LEGALZOOM.COM, INC. (LZ): Results of Operations and Financial Condition
LEGALZOOM.COM, INC. (LZ) filed an SEC Form 8-K — Results of Operations and Financial Condition. Exhibit 99.1 LegalZoom Reports Second Quarter 2026 Financial Results • Revenue of $205.3 million, up 7% year-over-year, driven by subscription revenue increasing 11% year-over-year, representing LegalZoom’s fifth consecutive quarter of double digit subscription revenue growth • S
How this was made
The 30-second read
Why it matters
Q2 showed revenue growth with subscription accelerating, while transaction revenue was slightly down. The company updated full-year 2026 revenue and Adjusted EBITDA guidance to reflect the evolving acquisition environment and margin discipline, including benefits from a workforce reduction.
Market read
Traders can reprice LZ based on the updated full-year guidance ranges, Q2 margin/cash flow performance, and the explicit assumption of no recovery in traditional search.
What to watch
Cash balance declined from $203.1M at Dec 31, 2025 to $167.2M at June 30, 2026, so investors may scrutinize free cash flow durability and working-capital dynamics alongside guidance.
LegalZoom reported second-quarter revenue of $205.3 million, up 7% year-over-year, with $45.9 million of Adjusted EBITDA and updated full-year 2026 revenue outlook to $795 million to $805 million.
Subscription revenue, gross margin, Adjusted EBITDA, net income and free cash flow improved year-over-year, but transaction revenue declined and the company reduced its full-year revenue outlook because of a more cautious view of customer acquisition.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total revenueGAAP | $205,289 (in thousands) | – | 7% |
| Transaction revenueGAAP | $71,890 (in thousands) | – | (1)% |
| Subscription revenueGAAP | $133,399 (in thousands) | – | 11% |
| Gross profitGAAP | $139,930 (in thousands) | – | 12% |
| Gross marginGAAP | 68% | – | 5% |
| Net income (loss)GAAP | $5,183 (in thousands) | – | n/m |
| Net income (loss) marginGAAP | 3% | – | n/m |
| Net income (loss) per share — basicGAAP | $0.03 | – | n/m |
| Net income (loss) per share — dilutedGAAP | $0.03 | – | n/m |
| Net cash provided by operating activitiesGAAP | $39,547 (in thousands) | – | 1% |
| Non GAAP net incomenon-GAAP | $27,444 (in thousands) | – | (3)% |
| Non GAAP net income per share — basicnon-GAAP | $0.16 | – | —% |
| Non GAAP net income per share — dilutednon-GAAP | $0.16 | – | 7% |
| Adjusted EBITDAnon-GAAP | $45,898 (in thousands) | – | 18% |
| Adjusted EBITDA marginnon-GAAP | 22% | – | 10% |
| Free cash flownon-GAAP | $33,690 (in thousands) | – | 7% |
| Transaction unitsother | 281 (in thousands) | – | 1% |
| Business formationsother | 125 (in thousands) | – | (5)% |
| Average order value (AOV)other | $256 | – | (2)% |
| Subscription units at period endother | 1,892 (in thousands) | – | (3)% |
| Average revenue per subscription unit (ARPU) at period endother | $270 | – | 5% |
| Six months ended June 30, 2026 total revenueGAAP | $412,070 (in thousands) | – | 10% |
| Six months ended June 30, 2026 transaction revenueGAAP | $148,513 (in thousands) | – | 6% |
| Six months ended June 30, 2026 subscription revenueGAAP | $263,557 (in thousands) | – | 12% |
| Six months ended June 30, 2026 gross profitGAAP | $272,183 (in thousands) | – | 13% |
| Six months ended June 30, 2026 gross marginGAAP | 66% | – | 3% |
| Six months ended June 30, 2026 net income (loss)GAAP | $6,287 (in thousands) | – | 29% |
| Six months ended June 30, 2026 net income (loss) marginGAAP | 2% | – | 100% |
| Six months ended June 30, 2026 net income (loss) per share — basicGAAP | $0.04 | – | 33% |
| Six months ended June 30, 2026 net income (loss) per share — dilutedGAAP | $0.04 | – | 33% |
| Six months ended June 30, 2026 net cash provided by operating activitiesGAAP | $86,829 (in thousands) | – | (3)% |
| Six months ended June 30, 2026 Non GAAP net incomenon-GAAP | $49,515 (in thousands) | – | (5)% |
