Legalzoom.Com, Inc 10-Q for FY2023 Q1

Legalzoom.Com, Inc. (LZ)

10-Q 2023-05-09 For: 2023-03-31

Added on April 07, 2026

About this 10-Q

Legalzoom.Com, Inc filed this 10-Q on May 9, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).

Headline figures

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

Revenue: $165.94M; up 6.8% from $155.43M a year earlier
Net loss: $2.36M; compared with a net loss of $25.75M a year earlier
Diluted EPS: -$0.01; compared with -$0.13 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	o
Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	o


		Page
Part I	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Loss	6
	Condensed Consolidated Statements of Stockholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	38
Part II	OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61
Item 3.	Defaults Upon Senior Securities	61
Item 4.	Mine Safety Disclosures	61
Item 5.	Other Information	61
Item 6.	Exhibits	62
Signatures		63


	March 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	204,126	$	189,082
Accounts receivable, net of allowances of $4,870 and $4,730, respectively	15,766		13,177
Prepaid expenses and other current assets	19,581		16,699
Current assets held for sale	22,722		22,722
Total current assets	262,195		241,680
Property and equipment, net	34,446		30,823
Goodwill	63,247		63,229
Intangible assets, net	17,566		18,900
Operating lease right-of-use assets	10,461		11,148
Deferred income taxes	26,682		29,380
Available-for-sale debt securities	1,000		995
Other assets	8,755		9,240
Total assets	$	424,352	$	405,395
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	25,803	$	25,312
Accrued expenses and other current liabilities	51,682		57,373
Deferred revenue	181,219		164,200
Operating lease liabilities	2,351		2,317
Total current liabilities	261,055		249,202
Operating lease liabilities, non-current	8,353		8,958
Deferred revenue	794		892
Other liabilities	4,133		3,968
Total liabilities	274,335		263,020
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.001 par value; 100,000 shares authorized at March 31, 2023 and December 31, 2022, none issued or outstanding at March 31, 2023 and December 31, 2022	—		—
Common stock, $0.001 par value; 1,000,000 shares authorized; 191,244 shares and 190,822 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	190		190
Additional paid-in capital	1,049,948		1,032,550
Accumulated deficit	(900,987)		(891,862)
Accumulated other comprehensive income	866		1,497
Total stockholders’ equity	150,017		142,375
Total liabilities and stockholders’ equity	$	424,352	$	405,395


☒			QUARTERLY 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


	Three Months Ended March 31,
		2023		2022
				(Restated)
Revenue		$	165,936	$	155,427
Cost of revenue		60,395		56,182
Gross profit		105,541		99,245
Operating expenses:
Sales and marketing		60,150		76,874
Technology and development		19,683		17,959
General and administrative		26,504		29,488

Total operating expenses		106,337		124,321
Loss from operations		(796)		(25,076)
Interest income (expense), net		1,581		(53)
Other income (expense), net		694		(1,544)
Income (loss) before income taxes		1,479		(26,673)
Provision for (benefit from) income taxes		3,837		(920)
Net loss		$	(2,358)	$	(25,753)
Net loss per share attributable to common stockholders—basic and diluted:		$	(0.01)	$	(0.13)
Weighted-average shares used to compute net loss per share attributable to common stockholders—basic and diluted:		191,293		198,265


	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive (Loss) Income		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2022	190,822	$	190	$	1,032,550	$	(891,862)	$	1,497	$	142,375
Issuance of common stock upon exercise of stock options	28	—		22		—		—		22
Issuance of common stock upon vesting of restricted stock awards	1,164	1		(1)		—		—		—
Stock-based compensation	—	—		17,378		—		—		17,378
Repurchased common stock	(771)	(1)		—		(6,767)		—		(6,768)
Other comprehensive loss	—	—		—		—		(631)		(631)
Net loss	—	—		—		(2,358)		—		(2,358)
Balance at March 31, 2023	191,244	$	190	$	1,049,948	$	(900,987)	$	866	$	150,017


