Yahoo Finance

• Revenue: $169 million, up 1% year-over-year, at the high end of guidance.

• Subscription Revenue: $111 million, up 5% year-over-year.

• Transaction Revenue: $58 million, down 7% year-over-year.

• Adjusted EBITDA: $47 million, representing a 28% margin, up 40% year-over-year.

• Gross Margin: 71%, compared to 67% in Q3 2023.

• Free Cash Flow: $22 million, compared to $19 million in the same period in 2023.

• Cash and Equivalents: $112 million, with no outstanding debt.

• Share Repurchase: 3.8 million shares repurchased for $25 million, reducing share count by approximately 2%.

• Business Formations: 113,000, an 18% decline year-over-year.

• Average Order Value (AOV): $227, down 13% year-over-year.

• Subscription Units: Over 1.7 million, up 10% year-over-year.

• ARPU (Average Revenue Per User): $264, down 1%.

• Warning! GuruFocus has detected 5 Warning Signs with LZ.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• LegalZoom.com Inc (NASDAQ:LZ) achieved third-quarter revenue at the high end of their guidance, reaching $169 million.

• Subscription revenue grew by 5% year-over-year, driven by strength in compliance-related subscriptions.

• The company reported a record adjusted EBITDA margin of 28%, reflecting strong bottom-line performance.

• LegalZoom.com Inc (NASDAQ:LZ) is focusing on shifting its business model towards high-margin subscription offerings, which is expected to drive long-term growth.

• The company is leveraging AI to enhance customer service and efficiency, with plans to introduce more AI-powered tools to support their offerings.

Negative Points

• Transaction revenue declined by 7% year-over-year, primarily due to a decrease in business formations.

• The company experienced a decline in market share for business formations, attributed to strategic testing and a focus on high-value customers.

• Average order value decreased by 13% year-over-year, influenced by a higher mix of lower-priced transactions.

• LegalZoom.com Inc (NASDAQ:LZ) is facing challenges in the overall business formation environment, which is currently soft.

• Despite hitting the top end of revenue guidance, year-over-year revenue growth was only 1% for the quarter.

Q & A Highlights

Q: Can you discuss the pricing tests conducted during the quarter and the potential direction for pricing going forward? A: Jeffrey Stibel, Independent Chairman of the Board: The pricing strategy is about aligning prices with the value we offer. We've conducted various tests, both increasing and decreasing prices. There's potential for higher pricing on high-value services, while some areas may see lower prices. The notion of a market shift towards free products is misleading, as many "free" offerings come with conditions. Our focus is on ensuring pricing reflects the strategic value we deliver.