Legalzoom.Com, Inc 10-K for FY2023

Legalzoom.Com, Inc. (LZ)

10-K 2024-02-29 For: 2023-12-31

Added on April 07, 2026

About this 10-K

Legalzoom.Com, Inc filed this 10-K on February 29, 2024, covering the fiscal year ended December 31, 2023 (FY2023).

Headline figures

Fiscal year ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $660.73M; up 6.6% from $619.98M a year earlier
Net income: $13.95M; compared with a net loss of $48.73M a year earlier
Diluted EPS: $0.07; compared with -$0.25 a year earlier

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Delaware			95-4752856
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

101 North Brand Boulevard, 11th Floor, Glendale, California 91203
(Address of Principal Executive Offices, including Zip code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	LZ	The Nasdaq Global Select Market


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


		Page
Part I
Item 1.	Business	1
Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	29
Item 1C.	Cybersecurity	30
Item 2.	Properties	31
Item 3.	Legal Proceedings	31
Item 4.	Mine Safety Disclosures	31
Part II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	32
Item 6.	[Reserved]	33
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	34
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 8.	Financial Statements and Supplementary Data	55
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosures	99
Item 9A.	Controls and Procedures	99
Item 9B.	Other Information	100
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	100
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	101
Item 11.	Executive Compensation	101
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	101
Item 13.	Certain Relationships and Related Transactions, and Director Independence	101
Item 14.	Principal Accountant Fees and Services	101
PART IV
Item 15.	Exhibits and Financial Statement Schedules	102
Item 16.	Form 10-K Summary	103
Signatures		104


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☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


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Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Approximate Dollar Value of Shares that May Yet be purchased Under the Plans
October 1, 2023 through October 31, 2023	—	$	—	—	$	100,000,000
November 1, 2023 through November 30, 2023	—	—		—	$	100,000,000
December 1, 2023 through December 31, 2023	—	—		—	$	100,000,000
Total	—	$	—	—


	June 30, 2021		December 31, 2021		December 31, 2022		December 31, 2023
LegalZoom.com, Inc.	$	100.00	$	42.46	$	20.45	$	29.85
Nasdaq Composite	$	100.00	$	108.20	$	73.00	$	105.58
Nasdaq CTA Internet	$	100.00	$	84.20	$	44.15	$	71.27


	Year Ended December 31,
	2023	2022
	(in thousands)
Number of business formations	581	474


	As of December 31,
	2023	2022
	(in thousands)
Number of subscription units	1,545	1,441


			Page

Report of Independent Registered Public Accounting Firm (PCAOB ID 238)			56
Audited Consolidated Financial Statements:
Consolidated Balance Sheets			58
Consolidated Statements of Operations			59
Consolidated Statements of Comprehensive Income (Loss)			60
Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity			61
Consolidated Statements of Cash Flows			63
Notes to Consolidated Financial Statements			65


	December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	225,719	$	189,082
Accounts receivable, net of allowances of $4,906 and $4,730	11,738		13,177
Prepaid expenses and other current assets	15,159		16,699
Current assets held for sale	22,722		22,722
Total current assets	275,338		241,680
Property and equipment, net	48,232		30,823
Goodwill	63,318		63,229
Intangible assets, net	13,735		18,900
Operating lease right-of-use assets	8,518		11,148
Deferred income taxes	29,015		29,380
Available-for-sale debt securities (amortized cost of $836 and $812)	1,159		995
Other assets	8,503		9,240
Total assets	$	447,818	$	405,395
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	32,282	$	25,312
Accrued expenses and other current liabilities	61,678		57,373
Deferred revenue	167,951		164,200
Operating lease liabilities	2,052		2,317
Total current liabilities	263,963		249,202
Operating lease liabilities, non-current	6,966		8,958
Deferred revenue	490		892
Other liabilities	7,565		3,968
Total liabilities	278,984		263,020
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.001 par value 100,000 shares authorized at December 31, 2023 and 2022, none issued or outstanding at December 31, 2023 and 2022	—		—
Common stock, $0.001 par value; 1,000,000 and 1,000,000 shares authorized; 188,538 and 190,822 shares issued and outstanding at December 31, 2023 and 2022, respectively	189		190
Additional paid-in capital	1,101,474		1,032,550
Accumulated deficit	(933,061)		(891,862)
Accumulated other comprehensive income	232		1,497
Total stockholders’ equity	168,834		142,375
Total liabilities and stockholders’ equity	$	447,818	$	405,395


