A notable highlight from the financial report is the 17% year-over-year increase in subscription revenue for the quarter, amounting to $106.7 million. This growth was significantly driven by a 7% rise in average revenue per subscription alongside the addition of 104,000 net new subscriptions over the past twelve months. Full-year subscription revenue also saw a 15% increase, totaling $412.9 million.
Despite the positive trends in subscription-based revenue, transaction revenue experienced a 6% decline year-over-year, indicating a potential area for strategic reassessment. The company’s gross margin stood at 65% for the quarter, a slight decrease from 68% in the same period in 2022, reflecting a margin contraction that could impact future profitability, indicating higher costs relative to sales.
The financial report also highlighted an impressive improvement in net income, which rose to $7.4 million for the quarter, representing 5% of revenue. This is a significant improvement from the net income of $1.7 million, or 1% of revenue, reported in the same period in 2022. Additionally, LegalZoom reported an increase in Adjusted EBITDA, which reached $33.4 million for the quarter, or 21% of revenue, compared to $26.5 million, or 18% of revenue, in the prior year.
LegalZoom ended the year with a strong balance sheet, boasting $225.7 million in cash and cash equivalents and no debt outstanding. This financial position provides the company with considerable flexibility to continue investing in growth initiatives and navigate potential economic uncertainties.
View the LegalZoom earnings presentation here.
INSIDER TAKE
LegalZoom’s financial performance in the fourth quarter and full year of 2023 underscores the increasing importance of subscription revenue in its business model. The growth in subscription-based revenue not only demonstrates the company’s ability to attract and retain customers but also highlights the stability and predictability this revenue stream brings to the overall financial health of the company.
As LegalZoom continues to expand its service offerings, such as the newly launched Business License service and Beneficial Ownership Information Report, it is well-positioned to capture more market share and enhance its subscription model. These innovative offerings, tailored to evolving legal needs, are expected to further solidify and expand LegalZoom’s subscription base.
LegalZoom’s latest earnings report showcases a company capitalizing on the strength of its subscription model while navigating the challenges of the market. Looking ahead to 2024, LegalZoom’s strategic focus on enhancing and expanding its subscription services, coupled with its robust financial position, positions it to thrive amid evolving market dynamics.
