling strategy for lower-priced subscriptions [43][45][46] Question: Can you discuss the integration process of Formation Nation? - The integration aims to decouple from free offerings and push lower-end customers to Formation Nation, which focuses on value pricing and higher engagement [52][54][56] Question: Will overall marketing spend be elevated going forward? - Management clarified that there will be a shift in marketing spend rather than an increase, focusing on efficiency and leveraging brand authority [61][62][65] Question: What is the expected contribution from Formation Nation moving forward? - Management indicated that while the initial contribution was approximately $8.6 million, the focus will be on integrated growth rather than segmenting revenues [68][70][72] Question: How is the company addressing macroeconomic pressures on business formations? - Management is modeling various scenarios to navigate uncertainties and has adjusted expectations for business formations to decline mid to high single digits [80][81] Question: What are the key inputs for achieving double-digit subscription growth? - Management emphasized the importance of attracting quality customers and shifting focus from unprofitable formations to higher-value subscriptions [102][104][106]

Company Vision and Mission - LegalZoom's vision is to be the guardian of people's aspirations, lives, and legacies[10] - The company's mission is transforming how people navigate the legal system[10] Market Opportunity and Leadership - The online legal and compliance market represents a significant $51 billion to $61 billion Serviceable Addressable Market (SAM)[13] - LegalZoom has formed 47 million businesses since inception[13] - LegalZoom has delivered 43 million estate planning solutions since inception[13] - LegalZoom has 19 million active legal & compliance subscriptions[13] - LegalZoom has over 1,000 independent attorney network servicing all 50 states[13] Financial Performance (Q1 2025) - GAAP Revenue for Q1 2025 was $123 million, a 5% year-over-year increase[50] - Adjusted Gross Profit for Q1 2025 was $183 million, representing 67% of revenue, a 10% year-over-year increase[50] - Adjusted EBITDA for Q1 2025 was $37 million, representing 20% of revenue, a 33% year-over-year increase[50] - Subscription revenue for Q1 2025 was $116 million, an 8% year-over-year increase[52] Strategic Initiatives - LegalZoom acquired Formation Nation, Inc on February 10, 2025, which is expected to positively contribute to Adjusted EBITDA and be accretive to Non-GAAP earnings per share[7, 27]

[LegalZoom First Quarter 2025 Results](index=1&type=section&id=LegalZoom%20First%20Quarter%202025%20Results) [Financial & Performance Highlights](index=1&type=section&id=First%20Quarter%202025%20Highlights) LegalZoom reported strong Q1 2025 results, exceeding expectations with 5% year-over-year revenue growth to $183.1 million, driven by an 8% increase in subscription revenue to $116.3 million Q1 2025 Key Financial Metrics (vs. Q1 2024) | Metric | Q1 2025 | Q1 2024 | % Change (YoY) | | :--- | :--- | :--- | :--- | | Total Revenue | $183.1M | $174.2M | 5% | | Subscription Revenue | $116.3M | $107.9M | 8% | | Transaction Revenue | $66.9M | $66.3M | 1% | | Net Income | $5.1M | $4.7M | 8% | | Adjusted EBITDA | $37.0M | $27.9M | 33% | | Adjusted EBITDA Margin | 20% | 16% | +400 bps | | Diluted Net Income per Share | $0.03 | $0.02 | 50% | | Free Cash Flow | $41.3M | $24.7M | 67% | - Subscription units at period end increased by **20%** year-over-year, reaching **1.924 million**[11](index=11&type=chunk) - Business formations decreased by **6%** year-over-year, while the average order value (AOV) saw a slight decline of **1%** to **$196**[9](index=9&type=chunk) [Operational Highlights & Strategic Initiatives](index=2&type=section&id=First%20Quarter%202025%20Operational%20Highlights) During the quarter, LegalZoom acquired Formation Nation, which contributed $8.6 million in revenue, appointed a new Chief Technology Officer, sold an office property, and increased its share repurchase authorization - Acquired Formation Nation on February 10, 2025, which contributed **$8.6 million** in revenue for the quarter post-acquisition[10](index=10&type=chunk) - Appointed Pratik Savai as Chief Technology Officer to spearhead technology advancements, including the use of generative AI[10](index=10&type=chunk) - Sold an office property, receiving net cash proceeds of approximately **$37.1 million**[10](index=10&type=chunk) - The Board of Directors approved a **$100.0 million** increase in its share repurchase program, leaving an aggregate of approximately **$150.0 million** for future repurchases[10](index=10&type=chunk) [Financial Outlook](index=3&type=section&id=Financial%20Outlook) LegalZoom reiterated its full-year 2025 guidance, projecting approximately 5% revenue growth and $165 million in Adjusted EBITDA, while providing Q2 2025 revenue and Adjusted EBITDA ranges Q2 2025 Outlook | Metric | Guidance Range (in millions) | | :--- | :--- | | Revenue | $181M - $185M | | Adjusted EBITDA | $37M - $41M | Full Year 2025 Outlook | Metric | Guidance | | :--- | :--- | | Revenue Growth (YoY) | ~5% | | Adjusted EBITDA | ~$165M | [Consolidated Financial Statements](index=6&type=section&id=Consolidated%20Financial%20Statements) [Unaudited Condensed Consolidated Balance Sheets](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets increased to $532.7 million from $373.9 million at year-end 2024, primarily driven by a rise in cash and goodwill, leading to a doubling of total stockholders' equity Balance Sheet Summary (in thousands) | Account | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $209,973 | $142,064 | | Goodwill | $141,131 | $63,318 | | Total Assets | $532,666 | $373,883 | | Total Liabilities | $345,454 | $280,626 | | Total Stockholders' Equity | $187,212 | $93,257 | [Unaudited Condensed Consolidated Statements of Operations](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended March 31, 2025, revenue increased to $183.1 million, with gross profit improving to $116.6 million, and a significant gain on asset sale boosting net income to $5.1 million Statement of Operations Summary (in thousands) | Account | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Revenue | $183,110 | $174,214 | | Gross Profit | $116,550 | $105,830 | | Gain on sale of assets | $14,337 | $0 | | Income from Operations | $8,966 | $5,055 | | Net Income | $5,127 | $4,744 | [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2025, net cash from operating activities significantly increased to $50.7 million, with investing activities reflecting an acquisition offset by an asset sale, resulting in a net cash increase of $67.9 million Cash Flow Summary (in thousands) | Activity | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $50,703 | $34,194 | | Net cash used in investing activities | ($20,450) | ($9,477) | | Net cash provided by (used in) financing activities | $37,604 | ($22,271) | | Net increase in cash and cash equivalents | $67,909 | $2,410 | | Cash and cash equivalents, at end of period | $209,973 | $228,129 | [Non-GAAP Financial Measures & Reconciliations](index=8&type=section&id=Non-GAAP%20Financial%20Measures%20%26%20Reconciliations) [Reconciliation of Net Income to Adjusted EBITDA](index=8&type=section&id=Adjusted%20EBITDA%20and%20Adjusted%20EBITDA%20Margin) The company reconciled its Q1 2025 net income of $5.1 million to an Adjusted EBITDA of $37.0 million, primarily by adding back stock-based compensation and depreciation, and subtracting a gain on asset sale Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Line Item | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Net income | $5,127 | $4,744 | | Stock-based compensation | $29,756 | $14,856 | | Depreciation and amortization | $10,406 | $7,670 | | Gain on sale of assets held for sale | ($14,337) | — | | **Adjusted EBITDA** | **$37,012** | **$27,902** | [Reconciliation of Net Income to Non-GAAP Net Income](index=9&type=section&id=Non-GAAP%20Net%20Income%2C%20Non-GAAP%20Net%20Income%20Margin%20and%20diluted%20Non-GAAP%20Net%20Income%20Per%20Share) Non-GAAP net income for Q1 2025 increased 30% to $23.8 million, reconciled from GAAP net income by adjusting for stock-based compensation and an asset sale gain, resulting in a diluted Non-GAAP EPS of $0.13 Reconciliation of Net Income to Non-GAAP Net Income (in thousands) | Line Item | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Net income | $5,127 | $4,744 | | Stock-based compensation | $29,756 | $14,856 | | Gain on sale of assets held for sale | ($14,337) | — | | **Non-GAAP net income** | **$23,822** | **$18,344** | Non-GAAP Net Income Per Share | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Non-GAAP net income per share — diluted | $0.13 | $0.09 | [Reconciliation to Free Cash Flow](index=10&type=section&id=Free%20Cash%20Flow) Free cash flow for Q1 2025 surged 67% to $41.3 million, derived from net cash provided by operating activities less purchases of property and equipment Free Cash Flow Calculation (in thousands) | Line Item | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $50,703 | $34,194 | | Purchase of property and equipment | ($9,378) | ($9,477) | | **Free cash flow** | **$41,325** | **$24,717** |