| Six months ended June 30, 2026 Non GAAP net income per share — basicnon-GAAP | $0.28 | – | (3)% |
| Six months ended June 30, 2026 Non GAAP net income per share — dilutednon-GAAP | $0.28 | – | (3)% |
| Six months ended June 30, 2026 Adjusted EBITDAnon-GAAP | $82,360 (in thousands) | – | 8% |
| Six months ended June 30, 2026 Adjusted EBITDA marginnon-GAAP | 20% | – | —% |
| Six months ended June 30, 2026 free cash flownon-GAAP | $74,664 (in thousands) | – | 2% |
| Six months ended June 30, 2026 transaction unitsother | 656 (in thousands) | – | 6% |
| Six months ended June 30, 2026 business formationsother | 267 (in thousands) | – | 2% |
| Six months ended June 30, 2026 average order value (AOV)other | $227 | – | 1% |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Transaction revenueTransaction units increased 1%, while business formations decreased 5% and average order value decreased 2%. | $71.9 million | – | decreased 1% year-over-year |
| Subscription revenueStrength in human-in-the-loop offerings and pricing initiatives. | $133.4 million | – | grew 11% year-over-year |
Full year ending December 31, 2026 and third quarter ending September 30, 2026 outlook
- RevenueFull year: $795 million to $805 million, or 6% year-over-year growth at the midpoint. Third quarter: $192 million to $196 million, or 2% year-over-year growth at the midpoint.
- NoteFull-year Adjusted EBITDA: $190 million to $195 million, reflecting 12% year-over-year growth at the midpoint, and a 24% margin.
- NoteThird-quarter Adjusted EBITDA: $49 million to $51 million, an 8% year-over-year increase at the midpoint, and a 26% margin.
Capital returns
- Completed $45.5 million of share repurchases in the quarter.
- Approximately $80.4 million remained under the existing authorization.
What drove it
- Subscription revenue increased 11% year-over-year, representing the fifth consecutive quarter of double digit subscription revenue growth.
- The company cited strength in human-in-the-loop offerings and pricing initiatives for subscription revenue growth.
- Gross margin was 68%, compared to 65% in the same period in 2025.
- The outlook reflects continued scaling of higher-value growth initiatives and ongoing momentum from the partner channel.
- Adjusted EBITDA outlook reflects disciplined cost management, ongoing gross margin improvement and benefits from a 13% workforce reduction announced today.
Concerns
- Transaction revenue decreased 1% year-over-year.
- Business formations decreased 5% year-over-year and subscription units at period end decreased 3% year-over-year.
- The company updated full-year revenue outlook to $795 million to $805 million from its previous outlook of $810 million to $830 million.
- The updated outlook reflects a more cautious view of customer acquisition for the remainder of the year and a recent industry-wide shift in customer discovery away from traditional search.
- Non GAAP net income decreased 3% year-over-year despite GAAP net income improving to $5.2 million from a net loss of $0.3 million.
What to watch
- Third-quarter revenue guidance of $192 million to $196 million, or 2% year-over-year growth at the midpoint.
- Third-quarter Adjusted EBITDA guidance of $49 million to $51 million and a 26% margin.
- Customer acquisition trends amid the shift in discovery away from traditional search.
- The scaling of new customer acquisition channels, partner-channel momentum and AI-channel discovery.
- The effect of the announced 13% workforce reduction on cost management and profitability.
Balance sheet and cash flow
- Cash and cash equivalents were $167.2 million as of June 30, 2026, compared to $203.1 million as of December 31, 2025.
- Cash flows provided by operating activities were $39.5 million for the quarter ended June 30, 2026, compared to $39.1 million in the same period in 2025.
- Free cash flow was $33.7 million for the quarter ended June 30, 2026, compared to $31.6 million in the same period in 2025.
- No debt outstanding as of June 30, 2026.
Analysis
LegalZoom delivered $205.3 million of second-quarter revenue, up 7% year-over-year. Subscription revenue of $133.4 million grew 11%, extending the company’s fifth consecutive quarter of double digit subscription revenue growth. Transaction revenue of $71.9 million decreased 1%, however, and business formations declined 5%. Subscription units at period end declined 3% to 1,892 (in thousands), while ARPU increased 5% to $270.
Profitability improved materially on reported measures. Gross margin rose to 68% from 65%, GAAP net income was $5.2 million compared with a $0.3 million net loss, and Adjusted EBITDA increased 18% to $45.9 million. The Adjusted EBITDA margin reached 22%, compared with 20% in the same period in 2025. Non GAAP net income declined 3% to $27.4 million, while diluted Non GAAP net income per share increased to $0.16 from $0.15.
Cash generation remained positive. Cash flows provided by operating activities were $39.5 million, compared with $39.1 million in the prior-year quarter, and free cash flow was $33.7 million, compared with $31.6 million. The company repurchased $45.5 million of shares during the quarter and had approximately $80.4 million remaining under its authorization. It ended the quarter with $167.2 million of cash and cash equivalents and no debt outstanding.
Management reduced its full-year revenue outlook to $795 million to $805 million from $810 million to $830 million, citing a more cautious customer-acquisition view and the industry-wide shift in customer discovery away from traditional search. The company retained a full-year Adjusted EBITDA range of $190 million to $195 million, although the prior range was $190 million to $200 million. The third-quarter guide calls for 2% revenue growth at the midpoint and an Adjusted EBITDA margin of 26%, placing continued emphasis on margin discipline as revenue growth moderates.
The central reported tension is strong subscription monetization and improved margins against softer transaction activity and a lower revenue outlook. Management stated that higher-value growth initiatives and the partner channel continue to scale, while it is building new customer-acquisition channels and investing behind its long-term growth strategy. The announced 13% workforce reduction is identified as a benefit to the profitability outlook.
Management, verbatim
Since late 2024, we've deliberately repositioned LegalZoom around subscription relationships that pair AI with trusted human expertise. That strategy is working. While demand for what we do is intact, discovery is moving.
Jeff Stibel, Chairman and Chief Executive Officer of LegalZoom
We're updating our revenue expectations based on recent changes in the customer acquisition environment, while our profitability outlook reflects the discipline of our operating model.
Noel Watson, Chief Operating Officer and Chief Financial Officer
Not in the filing
stated, not guessed- Operating income was not reported in the provided filing text.
- Operating expenses were not reported in the provided filing text.
- Tax rate was not reported in the provided filing text.
- Prior-quarter comparisons were not reported for the presented quarterly metrics.
- A dividend declaration or payment was not reported in the provided filing text.
- Full-year and third-quarter gross-margin, operating-expense and tax-rate guidance were not reported.
- A separate prior-release outlook section containing comparable quarterly guidance was not provided; therefore, no actual-versus-prior-guidance comparison is presented.
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
LegalZoom repositioned around subscription relationships pairing AI with human expertise, and management says customer discovery is shifting away from traditional search.
Ticker impact
LegalZoom reported Q2 2026 results and updated full-year 2026 revenue to $795.0–$805.0M and Adjusted EBITDA to $190.0–$195.0M.
Near-term bias upward if investors view the AI-channel shift as sustainable and the updated guidance as credible versus prior expectations.
The 8-K includes new, time-sensitive datapoints: Q2 revenue, margins, cash flow, and revised full-year guidance ranges, plus a workforce reduction benefit cited for EBITDA.
Market effects
Reinforces a broader shift in customer acquisition away from traditional search toward AI discovery, which may affect how investors underwrite online legal services and subscription models.
Limited, primarily company-specific disclosure from Mountain View, California.
Low, US-listed company filing with no stated international regulatory or macro trigger.
Counterpoint
The revenue outlook was lowered versus the prior range ($810–$830M to $795–$805M), suggesting customer acquisition headwinds may persist longer than management implies.
Key entities
- public_companyLegalZoom.com, Inc.
Nasdaq-listed online legal services provider reporting Q2 2026 results and updating 2026 guidance in an SEC 8-K.
- executiveJeff Stibel
Chairman and CEO, quoted on the AI-channel discovery strategy and outlook assumptions.
- executiveNoel Watson
COO and CFO, quoted on profitability outlook and operating efficiency.
