LegalZoom Amends Credit Agreement, Reduces Loan Commitments to $100M

LegalZoom amended its credit agreement, reducing revolving loan commitments from $150M to $100M and extending the maturity date to July 14, 2030. The amendment also introduces interest rate margin reductions based on leverage ratios and removes a credit spread adjustment. The company's overall stock score is 71, reflecting strong financial performance and positive corporate actions, tempered by high valuation concerns and mixed technical signals.

LegalZoom.com, Inc. (NASDAQ: LZ), a leading legal technology company, has announced an amendment to its revolving credit facility. According to a recent SEC filing, the company has reduced its total revolving loan commitments from $150 million to $100 million. Additionally, the maturity date of the revolving loan commitments has been extended from July 2, 2026, to July 14, 2030 [1].

The amendment includes several key changes. The interest rate margins on U.S. dollar borrowings under the facility will be calculated at either the Secured Overnight Financing Rate (Term SOFR) plus a margin between 2.00% and 1.25%, or a margin between 1.00% and 0.25% added to the highest of the administrative agent’s prime rate, the Federal Funds rate plus 0.50%, or one-month Term SOFR plus 1%. An additional 0.25% reduction in interest rate margins is introduced if the company achieves a total net first lien leverage ratio of 1.00 to 1.00 [1].

The commitment fee, initially set at 0.35%, is subject to reductions if the total net first lien leverage ratio does not exceed 3.50 to 1.00, with a further reduction if the ratio reaches 1.00 to 1.00. Additionally, the amendment removes a 0.10% credit spread adjustment to the Term SOFR benchmark for all available interest periods [1].

LegalZoom has reported no outstanding borrowings or letters of credit under the facility and confirmed compliance with all financial covenants as of the amendment date [1].

In other recent news, LegalZoom reported its first-quarter 2025 earnings, achieving an earnings per share of $0.13 and exceeding revenue expectations with $183.1 million, marking a 5% year-over-year increase. Subscription revenue, a significant focus for the company, grew by 8%, reinforcing a shift towards recurring revenue streams. LegalZoom has reaffirmed its full-year revenue growth target of approximately 5%, with projections for double-digit subscription revenue growth by the fourth quarter of 2025 [1].

JPMorgan has expressed a positive outlook on LegalZoom’s financial performance, increasing its price target to $12.00 while maintaining an Overweight rating, citing the company’s potential to outperform market expectations for revenue and earnings. Meanwhile, JMP Securities has maintained its Market Perform rating for LegalZoom, noting the company’s strong brand position but highlighting ongoing strategic challenges [1].

The overall stock score for LegalZoom is 71, reflecting strong financial performance and positive corporate actions, tempered by high valuation concerns and mixed technical signals.

References:
[1] https://www.investing.com/news/sec-filings/legalzoom-amends-credit-facility-reduces-commitment-and-extends-maturity-93CH-4140710