LegalZoom.com, Inc. (LZ) shares skyrocketed 11.86% in pre-market trading on Thursday, driven by the company's impressive fourth-quarter 2024 earnings and a positive outlook for the upcoming year. The surge in LegalZoom's stock price reflects investor optimism surrounding the company's strategic initiatives and growth prospects.

In the fourth quarter, LegalZoom reported revenue of $162 million, hitting the high end of its guidance. Subscription revenue grew 2% year-over-year to $109 million, bolstered by strength in compliance-related subscriptions. The company delivered a robust adjusted EBITDA of $44 million, representing a strong 27% margin. Free cash flow for the quarter stood at $36 million, significantly higher than the previous year's $14 million.

For the full year 2024, LegalZoom's adjusted EBITDA increased by 25% to $148 million, with an improved margin of 22%, reflecting the company's efforts to drive operational efficiencies and cost savings. However, the company faced challenges, including a 15% decline in business formations and a higher mix of lower-priced transactions.

Looking ahead, LegalZoom is optimistic about its prospects for 2025, forecasting a 5% year-over-year revenue growth and a double-digit increase in subscription revenue by the end of the year. The company's guidance factors in the impact of its recent acquisition of Formation Nation, which is expected to contribute positively to adjusted EBITDA in the first year, enhance customer service, and expand the portfolio of offerings.

LegalZoom's strategic focus lies in optimizing its subscription business, reorienting its go-to-market strategy, and leveraging AI to deliver expertise. The company aims to drive sustainable revenue performance by concentrating on legal and compliance services, with an emphasis on subscriptions. Additionally, LegalZoom plans to diversify its marketing spend, emphasizing its overall brand and positioning as a premium online legal and compliance services provider.

Analysts are generally optimistic about LegalZoom's prospects, with William Blair reiterating a "Hold" rating on the stock, citing the company's growth potential and efforts to enhance its offerings through partnerships and acquisitions. However, LegalZoom faces challenges, such as the uncertainty surrounding the beneficial ownership filing requirement, which is subject to continued judicial review.