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LegalZoom (LZ)
NASDAQ:LZ
Top Page
LegalZoom
(NASDAQ:LZ)
73Outperform
Positive Factors
Earnings
LegalZoom reported revenue of $161.7mn, which was higher than expected by analysts at $160.9mn.
Strategic Initiatives
The acquisition of Formation Nation enables LegalZoom to leverage Inc. Authority for value-priced formations while positioning the LegalZoom brand as a premium service.
Subscription Growth
LegalZoom added 49,000 net subscription units in the quarter, showing growth supported by improved bundling within its formation flow and ongoing demand for its compliance subscriptions.
Negative Factors
Business Formations
LegalZoom's formations fell by 15% year-over-year to 96,000, driven by both a loss in market share and a decline in macro-level formations.
Macro Sensitivity
LegalZoom has relatively little control over the next 12M top-line, given its macro sensitivity and challenged retention rates.
Transactional Revenue
Transaction revenues are expected to be under pressure in 2025E since BOIR comprised the majority of revenue contribution previously.
LegalZoom (LZ) vs. S&P 500 (SPY)
Market Cap
$1.52B
Dividend YieldN/A
Average Volume (3M)2.53M
Price to Earnings (P/E)51.4
Beta (1Y)1.10
Revenue Growth3.20%
EPS Growth130.57%
CountryUS
Employees964
SectorIndustrials
Sector Strength65
IndustrySpecialty Business Services
Share Statistics
EPS (TTM)0.17
Shares Outstanding176,089,700
10 Day Avg. Volume1,684,819
30 Day Avg. Volume2,531,059
Financial Highlights & Ratios
PEG Ratio0.39
Price to Book (P/B)N/A
Price to Sales (P/S)2.41
Price to Cash Flow (P/CF)9.60
P/FCF Ratio11.40
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$9.83Price Target Upside14.17% Upside
Rating ConsensusHold
Number of Analyst Covering9
LegalZoom Business Overview & Revenue Model
Company DescriptionLegalZoom (LZ) is a leading provider of online legal solutions for individuals, families, and small businesses. The company operates in the legal technology sector, offering a wide range of services including business formation, estate planning, intellectual property protection, and legal document review. LegalZoom's platform simplifies the legal process by providing easy-to-use, affordable, and accessible services that empower users to handle their legal needs without the need for direct attorney involvement.
How the Company Makes MoneyLegalZoom generates revenue primarily through its subscription-based services and transactional legal document services. Customers can purchase various legal documents and services on a one-time basis or subscribe to ongoing legal services through monthly or annual plans. These subscriptions often include access to attorney advice, legal forms, and compliance tools. Additionally, LegalZoom partners with legal professionals and firms to offer more comprehensive legal services, earning commissions or referral fees. The company's revenue is significantly supported by its strong brand presence, user-friendly platform, and strategic marketing efforts to attract and retain customers.
