LegalZoom.com, Inc. (Nasdaq: LZ), the No. 1 choice in online
small business formations, today announced results for its third
quarter ended September 30, 2023, including the following
highlights:
- Revenue was $167.3 million for
the quarter, up 8% year-over-year:
- Transaction revenue was
$57.4 million, down 2% year-over-year. The decline was
primarily driven by a 6% year-over-year reduction in average order
value driven by our nationwide roll-out of free LLC formations
beginning in the first quarter of 2023, partially offset by a 5%
increase in transaction unit volume.
- Subscription revenue was
$104.5 million, up 14% year-over-year. The increase was driven
by a 2% year-over-year increase in average revenue per subscription
unit and the addition of 153 thousand net new subscription units
added during the trailing twelve months.
- Partner revenue was
$5.5 million, flat year-over-year.
- Gross margin was 65% for the
quarter, compared to 68% in the same period in 2022, primarily
driven by higher filing fees as a percentage of revenue due to an
increase in business formation volumes associated with our
nationwide roll-out of free LLC formations beginning in the first
quarter of 2023.
- Net income was $7.5 million for
the quarter, or 5% of revenue, compared to net loss of
$12.0 million or 8% of revenue, for the same period in
2022.
- Adjusted EBITDA was
$33.7 million for the quarter, or 20% of revenue, compared to
$16.9 million, or 11% of revenue, for the same period in
2022.
- Non-GAAP net income was
$23.3 million for the quarter, compared to $8.1 million
for the same period in 2022.
- Cash and cash equivalents were
$212.1 million as of September 30, 2023, compared to
$189.1 million as of December 31, 2022.
- Cash flow provided by operating
activities was $27.4 million for the quarter compared to
$27.3 million for the same period in 2022.
- Free cash flow was
$19.4 million for the quarter compared to $21.2 million
for the same period in 2022.
- Basic and diluted net income per
share was $0.04 for the quarter compared to a basic and diluted net
loss per share of $0.06 for the same period in 2022, and basic and
diluted Non-GAAP net income per share was $0.12 for the
quarter compared to basic and diluted Non-GAAP net income per share
of $0.04 for the same period in 2022.
- Launched new products during and
subsequent to the end of the third quarter:
- LZ Books, an online accounting
solution that includes invoicing, payments and automated expense
categorization, as well as seamless integration with LegalZoom's LZ
Tax product.
- Doc Assist, a free document
summarization tool powered by generative AI which leverages
LegalZoom’s expertise in legal technology and provides users access
to legal expertise from LegalZoom’s attorney network.
- Business Licenses, a compliance
product built on a proprietary nationwide database that matches a
small business profile with the licenses and permits required to
operate the business.
- A revamped Legal Forms library
allowing users free access to over 160 attorney certified forms,
with the ability to personalize the document or execute via
LegalZoom’s eSignature tool for a fee.
“We had another strong quarter of financial performance, but
equally important, we continue to demonstrate increased product
velocity with the release of Business Licenses and the continued
evolution of Legal Forms,” said Dan Wernikoff, LegalZoom’s Chief
Executive Officer.
Noel Watson, LegalZoom’s Chief Financial Officer added, “Our
third quarter results outperformed our expectations and reflect
strong growth in business formations as well as strength in our
subscriptions business. This, combined with our continued focus on
profitability, drove third quarter Adjusted EBITDA of $33.7
million, double the prior-year period.”
Key Business Metrics and Non-GAAP Financial
Measures
(unaudited, in thousands except AOV, ARPU and percentages)
|
Three Months Ended |
|
% Growth |
|
Nine Months Ended |
|
% Growth |
|
September 30, |
|
(Decline) |
|
September 30, |
|
(Decline) |
|
|
2023 |
|
|
|
2022 |
|
|
YOY |
|
|
2023 |
|
|
|
2022 |
|
|
YOY |
Revenue |
$ |
167,274 |
|
|
$ |
155,277 |
|
|
8 |
% |
|
$ |
502,064 |
|
|
$ |
473,353 |
|
|
6 |
% |
Business formations |
|
137 |
|
|
|
117 |
|
|
17 |
% |
|
|
468 |
|
|
|
359 |
|
|
30 |
% |
Transaction units |
|
237 |
|
|
|
226 |
|
|
5 |
% |
|
|
828 |
|
|
|
718 |
|
|
15 |
% |
Average order value (AOV) |
$ |
242 |
|
|
$ |
258 |
|
|
(6 |
)% |
|
$ |
217 |
|
|
$ |
263 |
|
|
(17 |
)% |
Subscription units at period end |
|
1,568 |
|
|
|
1,415 |
|
|
11 |
% |
|
|
1,568 |
|
|
|
1,415 |
|
|
11 |
% |
Average revenue per subscription unit (ARPU) at period end |
$ |
265 |
|
|
$ |
259 |
|
|
2 |
% |
|
$ |
265 |
|
|
$ |
259 |
|
|
2 |
% |
Net income (loss) |
$ |
7,534 |
|
|
$ |
(11,981 |
) |
|
163 |
% |
|
$ |
6,571 |
|
|
$ |
(50,477 |
) |
|
113 |
% |
Adjusted EBITDA |
$ |
33,740 |
|
|
$ |
16,906 |
|
|
100 |
% |
|
$ |
85,253 |
|
|
$ |
37,239 |
|
|
129 |
% |
Net income (loss) margin |
|
5 |
% |
|
(8 |
)% |
|
158 |
% |
|
|
1 |
% |
|
(11 |
)% |
|
112 |
% |
Adjusted EBITDA margin |
|
20 |
% |
|
|
11 |
% |
|
80 |
% |
|
|
17 |
% |
|
|
8 |
% |
|
116 |
% |
Net cash provided by operating activities |
$ |
27,441 |
|
|
$ |
27,258 |
|
|
1 |
% |
|
$ |
101,814 |
|
|
$ |
52,015 |
|
|
96 |
% |
Free cash flow |
$ |
19,448 |
|
|
$ |
21,196 |
|
|
(8 |
)% |
|
$ |
78,594 |
|
|
$ |
35,574 |
|
|
121 |
% |
Certain percentages may not recalculate due to rounding. |
Stockholder Return Activity
During the third quarter ended September 30, 2023, LegalZoom
repurchased approximately 4.7 million shares of its common stock in
connection with a concurrent secondary equity offering at a price
per share of $9.55, for a total of $45.1 million. This repurchase
exhausted LegalZoom’s existing $150 million stock repurchase
program that was authorized on March 1, 2022. From March 1, 2022
through September 30, 2023, LegalZoom repurchased approximately
15.1 million shares of its common stock at an average cost of $9.92
per share, for a total of $150.0 million.
Today, LegalZoom announced its board of directors has authorized
a new stock repurchase program of up to $100.0 million of its
common stock with no expiration date.
Financial Guidance and Outlook
Our guidance for the fourth quarter ending December 31, 2023 is
as follows:
- Revenue is expected
to be in the range of $155 million to $157 million
- Adjusted EBITDA is
expected to be in the range of $28 million to $30 million
Our guidance for the full year ending December 31, 2023 is
updated as follows:
- Revenue is now
expected to be in the range of $657 million to $659 million
- Adjusted EBITDA is
now expected to be in the range of $114 million to $116
million
Webcast and Conference Call Information
A conference call to discuss LegalZoom’s third quarter 2023
results is scheduled for today, November 7, 2023, at 4:30 p.m.
Eastern time/1:30 p.m. Pacific time. Those interested in
participating in the conference call are invited to register
Here.
A live audio webcast of the event will be available on the
LegalZoom Investor Relations website,
https://investors.legalzoom.com. An archived replay of the webcast
also will be available shortly after the live event.
Forward-Looking Statements
This press release 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 press release may
be forward-looking statements. In some cases, you can identify
forward-looking statements by terms such as “may,” “will,”
“should,” “expects,” “plans,” “anticipates,” “could,” “intends,”
“targets,” “projects,” “contemplates,” “believes,” “estimates,”
“forecasts,” “predicts,” “potential” or “continue” or the negative
of these terms or other similar expressions. Forward-looking
statements contained in this press release include, but are not
limited to, statements regarding our quarterly and annual
guidance.
