Legalzoom.com, Inc. · NASDAQ:LZ
Legalzoom.com — Q3 2024 Earnings Presentation
27 slides from Legalzoom.com's earnings presentation, Nov 6, 2024
Slide 1: Investor Presentation
Investor Presentation November 2024
Slide 2: Forward-looking statements disclaimer
Forward-looking statements disclaimer This presentation 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
Slide 3: About non-GAAP financial measures
About non-GAAP financial measures This presentation includes certain non-GAAP financial measures including Adjusted EBITDA, Adjusted EBITDA margin, non-GAAP net income (loss), non-GAAP net income (loss) margin, adjusted gross profit, adjusted gross profit margin, certain non-GAAP expenses (including
Slide 4: About LegalZoom
About LegalZoom 4
Slide 5: Online legal and compliance is a big opportunity
Online legal and compliance is a big opportunity Little product Low tech Online innovation adoption lead gen Our $51B 25 ~4% 65% Market SAM(1) Offline Attorney legal services of lawyers cite as NPS(2) delivered largest marketing online in the US(3) expense(4) Advantaged Brand Efficient The Largest D
Slide 6: We solve important problems for our customers
We solve important problems for our customers… Entity creation and compliance is Small business owners have a fear of Consumers need legal help to protect their complicated, time-consuming and navigating complex regulatory matters, but families, but the cost of experts isn’t expensive to navigate on
Slide 7: Through our innovative legal technology platform
…through our innovative legal technology platform Small Business Services Business Business Legal Trademark & Business Business banking & formation compliance advice intellectual property management(1) websites(2) Consumer Services Estate Family Legal Real Prenuptial Name planning planning advice es
Slide 8: Large SAM, significant opportunity
(1) Large SAM, significant opportunity Life & Business Planning Business Management Expert Assistance $13B $15B $23B The largest digital formations During and post-business formation, We offer access to experts to help player, with ~9% market share(2), we offer a set of handle the most complex busin
Slide 9: Experienced management team
Experienced management team Jeff Stibel Noel Watson Nicole Miller Chief Executive Officer Chief Operating Officer & Chief Legal Officer Chief Financial Officer Sheily Chhabria Panchal Kathy Tsitovich Daniel Lysaught Aaron Stibel Chief People Officer Chief Corporate Development Chief Marketing Office
Slide 10: Three key focus areas
Three key focus areas Optimize our subscription business Reorient go-to-market strategy Leverage AI to deliver expertise 10 6
Slide 11: Investment highlights
Investment highlights The largest digital player in a large and fragmented formations market • Ability to operate at scale in a complex, highly regulated industry with low technology adoption • Leading brand and powerful customer acquisition channel with significant greenfield opportunity Attractive
Slide 12: Financial update
Financial update LEGAL7Z90mM
Slide 13: Q3 2024 snapshot
Q3 2024 snapshot GAAP Revenue Adjusted Gross Profit (1) Adjusted EBITDA (1) +1% YoY $167M $169M +7% YoY $120M $112M +40% YoY $47M $34M Q3'23 Q3'24 Q3'23 Q3'24 Q3'23 Q3'24 % of Revenue(1) % of Revenue(1) 67% 71% 20% 28% (1) This is a non-GAAP financial measure. Refer to the Appendix for a reconciliat
Slide 14: Subscription revenue
Subscription revenue(1) Subscription revenue is primarily comprised of +15% YoY registered agent and compliance packages, attorney advice, virtual mail, bookkeeping, legal forms, and e-signature services. $413M $359M $293M +5% YoY $105M $107M $108M $109M $111M Q3'23 Q4'23 Q1'24 Q2'24 Q3'24 2021 2022
Slide 15: Transaction revenue
Transaction revenue(1) Transaction revenue is primarily generated from business formations services as well as other small (5%) YoY $282M business and consumer transactions including beneficial ownership information reports, annual reports, $261M $248M trademark filings, and estate planning solution