	March 31, 2022
		As Reported		Adjustments		As Restated
Assets
Current assets:
Cash and cash equivalents		$	247,504	$	—	$	247,504
Accounts receivable, net of allowances of $3,633		12,784		605		13,389
Prepaid expenses and other current assets		23,172		(242)		22,930

Total current assets		283,460		363		283,823
Property and equipment, net		47,769		—		47,769


		Three Months Ended
	March 31, 2022
			As Reported		Adjustments		As Restated
Revenue			$	154,209	$	1,218	$	155,427
Cost of revenue			55,940		242		56,182
Gross profit			98,269		976		99,245
Operating expenses:
Sales and marketing			76,874		—		76,874
Technology and development			17,959		—		17,959
General and administrative			29,488		—		29,488

Total operating expenses			124,321		—		124,321
Loss from operations			(26,052)		976		(25,076)
Interest (expense) income, net			(53)		—		(53)
Other expense, net			(1,544)		—		(1,544)
Loss before income taxes			(27,649)		976		(26,673)
(Benefit from) provision for income taxes			2,960		(3,880)		(920)
Net loss			$	(30,609)	$	4,856	$	(25,753)


	Three Months Ended March 31, 2022
		As Reported		Adjustments		As Restated
Cash flows from operating activities
Net loss		$	(30,609)	$	4,856	$	(25,753)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		5,394		—		5,394
Amortization of right-of-use assets		378		—		378
Amortization of debt issuance costs		56		—		56
Impairment of other equity securities		170		—		170

Stock-based compensation		21,865		—		21,865
Deferred income taxes		2,791		(3,877)		(1,086)

Unrealized foreign exchange loss		1,379		—		1,379

Changes in operating assets and liabilities, net of effects of business combination:
Accounts receivable		(2,150)		(605)		(2,755)
Prepaid expenses and other current assets		(6,706)		242		(6,464)
Other assets		(811)		—		(811)
Accounts payable		(117)		—		(117)
Accrued expenses and other liabilities		5,675		97		5,772
Operating lease liabilities		(770)		—		(770)
Income tax payable		7		—		7
Deferred revenue		17,185		(713)		16,472
Net cash provided by operating activities		13,737		—		13,737
Cash flows from investing activities

Proceeds from acquisition working capital adjustment		304		—		304


	March 31, 2023		December 31, 2022
Prepaid expenses	$	12,423	$	10,624


	March 31, 2023		December 31, 2022
Deferred cost of revenue	3,461		1,915
Capitalized cloud computing development costs	1,176		1,407
Income tax receivable	217		760
Other current assets	2,304		1,993
Total prepaid expenses and other current assets	$	19,581	$	16,699


	March 31, 2023		December 31, 2022
Accrued payroll and related expenses	$	18,731	$	27,822
Accrued vendor payables	20,715		15,531
Accrued advertising	66		1,071
Sales allowances	4,512		4,426
Accrued sales, use and business taxes	3,746		3,838
Other	3,912		4,685
Total accrued expenses and other current liabilities	$	51,682	$	57,373


	Three Months Ended March 31,
		2023		2022
				(Restated)
Beginning balance		$	4,730	$	4,060
Add: amounts recognized as a reduction of revenue		2,116		1,721
Add: allowance for credit losses recognized in general and administrative expense		64		73
Less: write-offs, net of recoveries		(2,040)		(2,221)
Ending balance		$	4,870	$	3,633


	Three Months Ended March 31,
	2023
Expected life (years)	5.87
Risk-free interest rate	3.4	%
Expected volatility	50.7	%
Expected dividend yield	—


	Three Months Ended March 31,
	2023	2022
		(Restated)
Options to purchase common stock	21,066	17,832
RSUs	14,785	8,008
Employee stock purchase plan	136	91
PSUs	1,316	—
Total	37,303	25,931