The forward-looking statements in this press release are only
predictions. We have based these forward-looking statements largely
on our current expectations and projections about future events and
financial trends that we believe may affect our business, financial
condition and results of operations. Forward-looking statements
involve known and unknown risks, uncertainties and other important
factors that may cause our actual results, performance or
achievements to be materially different from any future results,
performance or achievements expressed or implied by the
forward-looking statements, including but not limited to the
following: the risk that our recent growth may not be indicative of
our future growth; our dependence on business formations and
fluctuations or declines in the number of business formations; the
impact of macroeconomic challenges on our business, including as a
result of inflation, global conflict, supply chain issues and
recessionary fears; our ability to provide high-quality products
and services, customer care and customer experience; our ability to
sustain our revenue growth rate and remain profitable in the
future; our ability to continue to innovate and provide a platform
that is useful to our customers and that meets our customers’
expectations; our ability to attract and retain customers and,
specifically, our ability to convert our transactional customers to
subscribers; our ability to drive additional purchases and
cross-sell to paying customers; our ability to maintain and expand
strategic relationships with third parties; our anticipation of
increasing expenses in the future; the competitive legal solutions
market; our ability to hire and retain top talent and motivate our
employees; risks and costs associated with complex and evolving
laws and regulations; the risk that the recent restatement of
certain of our prior quarterly financial statements may affect
investor confidence and raise reputational issues and may subject
us to additional risks and uncertainties; our ability to remediate
material weaknesses in our internal control over financial
reporting; and other factors discussed in the section titled “Risk
Factors” included in our Quarterly Report on Form 10-Q for the
three months ended June 30, 2023 filed with the Securities and
Exchange Commission, or SEC, on August 8, 2023, as well as those in
our subsequent filings with the SEC. The forward-looking statements
in this press release are based upon information available to us as
of the date of this press release, and while we believe such
information forms a reasonable basis for such statements, such
information may be limited or incomplete, and our statements should
not be read to indicate that we have conducted an exhaustive
inquiry into, or review of, all potentially available relevant
information. These statements are inherently uncertain and
investors are cautioned not to unduly rely upon these
statements.
You should read this press release with the understanding that
our actual future results, levels of activity, performance and
achievements may be materially different from what we expect. We
qualify all of our forward-looking statements by these cautionary
statements. Except as required by applicable law, we do not plan to
publicly update or revise any forward-looking statements contained
in this press release, whether as a result of any new information,
future events or otherwise.
About Non-GAAP Financial Measures
This press release includes non-GAAP financial
measures including Adjusted EBITDA, Adjusted EBITDA
margin, Non-GAAP net income, Non-GAAP net income margin,
Non-GAAP net income per share and Free cash flow. To supplement our
unaudited condensed consolidated financial statements, which are
prepared and presented in accordance with U.S. generally accepted
accounting principles, or GAAP, we use
certain non-GAAP financial measures, as described below,
to understand and evaluate our core operating performance.
These non-GAAP financial measures, which may be different
from similarly titled measures used by other companies, are
presented to enhance investors’ overall understanding of our
financial performance and liquidity and should not be considered a
substitute for, or superior to, the financial information prepared
and presented in accordance with GAAP. We believe that
these non-GAAP financial measures provide useful
information about our financial performance and liquidity, enhance
the overall understanding of our past performance and future
prospects and allow for greater transparency with respect to
important measures used by our management for financial and
operational decision-making. We are presenting
these non-GAAP measures to assist investors in seeing our
financial performance using a management view and because we
believe that these measures provide an additional tool for
investors to use in comparing our core financial performance over
multiple periods with other companies in our industry.
We define Adjusted EBITDA as Net income (loss) adjusted to
exclude interest income (expense), net, provision for (benefit
from) income taxes, depreciation and amortization, other expense
(income), net, stock-based compensation, impairment of goodwill,
long-lived and other assets, legal expenses, restructuring
expenses, transaction-related expenses and certain other
non-recurring income and expenses from time to time. Our Adjusted
EBITDA financial measure differs from GAAP in that it excludes
certain items of income and expense. We define Adjusted EBITDA
margin as Adjusted EBITDA as a percentage of revenue.
Adjusted EBITDA is one of the primary performance measures used
by our management and our board of directors to understand and
evaluate our financial performance and operating trends, including
period-to-period comparisons, prepare and approve our annual
budget, develop short and long-term operational plans and determine
appropriate compensation plans for our employees. Accordingly, we
believe that Adjusted EBITDA provides useful information to
investors and others in understanding and evaluating our results of
operations in the same manner as our management team and board of
directors. In assessing our performance, we exclude certain
expenses that we believe are not comparable period over period or
that we believe are not indicative of our underlying operating
performance. Adjusted EBITDA should not be considered in isolation
of, or as an alternative to, measures prepared and presented in
accordance with GAAP. There are a number of limitations related to
the use of Adjusted EBITDA rather than net income (loss), which is
the nearest GAAP equivalent of Adjusted EBITDA. Some of these
limitations include that the non-GAAP financial measure:
- may be calculated differently by other
companies in our industry, limiting its usefulness as a comparative
measure;
- does not reflect our capital
expenditures, future requirements for capital expenditures or
contractual commitments;
- excludes depreciation and amortization
and, although these are non-cash expenses, the assets being
depreciated may be replaced in the future;
- does not reflect changes in, or cash
requirements for, our working capital needs;
- excludes stock-based compensation
expense, which has been, and will continue to be, a significant
recurring expense for our business and an important part of our
compensation strategy; and
- does not reflect certain other expenses
that we do not consider representative of our underlying operating
performance, but that reduce cash available to us.
We define Non-GAAP net income as net income (loss) adjusted to
exclude amortization of acquired intangible assets, stock-based
compensation expense, certain transaction-related expenses, and
certain other non-recurring income and expenses from time to time,
net of related income tax impacts. Our Non-GAAP net income
financial measure differs from GAAP in that it excludes certain
items of income and expense. We define Net income (loss) margin as
net loss as a percentage of revenue. We define Non-GAAP net income
(loss) margin as Non-GAAP net income (loss) as a percentage of
revenue. We define Non-GAAP net income (loss) per share
attributable to common stockholders as Non-GAAP net income (loss)
divided by basic and diluted weighted-average common stock. We
believe Non-GAAP net income (loss) and Non-GAAP net income (loss)
per share attributable to common stockholders are operating
performance measures that provide investors and analysts with
useful supplemental information about the financial performance of
our business.
Free cash flow is a liquidity measure used by management in
evaluating the cash generated by our operations after purchases of
property and equipment including
capitalized internal-use software. We consider Free cash
flow to be an important measure because it provides useful
information to management and investors about the amount of cash
generated by our business that can be used for strategic
opportunities, including investing in our business and
strengthening our balance sheet. Once our business needs and
obligations are met, cash can be used to maintain a strong balance
sheet and invest in future growth. The usefulness of Free cash flow
as an analytical tool has limitations because it excludes certain
items that are settled in cash, does not represent residual cash
flow available for discretionary expenses, does not reflect our
future contractual commitments, and may be calculated differently
by other companies in our industry. Accordingly, it should not be
considered in isolation or as a substitute for analysis of other
GAAP financial measures, such as net cash used in or provided by
operating activities.
We are not providing a reconciliation for our
non-GAAP outlook on a forward-looking basis (including the
information under “Financial Guidance and Outlook” above), as we
are unable to provide a meaningful calculation or estimation of
reconciling items and the information is not available without
unreasonable effort. This is due to the inherent difficulty of
forecasting the timing or amount of various items that would impact
the most directly comparable forward-looking GAAP financial measure
that have not yet occurred, are out of LegalZoom’s control and/or
cannot be reasonably predicted.
Forward-looking non-GAAP financial measures provided
without the most directly comparable GAAP financial measures may
vary materially from the corresponding GAAP financial measures.
The tables in this press release contain more details on the
GAAP financial measures that are most directly comparable
to non-GAAP financial measures and the related
reconciliations between these financial measures.
LegalZoom
LegalZoom is the leading online platform for business formation
in the United States. Driven by a mission to unleash
entrepreneurship, LegalZoom delivers comprehensive legal, tax and
compliance products and expertise for small business owners through
easy-to-use technology. From free business formations to business
management solutions and professional advisory services, LegalZoom
supports millions of small business owners and their families
throughout the entrepreneurial journey. Founded on the belief that
everyone should have affordable access to legal and financial
expertise, LegalZoom empowers entrepreneurs to make their dream a
reality. To learn more about LegalZoom, visit
www.legalzoom.com.
Contact
Investor Relations
investor@legalzoom.com
LegalZoom.com, Inc.Unaudited Condensed
Consolidated Balance Sheets(In thousands, except par
values) |
|
|
September 30,
2023 |
|
December 31,
2022 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
212,147 |
|
|
$ |
189,082 |
|
Accounts receivable, net |
|
14,417 |
|
|
|
13,177 |
|
Prepaid expenses and other current assets |
|
17,494 |
|
|
|
16,699 |
|
Current assets held for sale |
|
22,722 |
|
|
|
22,722 |
|
Total current assets |
|
266,780 |
|
|
|
241,680 |
|
Property and equipment,
net |
|
43,763 |
|
|
|
30,823 |
|
Goodwill |
|
63,318 |
|
|
|
63,229 |
|
Intangible assets, net |
|
15,026 |
|
|
|
18,900 |
|
Operating lease right-of-use
assets |
|
9,199 |
|
|
|
11,148 |
|
Deferred income taxes |
|
18,570 |
|
|
|
29,380 |
|
Available-for-sale debt
securities |
|
1,237 |
|
|
|
995 |
|
Other assets |
|
8,620 |
|
|
|
9,240 |
|
Total assets |
$ |
426,513 |
|
|
$ |
405,395 |
|
Liabilities and
stockholders’ equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
32,311 |
|
|
$ |
25,312 |
|
Accrued expenses and other current liabilities |
|
55,375 |
|
|
|
57,373 |
|
Deferred revenue |
|
176,867 |
|
|
|
164,200 |
|
Operating lease liabilities |
|
2,269 |
|
|
|
2,317 |
|
Total current liabilities |
|
266,822 |
|
|
|
249,202 |
|
Operating lease liabilities,
non-current |
|
7,346 |
|
|
|
8,958 |
|
Deferred revenue |
|
560 |
|
|
|
892 |
|
Other liabilities |
|
4,443 |
|
|
|
3,968 |
|
Total liabilities |
|
279,171 |
|
|
|
263,020 |
|
Commitments and
contingencies |
|
|
|
Stockholders’ equity: |
|
|
|
Preferred stock, $0.001 par value; 100,000 shares authorized at
September 30, 2023 and December 31, 2022, none issued or
outstanding at September 30, 2023 and December 31,
2022 |
|
— |
|
|
|
— |
|
Common stock, $0.001 par value; 1,000,000 shares authorized;
187,776 shares and 190,822 shares issued and outstanding at
September 30, 2023 and December 31, 2022,
respectively |
|
187 |
|
|
|
190 |
|
Additional paid-in capital |
|
1,086,222 |
|
|
|
1,032,550 |
|
Accumulated deficit |
|
(940,550 |
) |
|
|
(891,862 |
) |
Accumulated other comprehensive income |
|
1,483 |
|
|
|
1,497 |
|
Total stockholders’ equity |
|
147,342 |
|
|
|
142,375 |
|
Total liabilities and
stockholders’ equity |
$ |
426,513 |
|
|
$ |
405,395 |
|
LegalZoom.com, Inc.Unaudited Condensed
Consolidated Statements of Operations(In thousands, except
per share amounts) |
|
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
(Restated) |
|
|
|
(Restated) |
Revenue |
|
$ |
167,274 |
|
|
$ |
155,277 |
|
|
$ |
502,064 |
|
|
$ |
473,353 |
|
Cost of revenue |
|
|
59,213 |
|
|
|
50,314 |
|
|
|
183,356 |
|
|
|
163,647 |
|
Gross profit |
|
|
108,061 |
|
|
|
104,963 |
|
|
|
318,708 |
|
|
|
309,706 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
51,071 |
|
|
|
67,369 |
|
|
|
164,746 |
|
|
|
215,964 |
|
Technology and development |
|
|
21,491 |
|
|
|
17,457 |
|
|
|
61,074 |
|
|
|
51,613 |
|
General and administrative |
|
|
25,243 |
|
|
|
30,103 |
|
|
|
78,683 |
|
|
|
88,560 |
|
Impairment of long-lived and other assets |
|
|
— |
|
|
|
237 |
|
|
|
— |
|
|
|
237 |
|
Total operating expenses |
|
|
97,805 |
|
|
|
115,166 |
|
|
|
304,503 |
|
|
|
356,374 |
|
Income (loss) from
operations |
|
|
10,256 |
|
|
|
(10,203 |
) |
|
|
14,205 |
|
|
|
(46,668 |
) |
Interest income, net |
|
|
2,623 |
|
|
|
535 |
|
|
|
6,357 |
|
|
|
511 |
|
Other (expense) income, net |
|
|
(882 |
) |
|
|
(2,536 |
) |
|
|
436 |
|
|
|
(6,102 |
) |
Income (loss) before income
taxes |
|
|
11,997 |
|
|
|
(12,204 |
) |
|
|
20,998 |
|
|
|
(52,259 |
) |
Provision for (benefit from) income taxes |
|
|
4,463 |
|
|
|
(223 |
) |
|
|
14,427 |
|
|
|
(1,782 |
) |
Net income (loss) |
|
$ |
7,534 |
|
|
$ |
(11,981 |
) |
|
$ |
6,571 |
|
|
$ |
(50,477 |
) |
