LegalZoom.com(LZ) - 2025 Q1 - Quarterly Results

LegalZoom First Quarter 2025 Results Financial & Performance Highlights 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] - Business formations decreased by 6% year-over-year, while the average order value (AOV) saw a slight decline of 1% to $196[9] Operational Highlights & Strategic Initiatives 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] - Appointed Pratik Savai as Chief Technology Officer to spearhead technology advancements, including the use of generative AI[10] - Sold an office property, receiving net cash proceeds of approximately $37.1 million[10] - 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] Financial Outlook 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 Unaudited Condensed Consolidated Balance Sheets 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 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 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 Reconciliation of Net Income to Adjusted EBITDA 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 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 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 |