Slide 16: Sales & marketing
Sales & marketing (1) Customer Acquisition Media “CAM” (19%) YoY Other Sales & Marketing $258M $246M 62M 72M $199M 54M (10%) YoY 195M 175M $62M 145M 17M $48M $43M 13M 9M 45M 35M 34M Q3'22 Q3'23 Q3'24 2021 2022 2023 % of Revenue % of Revenue Total Sales & Marketing 40% 29% 26% 45% 40% 30% CAM 29% 21%
Slide 17: Non-GAAP expenses
Non-GAAP expenses(1) Cost of Revenue (3%) YoY Sales & Marketing $556M $542M Technology & Development $527M 59M 60M 46M General & Administrative 51M 43M 60M 258M 246M 199M (9%) YoY $138M 15M $134M $122M 15M 14M 13M 16M 200M 222M 62M 48M 15M 181M 43M 48M 55M 49M Q3'22 Q3'23 Q3'24 2021 2022 2023 % of R
Slide 18: Q4 and FY24 guidance commentary
Q4 and FY24 guidance commentary Q4 2024 Full Year Guidance Total Revenue $158M - $162M • 2024 revenue growth of 3% at the midpoint • Includes expectation for a mid- to high-single Adjusted EBITDA(1) $40M - $44M digit decline in the formations macro(2) in 2024 • Commitment to margin expansion; 2024 A
Slide 19: Appendix
Appendix LEGAL7Z90mM
Slide 20: Reconciliation of GAAP expenses to non-GAAP expenses
Reconciliation of GAAP expenses to non-GAAP expenses FYE Dec 31, $K 2021 2022 2023 Q3’22 Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 Q2’24 Q3’24 Cost of revenue $189,364 $211,095 $239,263 $50,314 $47,448 $60,395 $63,749 $59,123 $55,907 $68,384 $63,609 $54,715 Stock-based compensation(1) 1,662 2,931 4,318 59
Slide 21: Reconciliation of GAAP expenses to non-GAAP expenses on a % of revenue basis
Reconciliation of GAAP expenses to non-GAAP expenses on a % of revenue basis FYE Dec 31, $K 2021 2022 2023 Q3’22 Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 Q2’24 Q3’24 Cost of revenue 33% 34% 36% 32% 32% 36% 38% 35% 35% 39% 36% 32% Stock-based compensation(1) 0% 0% 1% 0% 0% 1% 1% 1% 1% 1% 1% 1% Depreciatio
Slide 22: Reconciliation of GAAP expenses to non-GAAP expenses on a year-over-year % basis
Reconciliation of GAAP expenses to non-GAAP expenses on a year-over-year % basis FYE Dec 31, $K 2021 2022 2023 Q3’22 Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 Q2’24 Q3’24 Cost of revenue 23% 11% 13% 6% (2%) 7% 12% 18% 18% 13% (0%) (8%) Stock-based compensation(1) 1,439% 76% 47% (23%) 391% 216% (17%) 87% 6
Slide 23: Reconciliation of GAAP gross profit to non-GAAP gross profit
Reconciliation of GAAP gross profit to non-GAAP gross profit FYE Dec 31, $K 2021 2022 2023 Q3’22 Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 Q2’24 Q3’24 Gross profit $385,716 $408,884 $421,464 $104,963 $ 99,178 $105,541 $105,106 $108,061 $102,756 $105,830 $113,753 $113,884 Cost of revenue stock-based compen
Slide 24: Reconciliation of GAAP net (loss) income to Adjusted EBITDA
Reconciliation of GAAP net (loss) income to Adjusted EBITDA FYE Dec 31, $K 2021 2022 2023 Q3’22 Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 Q2’24 Q3’24 Net (loss) income ($108,664) ($48,733) $13,953 ($11,981) $1,744 ($2,358) $1,395 $7,534 $7,382 $4,744 $1,314 $11,051 Interest expense (income), net 27,984 (1
Slide 25: Reconciliation of GAAP net (loss) income to non-GAAP net (loss) income
Reconciliation of GAAP net (loss) income to non-GAAP net (loss) income FYE Dec 31, $K 2021 2022 2023 Q3’22 Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 Q2’24 Q3’24 Net (loss) income ($108,664) ($48,733) $13,953 ($11,981) $1,744 ($2,358) $1,395 $7,534 $7,382 $4,744 $1,314 $11,051 Amortization of acquired inta
Slide 26: Reconciliation of net cash provided by operating activities to free cash flow
Reconciliation of net cash provided by operating activities to free cash flow FYE Dec 31, $K 2021 2022 2023 Q3’22 Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 Q2’24 Q3’24 Net cash provided by operating activities $54,152 $73,837 $124,308 $27,258 $21,822 $29,208 $45,165 $27,441 $22,495 $34,194 $27,245 $31,613
Slide 27: LegalZoom
LEGALZ900m