Net income (loss) per share
attributable to common stockholders—basic |
|
$ |
0.04 |
|
|
$ |
(0.06 |
) |
|
$ |
0.03 |
|
|
$ |
(0.26 |
) |
Net income (loss) per share
attributable to common stockholders—diluted: |
|
$ |
0.04 |
|
|
$ |
(0.06 |
) |
|
$ |
0.03 |
|
|
$ |
(0.26 |
) |
Weighted-average shares used
to compute net income (loss) per share attributable to common
stockholders - basic |
|
|
191,033 |
|
|
|
194,906 |
|
|
|
191,222 |
|
|
|
196,984 |
|
Weighted-average shares used
to compute net income (loss) per share attributable to common
stockholders - diluted |
|
|
197,454 |
|
|
|
194,906 |
|
|
|
194,953 |
|
|
|
196,984 |
|
LegalZoom.com, Inc.Unaudited Condensed
Consolidated Statements of Cash Flows(In thousands) |
|
|
|
Nine Months Ended September 30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
(Restated) |
Cash flows from
operating activities |
|
|
|
|
Net income (loss) |
|
$ |
6,571 |
|
|
$ |
(50,477 |
) |
Adjustments to reconcile net
income (loss) to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization |
|
|
18,061 |
|
|
|
16,187 |
|
Amortization of right-of-use assets |
|
|
2,011 |
|
|
|
1,290 |
|
Amortization of debt issuance costs |
|
|
170 |
|
|
|
170 |
|
Impairment of other equity security |
|
|
— |
|
|
|
170 |
|
Impairment of long-lived assets |
|
|
— |
|
|
|
237 |
|
Stock-based compensation |
|
|
51,005 |
|
|
|
64,490 |
|
Deferred income taxes |
|
|
10,818 |
|
|
|
(2,637 |
) |
Change in fair value of contingent consideration |
|
|
(836 |
) |
|
|
(150 |
) |
Unrealized foreign exchange (gain) loss |
|
|
(179 |
) |
|
|
5,958 |
|
Other |
|
|
(39 |
) |
|
|
(1 |
) |
Changes in operating assets and liabilities, net of effects of
business combination: |
|
|
|
|
Accounts receivable |
|
|
(946 |
) |
|
|
(3,024 |
) |
Prepaid expenses and other current assets |
|
|
(785 |
) |
|
|
(296 |
) |
Other assets |
|
|
345 |
|
|
|
(863 |
) |
Accounts payable |
|
|
5,992 |
|
|
|
(6,417 |
) |
Accrued expenses and other liabilities |
|
|
(992 |
) |
|
|
7,585 |
|
Operating lease liabilities |
|
|
(1,723 |
) |
|
|
(1,599 |
) |
Income tax payable |
|
|
16 |
|
|
|
22 |
|
Deferred revenue |
|
|
12,325 |
|
|
|
21,370 |
|
Net cash provided by operating activities |
|
|
101,814 |
|
|
|
52,015 |
|
Cash flows from
investing activities |
|
|
|
|
Acquisition, net of cash
acquired |
|
|
— |
|
|
|
(2,532 |
) |
Proceeds from acquisition
working capital adjustment |
|
|
— |
|
|
|
307 |
|
Purchase of property and
equipment |
|
|
(23,220 |
) |
|
|
(16,441 |
) |
Other |
|
|
38 |
|
|
|
— |
|
Net cash used in investing activities |
|
|
(23,182 |
) |
|
|
(18,666 |
) |
Cash flows from
financing activities |
|
|
|
|
Repayment of capital lease
obligations |
|
|
(27 |
) |
|
|
— |
|
Payment of contingent
consideration |
|
|
— |
|
|
|
(600 |
) |
Repurchase of common
stock |
|
|
(54,873 |
) |
|
|
(61,736 |
) |
Shares surrendered for
settlement of minimum statutory tax withholding |
|
|
(6,353 |
) |
|
|
(41 |
) |
Proceeds from issuance of
stock under employee stock plans |
|
|
5,690 |
|
|
|
1,682 |
|
Net cash used in financing activities |
|
|
(55,563 |
) |
|
|
(60,695 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
|
|
(4 |
) |
|
|
(139 |
) |
Net increase (decrease) in
cash and cash equivalents |
|
|
23,065 |
|
|
|
(27,485 |
) |
Cash and cash equivalents, at
beginning of the period |
|
|
189,082 |
|
|
|
239,297 |
|
Cash and cash equivalents, at
end of the period |
|
$ |
212,147 |
|
|
$ |
211,812 |
|
Adjusted EBITDA and Adjusted EBITDA Margin
The following table presents a reconciliation of net income
(loss) to Adjusted EBITDA for each of the periods indicated
(unaudited):
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
(Restated) |
|
|
|
(Restated) |
|
|
(in thousands, except percentages) |
Reconciliation of net