	Series A Redeemable Convertible Preferred Stock			Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive (loss) Income		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance at December 31, 2020	23,081	$	70,906	125,037	$	126	$	102,417	$	(639,348)	$	(13,827)	$	(550,632)
Issuance of common stock upon exercise of stock options	—	—		831	—		534		—		—		534
Issuance of common stock upon vesting of restricted stock awards and ESPP	—	—		938	1		1,244		—		—		1,245
Shares surrendered for settlement of minimum statutory tax withholdings	—	—		(87)	—		(2,342)		—		—		(2,342)
Stock-based compensation	—	—		—	—		113,270		—		—		113,270
Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering	(23,081)	(70,906)		46,162	46		70,860		—		—		70,906
Issuance of common stock in connection with initial public offering, net of underwriting discounts and commissions	—	—		21,989	22		581,811		—		—		581,833
Private placement of common stock, net of underwriting discounts and commissions	—	—		3,214	3		85,047		—		—		85,050
Stock issuance costs	—	—					(5,636)		—		—		(5,636)
Net issuance and repayments of full recourse notes receivable	—	—		—	—		43		—		—		43
Special dividends	—	—		—	—		(88)		—		—		(88)
Other comprehensive income	—	—		—	—		—		—		12,032		12,032
Net loss	—	—		—	—		—		(108,664)		—		(108,664)
Balance at December 31, 2021	—	$	—	198,084	$	198	$	947,160	$	(748,012)	$	(1,795)	$	197,551
Issuance of common stock upon exercise of stock options and ESPP	—	—		540	—		2,436		—		—		2,436


	Year Ended December 31,
	2023		2022
	(in thousands)
Revenue	$	660,727	$	619,979
Cost of revenue(1)(2)	239,263		211,095
Gross profit	421,464		408,884
Operating expenses:
Sales and marketing(1)(2)	210,872		263,884
Technology and development(1)(2)	83,181		70,434
General and administrative(1)(2)	106,352		116,057
Impairment of long-lived assets	—		248
Total operating expenses	400,405		450,623
Income (loss) from operations	21,059		(41,739)
Interest expense	(493)		(260)
Interest income	9,307		1,803
Other income (expense), net	1,621		(4,477)
Impairment of other equity security	—		(3,000)
Income (loss) before income taxes	31,494		(47,673)
Provision for (benefit from) income taxes	17,541		1,060
Net income (loss)	$	13,953	$	(48,733)


	Year Ended December 31,
	2023		2022
	(in thousands)
Cost of revenue	$	4,318	$	2,931
Sales and marketing	6,096		10,144
Technology and development	18,899		16,574
General and administrative	36,702		50,820
Total stock-based compensation expense	$	66,015	$	80,469


	Year Ended December 31,
	2023		2022
	(in thousands)
Cost of revenue	$	12,772	$	8,581
Sales and marketing	5,286		7,014
Technology and development	4,184		2,834
General and administrative	3,141		3,316
Total depreciation and amortization expense	$	25,383	$	21,745


	Year Ended December 31,
	2023		2022		$ change		% change
	(in thousands, except percentages)
Revenue by type(1)
Transaction	$	247,780	$	260,781	$	(13,001)	(5	%)
Subscription	412,947		359,198		53,749		15	%

Total revenue	$	660,727	$	619,979	$	40,748	7	%


Level 1 —			Quoted prices in active markets for identical assets and liabilities.
Level 2 —			Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly.
Level 3 —			Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.


			Useful Life (Years)
Purchased and internally developed internal-use software			3
Building and building improvements			5–30
Land improvements			7
Furniture and office equipment			5
Computer hardware			3
Land			Indefinite
Leasehold improvements			Shorter of lease term or useful life


	As December 31,
	2023		2022
Accrued payroll and related expenses	$	33,635	$	27,822
Accrued vendor payables	11,223		15,531
Accrued advertising	—		1,071
Sales allowances	3,412		4,426
Accrued sales, use and business taxes	9,795		3,838
Other	3,613		4,685
Total accrued expenses and other current liabilities	$	61,678	$	57,373


	December 31, 2023
Land	$	6,400
Building and building improvements	16,322
Total assets held for sale	$	22,722


	Amount		Estimated useful life
	(in thousands)
Goodwill	$	48,617	—
Customer relationships	10,603		6 years
Developed technology	5,418		5 years
Trade names	179		26 months
Property and equipment	267		3-5 years
Deferred tax liability	(3,087)		—
Other liabilities	(787)		—
Total purchase consideration	$	61,210


		As of December 31,
Assets	Classification	2023		2022
Operating	Operating lease right-of-use assets	$	8,518	$	11,148
Finance	Property and equipment, net	27		62
Total leases		$	8,545	$	11,210
Liabilities
Current
Operating	Operating lease liabilities	$	2,052	$	2,317
Finance	Accrued expenses and other current liabilities	26		36
Non Current
Operating	Operating lease liabilities, non-current	6,966		8,958
Finance	Other liabilities	2		28
Total lease liabilities		$	9,046	$	11,339



	Operating leases			Finance leases			Total leases liabilities
2024	$	2,392		$	27		$	2,419
2025	1,828			2			1,830
2026	1,744			—			1,744
2027	1,677			—			1,677
2028	1,312			—			1,312
Thereafter	1,151			—			1,151
Total minimum lease payments	10,104			29			10,133
Less: Effects of discounting	1,086			1			1,087
Present value of lease liabilities	$	9,018		$	28		$	9,046
Less: current portion	$	2,052		$	26		$	2,078
Long-term lease liabilities	$	6,966		$	2		$	6,968
Weighted-average remaining lease term as of December 31, 2023 (in years)	5.0			1.1
Weighted-average incremental borrowing rate as of December 31, 2023	4.51		%	5.50		%
Weighted-average remaining lease term as of December 31, 2022 (in years)	5.6			1.9


	Amount
Balance as of December 31, 2021	$	59,910
Acquisition	3,409
Foreign currency translation	(90)
Balance as of December 31, 2022	63,229

Foreign currency translation	89
Balance as of December 31, 2023	$	63,318


	As of December 31, 2023
	Remaining Weighted average useful life (in years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	3.8	$	12,088	$	5,314	$	6,774
Developed technology	2.2	14,281		7,412		6,869
Trade names	1.0	358		339		19
Assembled workforce	1.8	$	125	$	52	73
Total intangible assets		$	26,852	$	13,117	$	13,735


	As of December 31, 2022
	Remaining Weighted average useful life (in years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	4.8	$	17,841	$	9,300	$	8,541
Developed technology	3.2	16,813		6,689		10,124
Trade names	1.3	503		383		120
Assembled workforce	2.8	125		10		115
Total intangible assets		$	35,282	$	16,382	$	18,900


For Years Ending December 31,
2024	$	5,082
2025	4,510
2026	2,670
2027	1,473

Total future amortization expense	$	13,735


	Year Ended December 31,
	2021
Settlement of interest rate swaps	$	1,052
Amortization of prior hedge effectiveness	3,095
Fair value adjustment of interest rate swap	364
Amortization of interest rate cap premium	28
Interest expense on hybrid debt	368
Discontinuance of interest rate swaps and prior hedge effectiveness	9,240
Total, recorded in interest expense, net	$	14,147


	Number of Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2022	17,155	$	11.13	7.1	$	3,698
Granted	4,181	8.54
Exercised	(743)	8.20
Cancelled	(19)	9.77
Forfeited	(88)	9.44
Outstanding at December 31, 2023	20,486	$	10.69	6.9	$	34,571
Vested and expected to vest at December 31, 2023	20,486	$	10.69	6.9	$	34,571
Exercisable at December 31, 2023	14,021	$	10.53	6.1	$	22,332


	Number of Units	Weighted- Average Grant- Date Fair Value
Unvested at December 31, 2022	8,879	$	14.76
Granted	9,974	8.87
Cancelled/forfeited	(1,405)	10.72
Vested	(3,441)	15.33
Unvested at December 31, 2023	14,007	$	10.83


	As of December 31, 2023
	Level 1		Level 2		Level 3
Available-for-sale debt securities	$	—	$	—	$	1,159
Money market funds	208,970		—		—
Total assets	$	208,970	$	—	$	1,159


	Gross Unrealized Tax Benefits
Balance at December 31, 2020	$	7,231
Additions for tax positions related to the current year	887
Reductions for tax positions related to prior years	(245)
Balance at December 31, 2021	$	7,873
Additions for tax positions related to the current year	999
Additions for tax positions related to prior years	48
Balance at December 31, 2022	$	8,920
Additions for tax positions related to the current year	2,181
Additions for tax positions related to prior years	418
Balance at December 31, 2023	$	11,519


	Year Ended December 31, 2023
(in thousands)	Before Tax Amount		Tax Effect		Net of Tax Amount
Foreign currency translation adjustments:
Beginning balance	$	1,358	$	—	$	1,358
Change during period	(1,370)		—		(1,370)
Ending balance	$	(12)	$	—	$	(12)
Available-for-sale debt securities:


	Year Ended December 31, 2022
(in thousands)	Before Tax Amount		Tax Effect		Net of Tax Amount
Foreign currency translation adjustments:
Beginning balance	$	(2,078)	$	—	$	(2,078)
Change during period	3,436		—		3,436
Ending balance	$	1,358	$	—	$	1,358
Available-for-sale debt securities:
Beginning balance	$	331	$	(48)	$	283
Unrealized loss	(147)		3		(144)
Ending balance	$	184	$	(45)	$	139







Accumulated other comprehensive loss:
Beginning balance	$	(1,747)	$	(48)	$	(1,795)
Other comprehensive income	3,289		3		3,292
Ending balance	$	1,542	$	(45)	$	1,497


	Year Ended December 31, 2021
(in thousands)	Before Tax Amount		Tax Effect		Net of Tax Amount
Foreign currency translation adjustments:
Beginning balance	$	(3,014)	$	—	$	(3,014)
Change during period	936		—		936
Ending balance	$	(2,078)	$	—	$	(2,078)
Available-for-sale debt securities:
Beginning balance	$	281	$	(36)	$	245
Unrealized gains	50		(12)		38

Ending balance	$	331	$	(48)	$	283
Cash flow hedges:
Beginning balance	$	(14,708)	$	3,650	$	(11,058)
Unrealized gain on interest rate swaps and cap	2,897		(1,449)		1,448
Reclassification of losses from interest rate cap to net loss	28		(8)		20
Reclassification of prior hedge effectiveness to net loss	3,076		(781)		2,295
Reclassification to net loss upon extinguishment of interest rate swaps	$	8,707	$	(1,412)	7,295
Ending balance	$	—	$	—	$	—
Accumulated other comprehensive loss:


Exhibit Number						Description of Exhibit
3.1						Amended and Restated Certificate of Incorporation of LegalZoom.com, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 2, 2021).
3.2						Amended and Restated Bylaws of LegalZoom.com, Inc. (incorporated by reference to Exhibit 3.4 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed with the SEC on June 21, 2021).
4.1						Form of LegalZoom.com, Inc.’s Common Stock Certificate (incorporated by reference to Exhibit 4.1 of Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed with the SEC on June 21, 2021).
4.2						Fourth Amended and Restated Investors’ Rights Agreement, by and among LegalZoom.com, Inc. and certain of its stockholders, dated June 18, 2021 (incorporated by reference to Exhibit 4.2 of Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed with the SEC on June 21, 2021).
4.3						Description of our Common Stock (incorporated by reference to Exhibit 4.3 to the Company’s Annual Report on Form 10-K filed with the SEC on March 1, 2023).
10.1+						2016 Stock Incentive Plan and forms of award agreements (incorporated by reference to Exhibit 10.1 of the Company’s Registration Statement on Form S-1 filed with the SEC on June 4, 2021).
10.2+						2021 Equity Incentive Plan and forms of award agreements (incorporated by reference to Exhibit 10.2 of Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed with the SEC on June 21, 2021).
10.3+						2021 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.3 of Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed with the SEC on June 21, 2021).
10.4+						Form of RSU Grant Notice (C-Team) (incorporated by reference to Exhibit 1 0 .2 to the Company ’s Quarterly Report on Form 10-Q filed with the SEC on May 9, 2023).
10.5+						Form of Option Grant Notice (C-Team) (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 9, 2023).
10.6+						Form of Indemnification Agreement, by and between LegalZoom.com, Inc. and each of its directors and executive officers (incorporated by reference to Exhibit 10.4 of the Company’s Registration Statement on Form S-1 filed with the SEC on June 4, 2021).
10.7+						Amended and Restated Employment Agreement, by and between LegalZoom.com, Inc. and Dan Wernikoff, dated June 16, 2021 (incorporated by reference to Exhibit 10.5 of Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed with the SEC on June 21, 2021).
10.8+						Amendment to Employment Agreement, by and between LegalZoom Inc. and Dan Wernikoff dated April 21, 2022 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 16, 2022).
10.9+						Amended and Restated Employment Agreement, by and between LegalZoom.com, Inc. and Noel B. Watson, dated June 16, 2021 (incorporated by reference to Exhibit 10.7 of Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed with the SEC on June 21, 2021).
10.10+						Amendment to Employment Agreement, by and between LegalZoom.com, Inc. and Noel Watson dated March 12, 2022 (incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K filed with the SEC on March 24, 2022).
10.11+						Amended and Restated Employment Agreement, by and between LegalZoom.com, Inc. and Shrisha Radhakrishna, dated June 16, 2021 (incorporated by reference to Exhibit 10.6 of Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed with the SEC on June 21, 2021).
10.12+						Amendment to Employment Agreement, by and between LegalZoom.com, Inc. and Shrisha Radhakrishna, dated October 26, 2021 (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 10, 2021).