LegalZoom acquires Formation Nation to boost services

MOUNTAIN VIEW, Calif. – LegalZoom.com, Inc. (NASDAQ:LZ), a prominent provider of online legal solutions with a market capitalization of $1.59 billion, has announced the acquisition of Formation Nation, a company specializing in small business services. The deal, which closed today, is valued at $49.3 million in cash and roughly 2.2 million shares of restricted stock, with an additional $15.4 million in cash contingent on future adjustments. According to InvestingPro analysis, LegalZoom maintains strong financial health with an impressive gross profit margin of 64.14%, suggesting efficient operations as it pursues this strategic expansion.

This strategic move aims to enhance LegalZoom’s offerings by integrating Formation Nation’s renowned customer service with LegalZoom’s technology platform. Formation Nation is known for its Nevada Corporate Headquarters (NCH) and Inc Authority brands, which cater to a range of business formation and compliance needs.

The acquisition is expected to be immediately beneficial to LegalZoom’s Adjusted EBITDA and Adjusted Earnings per Share in its first year. LegalZoom anticipates that the addition of over 140 experienced small business service professionals from Formation Nation will significantly improve its customer service capabilities.

LegalZoom’s Chairman and CEO Jeff Stibel expressed confidence that the merger of service and technology will reinforce LegalZoom’s position as a premium business formation advisor and enhance the customer experience. Cort Christie, CEO and Founder of Formation Nation, echoed this sentiment, looking forward to bringing their high-touch service model to LegalZoom’s customer base.

In related news, LegalZoom reported preliminary financial results for the fourth quarter and full year ended December 31, 2024. The company posted revenues of approximately $161.7 million for the quarter and $681.9 million for the year, with net incomes of approximately $12.9 million and $30.0 million, respectively. Adjusted EBITDA was reported at approximately $44.2 million for the quarter and $148.1 million for the year. InvestingPro data indicates the stock is currently trading below its Fair Value, presenting a potential opportunity for investors. The platform’s analysis reveals 14 additional key insights about LegalZoom’s financial position and growth prospects.

LegalZoom is scheduled to discuss the acquisition’s strategic benefits in more detail and provide a financial outlook for 2025 during their earnings call on February 26, 2025.

The preliminary financial results are based on unaudited information and are subject to change following year-end closing procedures. These results, as well as non-GAAP financial measures such as Adjusted EBITDA and free cash flow, are intended to provide additional insight into LegalZoom’s performance but should not be considered as a substitute for financial information prepared in accordance with GAAP. For a comprehensive analysis of LegalZoom’s financial position and future prospects, investors can access the detailed Pro Research Report available on InvestingPro, which includes expert insights and advanced metrics for over 1,400 US stocks.

This announcement is based on a press release statement from LegalZoom.

In other recent news, LegalZoom.com Inc has been in the spotlight with a series of developments. JMP Securities has maintained its Market Outperform rating on LegalZoom, citing the company’s leading position in the business formations sector, despite acknowledging potential challenges such as tough comparable results from previous years and rising competition in the industry. In the meantime, LegalZoom has announced the appointment of Charles Thomas as its new Chief Accounting Officer, an experienced executive who formerly served as Senior Vice President and Chief Accounting Officer at Veritone (NASDAQ:VERI), Inc.

On another note, JPMorgan has upgraded LegalZoom’s stock rating from Underweight to Overweight based on positive business formations data and expectations that the company’s 2025 adjusted EBITDA guidance will exceed analysts’ estimates by at least 5%. Conversely, UBS has initiated coverage of LegalZoom with a Neutral rating, highlighting the company’s recent strategic pivot following an unsuccessful attempt to widen its customer base with a freemium product.

These recent developments continue to shape the narrative around LegalZoom as the company navigates the evolving landscape of legal technology solutions, while analysts from different firms provide varying perspectives on its future prospects.

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