income (loss) to Adjusted EBITDA |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
7,534 |
|
|
$ |
(11,981 |
) |
|
$ |
6,571 |
|
|
$ |
(50,477 |
) |
Interest income, net |
|
|
(2,623 |
) |
|
|
(535 |
) |
|
|
(6,357 |
) |
|
|
(511 |
) |
Provision for (benefit from)
income taxes |
|
|
4,463 |
|
|
|
(223 |
) |
|
|
14,427 |
|
|
|
(1,782 |
) |
Depreciation and
amortization |
|
|
6,655 |
|
|
|
5,254 |
|
|
|
18,061 |
|
|
|
16,187 |
|
Other expense (income),
net |
|
|
882 |
|
|
|
2,536 |
|
|
|
(436 |
) |
|
|
6,102 |
|
Stock-based compensation |
|
|
15,582 |
|
|
|
19,778 |
|
|
|
51,005 |
|
|
|
64,490 |
|
Impairment of long-lived and
other assets |
|
|
— |
|
|
|
237 |
|
|
|
— |
|
|
|
237 |
|
Transaction-related
expenses |
|
|
— |
|
|
|
636 |
|
|
|
— |
|
|
|
758 |
|
Restructuring costs(1) |
|
|
68 |
|
|
|
804 |
|
|
|
803 |
|
|
|
1,795 |
|
Legal expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
40 |
|
Certain other non-recurring
expenses(2) |
|
|
1,179 |
|
|
|
400 |
|
|
|
1,179 |
|
|
|
400 |
|
Adjusted EBITDA |
|
$ |
33,740 |
|
|
$ |
16,906 |
|
|
$ |
85,253 |
|
|
$ |
37,239 |
|
Net income (loss) margin |
|
|
5 |
% |
|
|
(8 |
%) |
|
|
1 |
% |
|
|
(11 |
%) |
Adjusted EBITDA margin |
|
|
20 |
% |
|
|
11 |
% |
|
|
17 |
% |
|
|
8 |
% |
(1) For 2023, restructuring expenses related to the reduction of
our U.K. headcount, which is expected to be substantially complete
by December 31, 2023. For 2022, restructuring expenses related
to a phased severance event to reduce the U.S. headcount in June
and August 2022. Restructuring expenses include salary and benefits
for the impacted employees and are included in general and
administrative expenses in the accompanying unaudited condensed
consolidated statements of operations.
(2) For 2023, certain other non-recurring expenses included
costs incurred by the Company in conjunction with the secondary
offering of 16,100,000 shares of our common stock by a selling
stockholder during the three months ended September 30, 2023.
For 2022, certain other non-recurring expenses included costs
related to the departure of a member of management.
Non-GAAP Net Income, Non-GAAP Net Income
Margin and diluted Non-GAAP Net Income Per
Share
The following table presents a reconciliation of net income
(loss) to Non-GAAP net income for each of the periods
indicated (unaudited):
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
(Restated) |
|
|
|
(Restated) |
|
|
(in thousands, except per share amounts) |
Reconciliation of Net
income (loss) to Non-GAAP net income |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
7,534 |
|
|
$ |
(11,981 |
) |
|
$ |
6,571 |
|
|
$ |
(50,477 |
) |
Amortization of acquired
intangible assets |
|
|
1,292 |
|
|
|
781 |
|
|
|
3,874 |
|
|
|
2,241 |
|
Stock-based compensation |
|
|
15,582 |
|
|
|
19,778 |
|
|
|
51,005 |
|
|
|
64,490 |
|
Impairment of long-lived and
other assets |
|
|
— |
|
|
|
237 |
|
|
|
— |
|
|
|
237 |
|
Transaction-related
expenses |
|
|
— |
|
|
|
636 |
|
|
|
— |
|
|
|
758 |
|
Restructuring expenses |
|
|
68 |
|
|
|
804 |
|
|
|
803 |
|
|
|
1,795 |
|
Legal expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
40 |
|
Certain
other non-recurring expenses(1) |
|
|
1,179 |
|
|
|
400 |
|
|
|
1,179 |
|
|
|
400 |
|
Income tax effects(2) |
|
|
(2,347 |
) |
|
|
(2,550 |
) |
|
|
(7,091 |
) |
|
|
(7,233 |
) |
Non-GAAP net income |
|
$ |
23,308 |
|
|
$ |
8,105 |
|
|
$ |
56,341 |
|
|
$ |
12,251 |
|
Net income (loss) margin |
|
|
5 |
% |
|
|
(8 |
%) |
|
|
1 |
% |
|
(11 |
)% |
Non-GAAP net income margin |
|
|
14 |
% |
|
|
5 |
% |
|
|
11 |
% |
|
|
3 |
% |
Net income (loss) per share attributable to common
stockholders—basic |
|
$ |
0.04 |
|
|
$ |
(0.06 |
) |
|
$ |
0.03 |
|
|
$ |
(0.26 |
) |
Net income (loss) per share attributable to common
stockholders—diluted |