LegalZoom Financial Statement Overview
Summary
LegalZoom exhibits a strong financial position with consistent revenue growth, improved profitability, and robust cash flow management. The balance sheet reflects low leverage, although equity reliance could be improved. Overall, LegalZoom is well-positioned financially within the corporate services industry.Income Statement
LegalZoom has shown a strong improvement in profitability with a net profit margin of 4.39% in the latest year compared to earlier losses. Gross profit margin is robust at 64.77%, indicating efficient cost management. Revenue growth has been consistent, with a 3.20% increase from the previous year.75
Positive
Balance Sheet
The company has a conservative debt-to-equity ratio of 0.08, reflecting a low leverage position. However, the equity ratio stands at 24.95%, which suggests reliance on liabilities. ROE improved to 32.12%, demonstrating enhanced shareholder returns.65
Positive
Cash Flow
LegalZoom's free cash flow grew by 7.80%, showcasing strong cash generation capabilities. The operating cash flow to net income ratio is high at 4.53, indicating efficient conversion of income to cash. The company's free cash flow to net income ratio is 3.34, reflecting strong cash flow relative to net earnings.80
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 681.88M | 660.73M | 619.98M | 575.08M | 470.64M |
| Gross Profit | ||||
| 441.79M | 421.46M | 408.88M | 385.72M | 316.07M |
| EBIT | ||||
| 35.58M | 21.06M | -41.49M | -84.15M | 48.93M |
| EBITDA | ||||
| 80.59M | 60.06M | -41.74M | -79.07M | 71.90M |
| Net Income Common Stockholders | ||||
| 29.96M | 13.95M | -48.73M | -108.66M | 9.90M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 142.06M | 225.72M | 189.08M | 239.30M | 114.47M |
| Total Assets | ||||
| 373.88M | 447.82M | 405.39M | 431.01M | 252.06M |
| Total Debt | ||||
| 7.88M | 9.02M | 11.28M | 0.00 | 515.39M |
| Net Debt | ||||
| -134.19M | -216.70M | -177.81M | -239.30M | 400.92M |
| Total Liabilities | ||||
| 280.63M | 278.98M | 263.02M | 233.46M | 802.70M |
| Stockholders Equity | ||||
| 93.26M | 168.83M | 142.38M | 197.55M | -550.63M |
| Cash Flow | Free Cash Flow | |||
| 99.94M | 92.72M | 51.74M | 42.41M | 82.46M |
| Operating Cash Flow | ||||
| 135.64M | 124.31M | 73.84M | 54.15M | 93.05M |
| Investing Cash Flow | ||||
| -35.70M | -31.55M | -30.62M | -77.67M | -12.73M |
| Financing Cash Flow | ||||
| -183.28M | -56.15M | -93.34M | 123.36M | -15.09M |
LegalZoom Technical Analysis
Negative
8.61
Price Trends
9.18
Negative
8.56
Positive
7.69
Positive
Market Momentum
-0.07
Positive
37.07
Neutral
11.64
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For LZ, the sentiment is Negative. The current price of 8.61 is below the 20-day moving average (MA) of 9.38, below the 50-day MA of 9.18, and above the 200-day MA of 7.69, indicating a neutral trend. The MACD of -0.07 indicates Positive momentum. The RSI at 37.07 is Neutral, neither overbought nor oversold. The STOCH value of 11.64 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for LZ.
LegalZoom Risk Analysis
LegalZoom disclosed 40 risk factors in its most recent earnings report. LegalZoom reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
LegalZoom Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $167.44B | 55.97 | 17.43% | 0.65% | 13.73% | 9.93% | |
75 Outperform | $259.44B | 42.43 | 10.26% | 0.60% | 8.72% | 51.47% | |
73 Outperform | $1.52B | 51.40 | 22.86% | ― | 3.20% | 130.57% | |
66 Neutral | $25.46B | 27.91 | 248.42% | ― | 7.82% | -32.24% | |
62 Neutral | $8.05B | 13.60 | 4.04% | 3.11% | 3.70% | -14.19% | |
51 Neutral | $26.01B | 77.42 | 4.43% | ― | 30.23% | ― | |
44 Neutral | $38.98M | ― | -21.91% | ― | 16.55% | 15.72% |
* Industrials Sector Average
Performance Comparison
LZ
LegalZoom
8.72
-4.66
-34.83%
INTU
Intuit
613.78
-8.99
-1.44%
CRM
Salesforce
270.20
-32.51
-10.74%
GDDY
GoDaddy
180.72
58.49
47.85%
NOVA
Sunnova Energy International
0.33
-4.74
-93.49%
RKT
Rocket Companies
12.60
0.14
1.12%
LegalZoom Earnings Call Summary
Earnings Call Date: Feb 26, 2025 | % Change Since: -2.71% | Next Earnings Date: May 13, 2025
Earnings Call Sentiment Positive
The earnings call reflected a generally positive outlook with strong revenue and subscription growth, effective cost management, and strategic acquisitions. However, there are challenges in business formations and specific transaction revenues due to external factors.Highlights
Revenue and Subscription Growth
Fourth quarter revenue reached $162 million, at the high end of guidance. Subscription revenue grew 2% year-over-year, with approximately 1.8 million active subscriptions, up 14%.