	Three Months Ended March 31, 2022 (Restated)
(in thousands)	Before Tax Amount		Tax Effect		Net of Tax Amount
Foreign currency translation adjustments:
Beginning balance at December 31, 2021	$	(2,078)	$	—	$	(2,078)
Change during period	1,402		—		1,402
Ending balance at March 31, 2022	$	(676)	$	—	$	(676)




Available-for-sale debt securities:
Beginning balance at December 31, 2021	$	331	$	(48)	$	283
Unrealized gains	51		(13)		38
Ending balance at March 31, 2022	$	382	$	(61)	$	321
















Accumulated other comprehensive loss:
Beginning balance at December 31, 2021	$	(1,747)	$	(48)	$	(1,795)
Other comprehensive income	1,453		(13)		1,440
Ending balance at March 31, 2022	$	(294)	$	(61)	$	(355)


	As of March 31, 2023
	Level 1		Level 2		Level 3
Available-for-sale debt securities	$	—	$	—	$	1,000
Money market funds	171,736		—		—
Total assets	$	171,736	$	—	$	1,000
Contingent consideration	—		—		205
Total liabilities	$	—	$	—	$	205


	As of December 31, 2022
	Level 1		Level 2		Level 3
Available-for-sale debt securities	$	—	$	—	$	995
Money market fund	130,215		—		—
Total assets	$	130,215	$	—	$	995
Contingent consideration	—		—		836
Total liabilities	$	—	$	—	$	836


	Three Months Ended March 31, 2023
(in thousands)	Before Tax Amount		Tax Effect		Net of Tax Amount
Foreign currency translation adjustments:
Beginning balance at December 31, 2022	$	1,358	$	—	$	1,358
Change during period	(631)		—		(631)
Ending balance at March 31, 2023	$	727	$	—	$	727




Available-for-sale debt securities:
Beginning balance at December 31, 2022	$	184	$	(45)	$	139
Unrealized gains	—		—		—
Ending balance at March 31, 2023	$	184	$	(45)	$	139
Accumulated other comprehensive (loss) income:
Beginning balance at December 31, 2022	$	1,542	$	(45)	$	1,497


	As of March 31,
	2023	2022
	(in thousands)
Number of subscription units	1,501	1,362


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
January 1, 2023 through January 31, 2023	—	$	—	—	$	54,873,781
February 1, 2023 through February 28, 2023	—	$	—	—	$	54,873,781
March 1, 2023 through March 31, 2023	770,717	$	8.78	6,768,143	$	48,105,638
Total	770,717	$	8.78	6,768,143


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 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 on June 21, 2021).
10.1*						Amendment No. 1, dated as of May 5, 2023, by and between the Company, as borrower, the guarantors party thereto and JPMorgan Chase Bank, N.A., as administrative agent, relating to the Amended and Restated Credit and Guaranty Agreement, dated as of July 2, 2021, among the Company, the guarantors party thereto, the lenders and issuing lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent.
10.2+*						Form of RSU Grant Notice (C-team).
10.3+*						Form of Option Grant Notice (C-team).
31.1*						Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
31.2*						Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
32.1**						Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101						The following financial statements from our Quarterly Report on Form 10-Q for the three months ended March 31, 2023 were formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Loss, (iv) Condensed Consolidated Statement of Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows.
104						Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).


	LegalZoom.Com, Inc.

Date: May 9, 2023	By:	/s/ Dan Wernikoff
		Dan Wernikoff
		Chief Executive Officer and Director
		(Principal Executive Officer)

Date: May 9, 2023		/s/ Noel Watson
		Noel Watson
		Chief Financial Officer
		(Principal Financial and Accounting Officer)


Optionholder:
Date of Grant:
Vesting Commencement Date:
Number of Shares of Common Stock Subject to Option:
Exercise Price (Per Share):
Expiration Date: