LEGALZOOMCOM INC

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and Part II, Item 8, “Financial Statements and Supplementary Data” included in our 2023 Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on February 29, 2024. The following discussion contains forward-looking statements based upon current plans, expectations and beliefs and that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the "Risk Factors" section of this Quarterly Report on Form 10-Q. See “Forward-Looking Statements” preceding Part I of this Quarterly Report on Form 10-Q.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and Part II, Item 8, “Financial Statements and Supplementary Data” included in our 2023 Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on February 29, 2024 and our other filings with the SEC. The following discussion contains forward-looking statements based upon current plans, expectations and beliefs and that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the "Risk Factors" section of this Quarterly Report on Form 10-Q. See “Forward-Looking Statements” preceding Part I of this Quarterly Report on Form 10-Q.

Previous wording

•Macroeconomic factors. Adverse changes in general macroeconomic, political, regulatory and market conditions can negatively impact consumer spending patterns, the success of existing small businesses and the formation of new small businesses. While we continue to actively monitor the impacts of the evolving macroeconomic environment on all aspects of our business, future negative or decelerating impacts from factors such as inflation, higher interest rates, regulatory obstacles or changes in laws (including changes in tax laws and regulations) remain uncertain.

Current wording

•Macroeconomic factors. Adverse changes in general macroeconomic, political, regulatory and market conditions can negatively impact consumer spending patterns, the success of existing small businesses and the rate of new small business formations. We believe downward macroeconomic pressure contributed to the increase in corporate dissolutions and the deceleration in business formations that we experienced in the six months ended June 30, 2024, which, in turn, negatively impacted our ability to upsell and retain our customers. While we continue to actively monitor the impacts of the evolving macroeconomic environment on all aspects of our business, we expect the macroeconomic environment to remain challenging throughout the remainder of 2024.

Previous wording

•Our share of business formations. In the three months ended March 31, 2024 and 2023, business formations represented the largest share of our total transaction orders. Business formations act as an entrance point for many customers to the LegalZoom ecosystem, where they then often purchase a mix of transaction and subscription offerings alongside and after the initial formation transaction. As a result, our operating results depend on the continuation of new business formations in the U.S. and even more so, on our ability to increase our share of these formations. In an effort to increase our share of new business formations in the U.S., we have introduced and may continue to introduce lower-priced products and services to target more price conscious customers.

Current wording

•Our share of business formations. In the three and six months ended June 30, 2024 and 2023, business formations represented the largest share of our total transaction orders. Business formations act as an entrance point for many customers to the LegalZoom ecosystem, where they then often purchase a mix of transaction and subscription offerings alongside and after the initial formation transaction. As a result, our operating results depend on the continuation of new business formations in the U.S. and even more so, on our ability to increase our share of these formations.

Previous wording

•Ability to enhance customer lifetime value. Our goal is for customers to grow their use of our platform post-formation to include additional transaction products and subscription services as their businesses evolve and that, in turn, customers increase their cumulative spend with us over time. As a result, our future performance depends on our ability to integrate new products and services into our LegalZoom ecosystem and to increase recurring revenue through subscription offerings. As we continue to test new and existing products and services in order to optimize our product line-up, we expect increased volatility across our key business metrics. In addition, in an effort to enhance customer lifetime value, we intend to continue to invest in improving our customer experience, which includes investments in our educational content and improving our website and mobile experience.

Current wording

•Ability to enhance customer lifetime value. Our future performance depends on our ability to integrate new products and services into our LegalZoom ecosystem and to increase recurring revenue through subscription offerings. As we continue to test new and existing products and services in order to optimize our core product line-up, including converting certain transaction offerings to subscription offerings and testing various commercialization strategies for those offerings, we expect increased volatility across our key business metrics. In addition, in an effort to enhance customer lifetime value, we intend to continue to invest in improving our customer experience, which includes investments in our educational content and improving our website and mobile experience.

Previous wording

•Ability to integrate experts. We believe that our expert offerings significantly expand our addressable market. We aim to increase the consumption of our higher-cost expert offerings through targeted cross-selling and promotion of our products, as well as by improving the platforms through which our customers and experts interact. Our ability to further integrate experts into our LegalZoom ecosystem and to increase the consumption of our expert offerings by new and existing customers is key to our future success.

Current wording

•Ability to integrate experts. We believe that our expert offerings significantly expand our addressable market. We aim to increase the consumption of our higher-cost expert offerings through targeted cross-selling and promotion of our products, as well as by improving the platforms through which our customers and experts interact. The extent to which we are able to integrate experts into our LegalZoom ecosystem and increase the consumption of our expert offerings by new and existing customers will impact our future results of operations.

Previous wording

We define the number of business formations in a given period as the number of limited liability company, or LLC, incorporation, not-for-profit and doing business as, or DBA, orders placed on our platform in such period. We consider the number of business formations to be an important metric considering that it is typically the first product or service small business customers purchase on our platform, creating the foundation for additional products and subsequent subscription and partner revenue as customers adopt additional products and services throughout the lifecycle of their business.

Current wording

We define the number of business formations in a given period as the number of limited liability company, or LLC, incorporation, not-for-profit and doing business as, or DBA, orders placed on our platform in such period. We consider the number of business formations to be an important metric considering that it is typically the first product or service small business customers purchase on our platform, creating the foundation for additional products and subsequent subscription revenue as customers adopt additional products and services throughout the lifecycle of their business.

Previous wording

The below table sets forth the number of business formations for the three months ended March 31, 2024 and 2023:

Current wording

The below table sets forth the number of business formations for the three and six months ended June 30, 2024 and 2023:

Previous wording

We experienced an 18% decrease in business formation transactions during the three months ended March 31, 2024, compared to the three months ended March 31, 2023. Our business formation transactions decreased during the three months ended March 31, 2024 primarily due to a decrease in LLC formations and the exit of certain channel partner relationships in the third quarter of 2023. Our business formations lagged behind the 2% decrease in overall U.S. business formations during the three months ended March 31, 2024 compared to the three months ended in March 31, 2023 based on a review of U.S. Census data revealing new applications for EINs.

Current wording

We experienced a 17% and 18% decrease in business formation transactions during the three and six months ended June 30, 2024, respectively, compared to the three and six months ended June 30, 2023. The decrease in business formation transactions during the three and six months ended June 30, 2024 was primarily due to a 12% decrease in direct channel LLC formations driven partly by the challenging macroeconomic environment, as well as due to the exit of certain channel partner relationships in the third quarter of 2023. This compares to an overall U.S. business formations decline of 6% and 4%, respectively, during the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023 based on a review of U.S. Census data revealing new applications for EINs.

Previous wording

We define the number of transactions in a given period as gross transaction order volume, prior to refunds, on our platform during such period. Transactions may include one or more services purchased at the same time. For example, a customer of our business formation services may choose to form an LLC and purchase an operating agreement and business licenses at the same time. This constitutes a single transaction. Refunds, or partial refunds, may be issued under certain circumstances pursuant to the terms of our customer satisfaction guarantee. We consider the number of transactions to be an important metric considering that our customers generally begin their LegalZoom journey with a transaction, creating the foundation for generating subsequent subscription and partner revenue.

Current wording

We define the number of transactions in a given period as gross transaction order volume, prior to refunds, on our platform during such period. Transactions may include one or more services purchased at the same time. For example, a customer of our business formation services may choose to form an LLC and purchase an operating agreement and business licenses at the same time. This constitutes a single transaction. Refunds, or partial refunds, may be issued under certain circumstances pursuant to the terms of our customer satisfaction guarantee. We consider the number of transactions to be an important metric considering that our customers generally begin their LegalZoom journey with a transaction, creating the foundation for generating subsequent subscription revenue.

Previous wording

The below table sets forth the number of transactions for the three months ended March 31, 2024 and 2023:

Current wording

The below table sets forth the number of transactions for the three and six months ended June 30, 2024 and 2023:

Previous wording

We experienced a 9% increase in the number of transactions during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase in the number of transactions during the three months ended March 31, 2024 resulted primarily from the introduction of our beneficial ownership information report product along with increases in other small business related transactions, including annual reports and corporate dissolutions. These increases were partially offset by the decrease in business formations discussed above.

Current wording

We experienced a 3% and 6% increase in the number of transactions during the three and six months ended June 30, 2024, respectively, compared to the three and six months ended June 30, 2023. The increase in the number of transactions during both the three and six months ended June 30, 2024 resulted primarily from the introduction of our beneficial ownership information report product in December 2023, along with increases in other small business related transactions, including annual reports and corporate dissolutions. These increases were partially offset by the decrease in business formations discussed above.

Previous wording

We define average order value for a given period as total transaction revenue divided by total number of transactions in such period. We consider average order value to be an important metric given it indicates how much customers are spending on our platform per transaction.

Current wording

We define average order value for a given period as total transaction revenue divided by total number of transactions in such period. We consider average order value to be an important metric given that it indicates how much customers are spending on average on our platform per transaction.

Previous wording

The below table sets forth the average order value for the three months ended March 31, 2024 and 2023:

Current wording

The below table sets forth the average order value for the three and six months ended June 30, 2024 and 2023:

Previous wording

Average order value decreased by 10% during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease in average order value for the three months ended March 31, 2024 was primarily driven by a shift in the mix of our products towards lower priced transaction products, including annual reports, beneficial ownership information reports and corporate dissolutions, along with a reduction in fees earned from third-party providers from leads generated for such providers through our online platform.

Current wording

Average order value was flat for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, and down 5% for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily driven by a higher mix of lower priced small business related transactions, including annual reports and beneficial ownership information reports, and a reduction in fees earned from third-party providers from leads generated for such providers through our online platform. These decreases were partially offset by an increase in average order value related to our consumer transaction products due to commercialization changes within our consumer product suite.

Previous wording

We define the number of subscription units in a given period as the paid subscriptions at the end of such period, including those that are not yet 60 days past their subscription order dates. Refunds, or partial refunds, may be issued under certain circumstances pursuant to the terms of our customer satisfaction guarantee.

Current wording

We define the number of subscription units in a given period as the number of paid subscriptions at the end of such period, including those that are not yet 60 days past their subscription order dates. Refunds, or partial refunds, may be issued under certain circumstances pursuant to the terms of our customer satisfaction guarantee.

Previous wording

We consider the number of subscription units to be an important metric since subscriptions enable us to increase the lifetime value of a customer through deeper, longer-term relationships. In addition, as we innovate our product line-up and make a free business formation a foundational element of our business model, we believe the number of subscription units, when viewed together with the number of business formations during a particular period, provides insight into the effectiveness of our “freemium” strategy and its ability to drive growth in our subscription business.

Current wording

We consider the number of subscription units to be an important metric since subscriptions enable us to increase the lifetime value of a customer through deeper, longer-term relationships. In addition, as we continue to innovate our product line-up, including by testing varying price points for our products and evaluating our commercialization strategy, we believe the number of subscription units, when viewed together with the number of business formations during a particular period, provides insight into the effectiveness of our efforts to drive growth in our subscription business.

Previous wording

We achieved 7% growth in subscription units from March 31, 2023 to March 31, 2024, primarily driven by an increase in forms and e-signature subscriptions resulting from bundling of these products into certain business formation offerings as well as an increase in virtual mail subscriptions. This growth was partially offset by a decline in registered agent and compliance subscriptions driven by the exit of certain channel partner relationships in the third quarter of 2023.

Current wording

We achieved 4% growth in subscription units from June 30, 2023 to June 30, 2024, primarily driven by an increase in forms and e-signature subscriptions resulting from bundling of these products into certain business formation offerings, as well as an increase in virtual mail subscriptions. This growth was partially offset by a decline in registered agent and compliance subscriptions driven by the exit of certain channel partner relationships in the third quarter of 2023.

Previous wording

On a sequential basis, the number of subscription units as of March 31, 2024 increased 4% from 1,545 thousand subscription units as of December 31, 2023.

Current wording

On a sequential basis, the number of subscription units as of June 30, 2024 slightly increased from 1,605 thousand units as of March 31, 2024.

Previous wording

ARPU increased 5% as of March 31, 2024 compared to March 31, 2023 driven primarily by a shift in mix towards our higher priced subscription offerings. ARPU was also impacted by the exit of certain channel partner relationships in the third quarter of 2023 and by the introduction of our forms and e-signature subscription offerings, both of which carry lower price points. ARPU as of March 31, 2024 was down 2% sequentially compared to December 31, 2023.

Current wording

ARPU increased 4% as of June 30, 2024 compared to June 30, 2023 driven primarily by a shift in mix towards our higher priced subscription offerings, partially offset by an increase in our forms and e-signature subscription offerings, both of which carry lower price points. ARPU was also impacted by the exit of certain channel partner relationships in the third quarter of 2023. ARPU as of June 30, 2024 was flat compared to March 31, 2024.

Previous wording

We define annual small business retention rate as the percentage of small business subscription units active as of the last day of the quarter one year ago that were still active subscriptions 12 months later. Small business subscription units represent our subscriptions targeted at our small business customers and include subscriptions for our registered agent and compliance services, LZ Tax, our small business legal advisory plan and subscriptions acquired through our purchase of Earth Class Mail and Revvsales Inc., and exclude subscriptions from our enterprise customers, our operations in the U.K. and our consumer legal advisory plan. Annual small business retention rate includes both monthly and annual subscription units and reflects all subscription unit attrition, including as a result of actual business failures of certain of our customers. Our annual small business retention rate as of March 31, 2024 was approximately 64%.

Current wording

We define annual small business retention rate as the percentage of small business subscription units active as of the last day of the quarter one year ago that were still active subscriptions 12 months later. Small business subscription units represent our subscriptions targeted at our small business customers and include subscriptions for our registered agent and compliance services, LZ Tax, our small business legal advisory plan and subscriptions acquired through our purchase of Earth Class Mail and Revvsales Inc., and exclude subscriptions from our enterprise customers, our operations in the U.K. and our consumer legal advisory plan. Annual small business retention rate includes both monthly and annual subscription units and reflects all subscription unit attrition, including as a result of actual business failures of certain of our customers. Our annual small business retention rate as of June 30, 2024 was approximately 63%.

Previous wording

We expect annual retention rate to fluctuate as we continue to test new products, subscription term lengths and price points and seek to optimize our product offerings across our lineup in connection with our “freemium” strategy. While there may be a general correlation between annual small business retention rate and our ability to increase customer lifetime value and the growth of our customer base, we do not view it as a predictor of future revenue given the varying needs of a small business during its lifecycle and the varying use cases of the products underlying our subscription units.

Current wording

We expect annual retention rate to fluctuate as we continue to test new products, subscription term lengths and price points and seek to optimize our product offerings across our lineup. While there may be a general correlation between annual small business retention rate and our ability to increase customer lifetime value and the growth of our customer base, we do not view it as a predictor of future revenue given the varying needs of a small business during its lifecycle and the varying use cases of the products underlying our subscription units.

Previous wording

Gross profit, or revenue less cost of revenue, and gross margin, or gross profit as a percentage of revenue, have been and will continue to be affected by various factors, primarily the mix between transaction and subscription revenue. Our long-term gross margin expansion is also expected to be driven by automation improvements and digitization efforts. Further, our acquisitions of other companies have negatively impacted our gross margin in the short term, and any such future acquisitions could have a similar effect.

Current wording

Gross profit, or revenue less cost of revenue, and gross margin, or gross profit as a percentage of revenue, have been and will continue to be affected by various factors, primarily the mix between transaction and subscription revenue. Our long-term gross margin expansion is also expected to be driven by automation improvements and digitization efforts. Further, our acquisitions of other companies have negatively impacted our gross margin in the short term, and any such future acquisitions could have a similar effect. Our gross margin could fluctuate from period to period due to fulfillment rates and seasonality.

Previous wording

Technology and development expenses consist primarily of personnel costs and related benefits, including stock-based compensation, expenses for outside consultants, an allocation of depreciation and amortization and allocated overhead. These expenses include costs incurred in the development and implementation of our products, websites, mobile applications, online legal platform, research and development and related infrastructure. Technology and development expenses are expensed as incurred, except to the extent that such costs are associated with internal-use software costs that qualify for capitalization.

Current wording

Technology and development expenses consist primarily of personnel costs and related benefits, including stock-based compensation for technology and development personnel, expenses for outside consultants, an allocation of depreciation and amortization and allocated overhead. These expenses include costs incurred in the development and implementation of our products, websites, mobile applications, online legal platform, research and development and related infrastructure. Technology and development expenses are expensed as incurred, except to the extent that such costs are associated with internal-use software costs that qualify for capitalization.

Previous wording

We expect our technology and development expenses to continue to increase in absolute dollars for the foreseeable future as we invest in new products and services and in production automation technologies to enhance our customer experience. We expect our technology and development expenses to remain relatively consistent or increase as a percentage of our revenue over the long-term, although our technology and development expenses may fluctuate as a percentage of our revenue from period-to-period due to seasonality and the timing and extent of these expenses.

Current wording

We expect our technology and development expenses to remain relatively consistent as a percentage of our revenue for the foreseeable future, although our technology and development expenses may fluctuate as a percentage of our revenue from period-to-period due to seasonality and the timing and extent of these expenses.

Previous wording

Sales and marketing expenses for the three months ended March 31, 2024 decreased primarily due to a $6.0 million reduction in payroll and related benefits largely due to a reduction in sales and marketing headcount. Customer acquisition marketing spend was $40.6 million and $40.7 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Sales and marketing expenses for the three months ended June 30, 2024 increased by $6.6 million primarily due to a $11.1 million increase in customer acquisition marketing spend, partially offset by a $4.3 million reduction in payroll and related benefits largely due to a reduction in sales and marketing headcount.

Previous wording

The change in interest income was primarily due to dividend income generated from our money market investments during the three months ended March 31, 2024.

Current wording

The change in interest income was primarily due to interest income generated from our money market investments during the three months ended June 30, 2024.

Previous wording

The provision for income taxes for the three months ended March 31, 2024 resulted from a $0.6 million favorable change as compared to the three months ended March 31, 2023. The change was primarily due to higher pre-tax book income and non-deductible stock-based compensation for the three months ended March 31, 2024. This resulted in a lower effective tax rate for the three months ended March 31, 2024 compared to a lower pre-tax income with a higher effective tax rate for the three months ended March 31, 2023.

Current wording

There was a $4.1 million favorable change in the provision for income taxes for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The change was primarily due to lower nondeductible stock-based compensation and higher excess tax benefits on stock-based compensation for the three months ended June 30, 2024. This resulted in a lower effective tax rate.

Previous wording

The increase in total revenue for the three months ended March 31, 2024 primarily driven by an increase in subscription revenue. Subscription revenue was 62% and 59% of total revenue for the three months ended March 31, 2024 and 2023, respectively, and transaction revenue was 38% and 41% of total revenue for the three months ended March 31, 2024 and 2023, respectively.

Current wording

The increase in total revenue six months ended June 30, 2024 was primarily driven by an increase in subscription revenue. Subscription revenue was 62% and 60% of total revenue for the six months ended June 30, 2024 and 2023, respectively, and transaction revenue was 38% and 40% of total revenue for the six months ended June 30, 2024 and 2023, respectively.

Previous wording

Transaction revenue for the three months ended March 31, 2024 decreased due to a 10% decrease in average order value compared to the three months ended March 31, 2023, partially offset by a 9% increase in transaction units over the same period. The decrease in average order value for the three months ended March 31, 2024 was primarily driven by a shift in the mix of our products towards lower priced transaction products, including annual reports, beneficial ownership information reports and corporate dissolutions, along with a reduction in fees earned from third-party providers from leads generated for such providers through our online platform. The increase in transaction units during the three months ended March 31, 2024 resulted primarily from the introduction of our beneficial ownership information report product, as well as an increase in other small business related transactions, including annual reports and corporate dissolutions. The foregoing increases in transaction units were partially offset by an 18% reduction in business formations primarily due to a decrease in LLC formations and the exit of certain channel partner relationships in the third quarter of 2023.

Current wording

Transaction revenue for the six months ended June 30, 2024 increased due to a 6% increase in the number of transactions, partially offset by a 5% decrease in average order value compared to the six months ended June 30, 2023. The overall increase in transaction units during the six months ended June 30, 2024 resulted primarily from the introduction of our beneficial ownership information report product in December 2023 along with the increase in other small business related transactions, including annual reports and corporate dissolutions. The increase in transaction units was partially offset by an 18% reduction in business formations primarily due to a 12% decrease in direct channel LLC formations driven partly by a challenging macroeconomic environment, as well as due to and the exit of certain channel partner relationships in the third quarter of 2023. The 5% decrease in average order value for the six months ended June 30, 2024 was driven primarily by a higher mix of lower priced small business related transactions, including annual reports and beneficial ownership information reports, and a reduction in fees from third-party providers through our online platform, partially offset by an increase in average order value of our consumer transaction products due to commercialization changes within our consumer product suite.

Previous wording

Subscription revenue for the three months ended March 31, 2024 increased primarily due to a 7% increase in the number of subscription units and a 5% improvement in ARPU compared to the three months ended March 31, 2023. The increase in subscription units was primarily driven by an increase in forms and e-signature subscriptions primarily due to the bundling of these products into certain business formation offerings, as well as an increase in virtual mail subscriptions. This growth was partially offset by a decline in registered agent and compliance subscriptions driven by the exit of certain channel partner relationships in the third quarter of 2023. ARPU as of March 31, 2024 increased 5% compared to March 31, 2023 driven primarily by a shift in mix towards our higher priced subscription offerings. ARPU was also impacted by the exit of certain channel partner relationships in the third quarter of 2023 and by the introduction of our forms and e-signature subscription offerings, both of which carry lower price points.

Current wording

Subscription revenue for the six months ended June 30, 2024 increased primarily due to a 4% increase in the number of subscription units as of June 30, 2024 compared to June 30, 2023 and a 4% increase in ARPU compared to June 30, 2023. The increase in subscription units was driven primarily by an increase in forms and e-signature subscriptions resulting from bundling of these products into certain business formation offerings, as well as an increase in virtual mail subscriptions. This growth was partially offset by a decline in registered agent and compliance subscriptions driven by the exit of certain channel partner relationships in the third quarter of 2023. ARPU increased 4% compared to June 30, 2023 driven primarily by a shift in the mix of our higher priced subscription offerings. ARPU was also impacted by the exit of certain channel partner relationships in the third quarter of 2023 and the increased mix of our forms and e-signature subscription offerings, both of which carry lower price points.

Previous wording

Cost of revenue for the three months ended March 31, 2024 increased by $8.0 million mainly due to a $3.2 million increase in filing fees and a $1.8 million increase in depreciation and amortization expense. The increase in filing fees was primarily driven by filing fees related to business formations during the three months ended March 31, 2024 in certain states that temporarily halted charging filing fees in the first half of 2023.

Current wording

Cost of revenue for the six months ended June 30, 2024 increased by $7.9 million mainly due to a $5.4 million increase in payroll and related benefits, a $3.5 million increase in depreciation and amortization expense, and a $1.3 million increase in filing fees, partially offset by a $4.5 million decrease in third-party staffing fees. The increase in filing fees was primarily driven by filing fees related to business formations during the six months ended June 30, 2024 in certain states that temporarily halted charging filing fees in the first half of 2023, partially offset by the decrease in overall business formations during the six months ended June 30, 2024.

Previous wording

We fund our operations and capital expenditures from cash flows from operating activities. Our primary requirements for liquidity and capital are to finance working capital, capital expenditures and general corporate purposes. At March 31, 2024, our principal sources of liquidity were cash and cash equivalents of $228.1 million, which consisted of cash on deposit with banks and money market funds, of which approximately $2.7 million related to our foreign subsidiaries. Our cash and cash equivalents increased by $2.4 million from December 31, 2023 to March 31, 2024, primarily as a result of cash provided by operating activities, partially offset by purchases of property and equipment and stock repurchases during the three months ended March 31, 2024.

Current wording

We fund our operations and capital expenditures from cash flows from operating activities. Our primary requirements for liquidity and capital are to finance working capital, capital expenditures and general corporate purposes. At June 30, 2024, our principal sources of liquidity were cash and cash equivalents of $118.8 million, which consisted of cash on deposit with banks and money market funds, of which approximately $1.7 million related to our foreign subsidiaries. Our cash and cash equivalents decreased by $106.9 million from December 31, 2023 to June 30, 2024, primarily as a result of stock repurchases and purchases of property and equipment, partially offset by cash provided by operating activities during the six months ended June 30, 2024.

Previous wording

We currently anticipate that our available cash, cash equivalents and cash provided by operating activities will be sufficient to meet our operational cash needs for at least the next twelve months and in the foreseeable future. We have the ability to supplement our liquidity needs over the longer term with borrowings under our 2021 Revolving Facility. In addition, we previously announced our intention to sell our operating headquarters in Austin, Texas, which is discussed in more detail in Note 4 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Current wording

We currently anticipate that our available cash, cash equivalents and cash provided by operating activities will be sufficient to meet our operational cash needs for at least the next twelve months and in the foreseeable future. We have the ability to supplement our liquidity needs with borrowings under our 2021 Revolving Facility. In addition, we previously announced our intention to sell our operating headquarters in Austin, Texas, which is discussed in more detail in Note 4 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

In October 2023, our board of directors approved a new stock repurchase program, pursuant to which our management is authorized to repurchase up to $100.0 million of shares of our common stock from time to time. At March 31, 2024, approximately $87.2 million remained available for future repurchases of our common stock under the stock repurchase program. For additional information regarding our stock repurchase program, refer to Note 7 to our unaudited condensed consolidated financial statements.

Current wording

In October 2023, our board of directors approved a new stock repurchase program, pursuant to which our management is authorized to repurchase up to $100.0 million of shares of our common stock from time to time. In May 2024, our board of directors approved a $75.0 million increase in the stock repurchase program, bringing the aggregate amount authorized to $175.0 million. At June 30, 2024, approximately $37.0 million remained available for future repurchases of our common stock under the stock repurchase program. For additional information regarding our stock repurchase program, refer to Note 7 to our unaudited condensed consolidated financial statements.

Previous wording

In the three months ended March 31, 2024, cash provided by operating activities was $34.2 million resulting from net income of $4.7 million, adjusted for stock-based compensation and other non-cash expenses of $24.9 million and net cash flows provided by changes in operating assets and liabilities of $4.6 million. The $4.6 million of net cash flows provided from changes in our operating assets and liabilities included a $19.6 million increase in deferred revenue largely due to growth of our subscription units, which are predominantly billed in advance of our revenue recognition and a $1.4 million increase in accounts payable, partially offset by a $4.0 million increase in accounts receivable, a $2.8 million increase in prepaid and other current assets, and a $9.7 million reduction in accrued expenses and operating lease liability and other liabilities due to the timing of our payments.

Current wording

In the six months ended June 30, 2024, cash provided by operating activities was $61.4 million resulting from net income of $6.1 million, adjusted for stock-based compensation and other non-cash expenses of $50.8 million and net cash flows provided by changes in operating assets and liabilities of $4.6 million. The $4.6 million of net cash flows provided from changes in our operating assets and liabilities included a $21.2 million increase in deferred revenue largely due to growth of our subscription units, which are predominantly billed in advance of our revenue recognition and a $1.9 million increase in accounts payable, partially offset by a $3.4 million increase in accounts receivable, a $7.3 million increase in prepaid and other current assets, and a $7.5 million reduction in accrued expenses and operating lease and other liabilities due to the timing of our payments.

Previous wording

In the three months ended March 31, 2024, net cash used in investing activities was $9.5 million resulting primarily from purchases of property and equipment, including capitalization of internal-use software.

Current wording

In the six months ended June 30, 2024, net cash used in investing activities was $19.4 million resulting primarily from purchases of property and equipment, including capitalization of internal-use software.

Previous wording

In the three months ended March 31, 2024, net cash used in financing activities was $22.3 million, resulting from $12.8 million in repurchases of our common stock under our stock repurchase program and a $9.6 million settlement of minimum statutory tax withholding upon vesting of RSUs.

Current wording

In the six months ended June 30, 2024, net cash used in financing activities was $149.0 million, primarily resulting from $136.5 million in repurchases of our common stock under our stock repurchase program and a $14.2 million settlement of minimum statutory tax withholding upon vesting of RSUs.

Previous wording

We have non-cancelable agreements with various vendors, which require us to pay $49.6 million over a four-year period, of which $33.0 million remains to be paid as of March 31, 2024.

Current wording

We have non-cancelable agreements with various vendors, which require us to pay $47.5 million over a four-year period, of which $28.0 million remains to be paid as of June 30, 2024.

Previous wording

At March 31, 2024, we had various non-cancelable operating leases for office space and equipment, which expire between May 2024 and November 2029. As of March 31, 2024, we had total minimum operating lease maturities of $9.5 million, $1.7 million of which mature within nine months. See Note 8 of our consolidated financial statements included in our 2023 Annual Report on Form 10-K for additional information regarding our future operating lease payments.

Current wording

At June 30, 2024, we had various non-cancelable operating leases for office space and equipment, which expire between July 2024 and November 2029. As of June 30, 2024, we had total minimum operating lease maturities of $8.8 million, $1.0 million of which mature within six months. See Note 8 of our consolidated financial statements included in our 2023 Annual Report on Form 10-K for additional information regarding our future operating lease payments.

Previous wording

Adjusted EBITDA increased from $21.9 million for the three months ended March 31, 2023 to $27.9 million for the three months ended March 31, 2024. The increase of $6.0 million resulted primarily from an increase in revenue of $8.3 million and a reduction in operating expenses, excluding non-cash and non-recurring items, of $3.2 million, partially offset by a $5.4 million increase in cost of revenue, excluding non-cash items.

Current wording

Adjusted EBITDA decreased from $29.6 million for the three months ended June 30, 2023 to $28.9 million for the three months ended June 30, 2024. The decrease of $0.7 million resulted primarily from an increase in revenue of $8.5 million and a $2.4 million reduction in cost of revenue, excluding non-cash items, partially offset by an increase in operating expenses, excluding non-cash and non-recurring items, of $11.6 million.