Core Insights - LegalZoom reported strong first quarter results with a revenue of $183.1 million, reflecting a 5% year-over-year growth, driven by an 8% increase in subscription revenue to $116.3 million [5][6][29] - The company achieved an Adjusted EBITDA of $37.0 million, marking a 33% increase year-over-year, with an Adjusted EBITDA margin of 20% [5][6][34] - LegalZoom reiterated its full-year revenue outlook of 5% year-over-year growth, despite macroeconomic uncertainties [2][5] Financial Performance - First quarter net income was $5.1 million, an 8% increase from the previous year, maintaining a net income margin of 3% [5][6][29] - Non-GAAP net income for the quarter was $23.8 million, up 30% year-over-year, with a Non-GAAP net income margin of 13% [6][34] - Cash and cash equivalents at the end of the quarter totaled $210.0 million, up from $142.1 million at the end of 2024 [5][6][26] Operational Highlights - The company experienced a 20% increase in subscription units year-over-year, indicating successful subscription growth initiatives [5][6][7] - LegalZoom's acquisition of Formation Nation contributed $8.6 million in revenue since the acquisition date [8] - The company announced a $100 million increase in its share repurchase authorization, bringing the total to approximately $150 million [5][8] Key Business Metrics - Transaction revenue was $66.9 million, a 1% increase year-over-year, with transaction units also up by 1% [6][7] - Average revenue per subscription unit (ARPU) decreased by 7% to $252 [7] - Free cash flow for the quarter was $41.3 million, a significant increase of 67% year-over-year [6][37]

Company Overview - LegalZoom.com, Inc. is a leading online platform for legal services, transforming how individuals and small businesses navigate the legal system [2][3] - The company combines intuitive technology with access to experienced attorneys, offering tools and guidance for business formations, compliance, estate planning, and ongoing legal support [2] Upcoming Investor Conferences - LegalZoom management will participate in the Jefferies 2025 Software & Internet Conference on May 28, 2025, with a fireside chat led by CEO Jeff Stibel and CFO Noel Watson [4] - The company will also participate in the William Blair 45th Annual Growth Stock Conference on June 4, 2025, with CFO Noel Watson hosting a fireside chat and investor meetings on June 3 and 4 [4] Investor Relations - A live audio webcast and replay of the presentations from these conferences will be available on the LegalZoom Investor Relations website [1]