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LegalZoom (LZ)
NASDAQ:LZ
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LegalZoom
(NASDAQ:LZ)
Rating:75Outperform
Price Target:
$10.50
▲(14.38%Upside)
Positive Factors
Earnings Performance
LegalZoom reported strong first-quarter results, with revenue and free cash flow exceeding estimates.
Strategic Focus
LegalZoom is focusing on driving subscription revenue and its core legal and compliance offering, which is seen as a strategic move.
Subscription Revenue Growth
Management highlights that subscription revenue growth benefits from compliance pricing initiatives and increased virtual mail subscriptions.
Negative Factors
Growth Profile
Analyst reiterates an underperform rating due to lower growth profile compared to competitors.
Market Conditions
Business Formations were down 15% year-over-year, attributed to a softer macroeconomic environment and a shift in focus towards higher value customers.
Revenue Challenges
The discontinuation of LZ Tax and BOIR requirements is expected to create a four-point headwind to growth.
LegalZoom (LZ) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.65B
Dividend YieldN/A
Average Volume (3M)1.94M
Price to Earnings (P/E)53.1
Beta (1Y)0.84
Revenue Growth3.25%
EPS Growth56.17%
CountryUS
Employees964
SectorIndustrials
Sector Strength92
IndustrySpecialty Business Services
Share Statistics
EPS (TTM)0.13
Shares Outstanding181,184,390
10 Day Avg. Volume1,593,478
30 Day Avg. Volume1,942,209
Financial Highlights & Ratios
PEG Ratio2.38
Price to Book (P/B)16.37
Price to Sales (P/S)0.00
P/FCF Ratio15.52
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$9.70Price Target Upside5.66% Upside
Rating ConsensusHold
Number of Analyst Covering7
LegalZoom Business Overview & Revenue Model
Company DescriptionLegalZoom.com, Inc. operates an online platform for legal and compliance solutions in the United States. The company's platform offers products and services, including business formations, creating estate planning documents, protecting intellectual property, completing certain forms and agreements, providing access to independent attorney advice, and connecting customers with experts for tax preparation and bookkeeping services. It serves small businesses and individuals. LegalZoom.com, Inc. was incorporated in 1999 and is headquartered in Glendale, California.
How the Company Makes MoneyLegalZoom makes money primarily through a subscription-based model and one-time transaction fees for its various services. The company offers several subscription plans that provide ongoing legal advice and support, catering to both businesses and individuals. Additionally, LegalZoom generates revenue from one-time services such as business formations, trademark registrations, and estate planning document preparation. Partnerships with legal professionals and other service providers also contribute to its revenue by enhancing its product offerings and expanding its customer base. The company leverages its online platform to reach a broad audience, making legal services more accessible and driving its revenue growth.
LegalZoom Earnings Call Summary
Earnings Call Date:May 07, 2025
(Q1-2025)
| % Change Since: 26.62%|
Next Earnings Date:Aug 07, 2025
Earnings Call Sentiment Neutral
The earnings call highlights a solid financial performance with positive revenue and subscription growth despite macroeconomic challenges. The company successfully integrated Formation Nation, contributing to revenue, and maintained a strong cash position. However, there were challenges with weaker business formations, ARPU decline, and macroeconomic uncertainties affecting growth projections. The overall sentiment is balanced, with both positive and negative aspects considered.Q1-2025 Updates
Positive Updates
Revenue and Subscription Growth
First quarter revenue of $183 million increased 5% year-over-year, with subscription revenue growing 8% year-over-year from compliance-related and virtual mail subscriptions.
Adjusted EBITDA Performance
First quarter adjusted EBITDA of $37 million exceeded expectations, with an adjusted EBITDA margin of 20%, benefiting from strong revenue performance and cost efficiencies.
Formation Nation Integration Success
Formation Nation contributed approximately $8.6 million in revenues in the first quarter, and early integration efforts are promising.
Strong Cash Position
Ended the quarter with $210 million in cash and cash equivalents, with no debt, and generated free cash flow of $41 million, up 67% compared to $25 million in 2024.
Growth in Subscription Units
Approximately 1.9 million subscription units at the end of the quarter, a 20% increase driven by bundling forms and e-signature and bookkeeping subscriptions.
Negative Updates
Weaker Business Formations
Business formations decreased by 6% year-over-year due to a softer business formations macro and a focus on quality share acquisition.