Strong Adjusted EBITDA Performance
Fourth quarter adjusted EBITDA was $44 million, representing a 27% margin, a 32% year-over-year increase. Full-year adjusted EBITDA of $148 million grew 25%, with margins improving by 380 basis points.
Formation Nation Acquisition
The acquisition of Formation Nation is expected to positively contribute to adjusted EBITDA in the first year and significantly strengthen LegalZoom's customer service profile and offerings.
AI and Technology Integration
LegalZoom is leveraging AI and its proprietary data to enhance customer service and efficiency, including launching AI-powered tools like an estate plan AI assistant.
Focus on Quality Share
Shifted over 10% more customers to pro and premium packages year-over-year, focusing on high-value customers for sustainable growth.
Lowlights
Decline in Business Formations
Recorded 96,000 business formations in Q4, a 15% decline, due to a combination of a softer business formations macro and focus on attracting high-value customers.
Challenges with Beneficial Ownership Filing
The beneficial ownership filing requirement's deadline remains volatile, impacting transaction revenue expectations for 2025.
Decreased Average Order Value
Average order value was $220 for the quarter, down 9% due to a higher mix of lower-priced transactions.
Company Guidance
In LegalZoom's Fourth Quarter 2024 Earnings Conference Call, the company provided guidance for 2025, emphasizing a strategic focus on subscription revenue growth and quality customer acquisition. LegalZoom reported fourth-quarter revenue of $162 million, with subscription revenue growing 2% year-over-year. The company aims for 5% year-over-year revenue growth in 2025, projecting double-digit subscription revenue growth by year-end. Adjusted EBITDA for Q4 was $44 million, with a margin of 27%, and the full-year adjusted EBITDA was $148 million, reflecting a 25% increase. LegalZoom also highlighted a shift in go-to-market strategy, leveraging partnerships and AI-driven solutions to enhance service offerings. The acquisition of Formation Nation is expected to contribute positively to adjusted EBITDA, with a focus on integration and cross-selling opportunities. The company maintains a stable marketing budget while doubling brand spend to enhance customer awareness and engagement. LegalZoom anticipates continued operational efficiencies and a focus on core legal and compliance services to drive sustainable growth.LegalZoom Corporate Events
M&A TransactionsBusiness Operations and StrategyFinancial Disclosures
LegalZoom Reports Strong Q4 2024 Financial Results
Positive
Feb 26, 2025
LegalZoom reported strong financial results for the fourth quarter and full year 2024, with revenue and net income exceeding expectations. The company announced a 5% revenue growth guidance for 2025 and plans to expand margins, supported by the acquisition of Formation Nation to bolster its growth strategy.
M&A TransactionsBusiness Operations and Strategy
LegalZoom Acquires Formation Nation for Strategic Expansion
Positive
Feb 10, 2025
On February 10, 2025, LegalZoom acquired Formation Nation to boost its go-to-market strategy and expand its range of small business solutions. This acquisition, valued at $49.3 million in cash and approximately 2.2 million restricted shares, is expected to enhance LegalZoom’s industry positioning by merging Formation Nation’s customer service strengths with its own technology platform. The transaction, which closed on the same day, is projected to positively impact LegalZoom’s Adjusted EBITDA and earnings per share in the first year.
Executive/Board Changes
LegalZoom Appoints Charles Thomas as Chief Accounting Officer
Positive
Jan 14, 2025
On January 7, 2025, LegalZoom appointed Charles Thomas as the new Chief Accounting Officer, effective February 3, 2025, succeeding Noel Watson in this role. Mr. Thomas brings extensive experience from his previous roles at Veritone, Inc. and TrueCar, Inc., and his appointment is expected to enhance the company’s accounting leadership and operations.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.