|
$ |
0.04 |
|
|
$ |
(0.06 |
) |
|
$ |
0.03 |
|
|
$ |
(0.26 |
) |
Non-GAAP net income per
share—basic |
|
$ |
0.12 |
|
|
$ |
0.04 |
|
|
$ |
0.29 |
|
|
$ |
0.06 |
|
Non-GAAP net income per
share—diluted |
|
$ |
0.12 |
|
|
$ |
0.04 |
|
|
$ |
0.29 |
|
|
$ |
0.06 |
|
Weighted-average shares used
to compute net income (loss) per share attributable to common
stockholders—basic |
|
|
191,033 |
|
|
|
194,906 |
|
|
|
191,222 |
|
|
|
196,984 |
|
Weighted-average shares used
to compute net income (loss) per share attributable to common
stockholders—diluted |
|
|
197,454 |
|
|
|
194,906 |
|
|
|
194,953 |
|
|
|
196,984 |
|
Weighted-average shares used
to compute Non-GAAP net income per share attributable to common
stockholders—basic |
|
|
191,033 |
|
|
|
194,906 |
|
|
|
191,222 |
|
|
|
196,984 |
|
Weighted-average shares used
to compute Non-GAAP net income per share attributable to
common stockholders—diluted |
|
|
197,454 |
|
|
|
196,081 |
|
|
|
194,953 |
|
|
|
199,310 |
|
(1) For 2023, certain other non-recurring expenses included
costs incurred by the Company in conjunction with the secondary
offering of 16,100,000 shares of our common stock by a selling
stockholder during the three months ended September 30, 2023.
For 2022, certain other non-recurring expenses included costs
related to the departure of a member of management.
(2) The estimated income tax effect of
the non-GAAP pre-tax adjustments is determined by
applying the statutory rate of the originating jurisdiction, if
applicable.
The following table shows the computation of basic and diluted
Non-GAAP net income per share attributable to common stockholders
(unaudited):
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
(Restated) |
|
|
|
(Restated) |
|
|
(in thousands, except per share amounts) |
Non-GAAP net income and Non-GAAP net income per share
attributable to common stockholders: |
|
|
|
|
|
|
|
|
Non-GAAP net income |
|
$ |
23,308 |
|
|
$ |
8,105 |
|
|
$ |
56,341 |
|
|
$ |
12,251 |
|
Reconciliation of denominator for net income (loss) per
share attributable to common stockholders to Non-GAAP net income
per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
Weighted-average shares used to compute Non-GAAP net income per
share attributable to common stockholders—basic: |
|
|
191,033 |
|
|
|
194,906 |
|
|
|
191,222 |
|
|
|
196,984 |
|
Effect of potentially dilutive securities: |
|
|
|
|
|
|
|
|
Stock options |
|
|
2,699 |
|
|
|
522 |
|
|
|
1,347 |
|
|
|
1,719 |
|
Restricted stock units |
|
|
3,702 |
|
|
|
653 |
|
|
|
2,372 |
|
|
|
607 |
|
Employee stock purchase plan |
|
|
20 |
|
|
|
— |
|
|
|
12 |
|
|
|
— |
|
Weighted-average common stock used in
computing Non-GAAP net income per share attributable to
common stockholders—diluted |
|
|
197,454 |
|
|
|
196,081 |
|
|
|
194,953 |
|
|
|
199,310 |
|
Non-GAAP net income per share attributable to common
stockholders—basic |
|
$ |
0.12 |
|
|
$ |
0.04 |
|
|
$ |
0.29 |
|
|
$ |
0.06 |
|
Non-GAAP net income per share attributable to common
stockholders—diluted |
|
$ |
0.12 |
|
|
$ |
0.04 |
|
|
$ |
0.29 |
|
|
$ |
0.06 |
|
Free Cash Flow
The following table presents a reconciliation of net cash
provided by operating activities to free cash flow (unaudited):
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
(Restated) |
|
|
|
(Restated) |
|
|
(in thousands) |
Reconciliation of Net Cash Provided by Operating Activities
to Free Cash Flow |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
27,441 |
|
|
$ |
27,258 |
|
|
$ |
101,814 |
|
|
$ |
52,015 |
|
Purchase of property and equipment |
|
|
(7,993 |
) |
|
|
(6,062 |
) |
|
|
(23,220 |
) |
|
|
(16,441 |
) |
Free cash flow |
|
$ |
19,448 |
|
|
$ |
21,196 |
|
|
$ |
78,594 |
|
|
$ |
35,574 |
|
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