ARPU Decline
Average revenue per user (ARPU) was $252 for the quarter, down 7% due to a shift towards lower-priced subscription offerings and a decrease in higher-priced tax subscriptions.
Macroeconomic Uncertainty
Census EIN applications fell 5% year-over-year, and the company adjusted assumptions for business formations to decline mid- to high single digits due to uncertain economic conditions.
Elimination of BOIR Filing Requirement
FinCEN ruling eliminated the BOIR filing requirement for U.S. companies, impacting transaction revenue growth.
Pressure on Marketing Spend
Increased marketing spend by 9% year-over-year, with adjustments to account for shifts in economic conditions and reduced upfront marketing commitments.
Company Guidance
In the LegalZoom First Quarter 2025 Earnings Conference Call, the company reported strong performance, exceeding its guidance with $183 million in revenue, a 5% year-over-year increase, and a subscription revenue growth of 8%, attributed to pricing strategies and the introduction of higher-value subscriptions. The adjusted EBITDA for the quarter was $37 million, with a margin of 20%, demonstrating effective cost management. LegalZoom reiterated its full-year revenue growth outlook of 5% and an adjusted EBITDA margin of 23%, projecting an adjusted EBITDA of approximately $165 million. Despite challenges in the macroeconomic environment, including a projected decline in Census EIN applications, the company remains confident in achieving double-digit subscription revenue growth by Q4 2025, driven by strategic shifts towards quality share acquisition and subscription-based offerings. The acquisition of Formation Nation contributed $8.6 million in revenue, and LegalZoom continues to leverage partnerships and technology innovations to enhance its market position and ensure long-term growth.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
Positive
9.18
Price Trends
8.28
Positive
8.66
Positive
7.93
Positive
Market Momentum
0.32
Positive
57.19
Neutral
24.10
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For LZ, the sentiment is Positive. The current price of 9.18 is above the 20-day moving average (MA) of 9.10, above the 50-day MA of 8.28, and above the 200-day MA of 7.93, indicating a bullish trend. The MACD of 0.32 indicates Positive momentum. The RSI at 57.19 is Neutral, neither overbought nor oversold. The STOCH value of 24.10 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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 1 New Risks
1.
Failure to effectively manage our growth could adversely impact our business Q4, 2024
LegalZoom Peers Comparison
Overall Rating
UnderperformOutperform
Sector (65)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
81 Outperform | $3.37B | 23.47 | 7.17% | 0.72% | 5.04% | 31.69% | |
81 Outperform | $4.01B | 14.16 | 17.36% | 1.69% | 5.29% | 31.95% | |
75 Outperform | $1.65B | 53.09 | 17.09% | ― | 3.25% | 56.17% | |
74 Outperform | $3.25B | 41.15 | 4.46% | 1.88% | 2.81% | -67.57% | |
73 Outperform | $3.89B | 48.98 | 6.25% | ― | 32.27% | -40.50% | |
65 Neutral | $4.44B | 12.22 | 5.28% | 248.14% | 4.08% | -12.12% | |
58 Neutral | $3.03B | 549.40 | -13.59% | ― | 37.97% | -499.29% |
* Industrials Sector Average
Performance Comparison
LZ
LegalZoom
9.18
0.68
8.00%
ABM
ABM Industries
52.72
5.88
12.55%
CBZ
CBIZ
72.00
-3.85
-5.08%
MMS
Maximus
71.75
-13.77
-16.10%
UNF
UniFirst
187.40
30.33
19.31%
FA
First Advantage
18.10
1.45
8.71%
LegalZoom Corporate Events
Executive/Board ChangesM&A TransactionsStock BuybackBusiness Operations and StrategyFinancial Disclosures
LegalZoom Expands Stock Buyback Program by $100 Million
Positive
May 7, 2025
On May 7, 2025, LegalZoom announced a $100 million increase in its stock repurchase program, bringing the total authorization to $315 million, with $150 million available for future repurchases. This move reflects confidence in its financial health following a strong first quarter in 2025, where revenue grew by 5% year-over-year to $183.1 million, driven by an 8% increase in subscription revenue. LegalZoom’s acquisition of Formation Nation and the appointment of a new Chief Technology Officer are expected to enhance its service offerings and technological capabilities.
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.