LEGALZOOM.COM, INC. (LZ): LegalZoom Reports Third Quarter 2026 Financial Results
LEGALZOOM.COM, INC. (LZ) filed an SEC Form 8-K — Results of Operations and Financial Condition. Exhibit 99.1 LegalZoom Reports Third Quarter 2026 Financial Results • Revenue of $195.1 million, up 3% year-over-year, above the midpoint of the Company’s guidance range • Subscription revenue of $139.7 million, up 11% year-over-year, marking the sixth consecutive quarter of doub
How this was made
The 30-second read
Why it matters
The reaffirmed revenue outlook and revised Adjusted EBITDA guidance suggest tighter operating margins, which could temper investor enthusiasm despite subscription growth.
Market read
The earnings release provides fresh data for traders; the guidance update may influence short‑term price action and sector sentiment.
What to watch
Cash balance of $181.7M and debt‑free status provide flexibility for strategic investments
Third-quarter revenue grew 3% as 11% subscription revenue growth offset a 14% decline in transaction revenue; LegalZoom narrowed full-year revenue guidance and reduced its Adjusted EBITDA outlook.
Subscription revenue grew 11%, gross margin reached 71%, and GAAP net income increased to $8.1 million, but transaction revenue declined 14%, operating cash flow and free cash flow declined year-over-year, and the company reduced its full-year Adjusted EBITDA outlook to $180 million to $185 million from $190 million to $195 million.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Three Months Ended September 30, 2026 Total revenueGAAP | $195.1M | – | 3 % |
| Nine Months Ended September 30, 2026 Total revenueGAAP | $607.2M | – | 7 % |
| Three Months Ended September 30, 2026 Gross profitGAAP | $138.1M | – | 8 % |
| Nine Months Ended September 30, 2026 Gross profitGAAP | $410.2M | – | 11 % |
| Three Months Ended September 30, 2026 Gross marginGAAP | 71 % | – | 6 % |
| Nine Months Ended September 30, 2026 Gross marginGAAP | 68 % | – | 5 % |
| Three Months Ended September 30, 2026 Sales and marketing expenseGAAP | 76,909 | – | – |
| Three Months Ended September 30, 2026 Technology and development expenseGAAP | 14,297 | – | – |
| Three Months Ended September 30, 2026 General and administrative expenseGAAP | 33,313 | – | – |
| Three Months Ended September 30, 2026 Total operating expensesGAAP | 124,519 | – | – |
| Nine Months Ended September 30, 2026 Total operating expensesGAAP | 383,288 | – | – |
| Three Months Ended September 30, 2026 Income from operationsGAAP | 13,544 | – | – |
| Nine Months Ended September 30, 2026 Income from operationsGAAP | 26,958 | – | – |
| Three Months Ended September 30, 2026 Net incomeGAAP | $8.06M | – | 79 % |
| Nine Months Ended September 30, 2026 Net incomeGAAP | $14.35M | – | 53 % |
| Three Months Ended September 30, 2026 Net income marginGAAP | 4 % | – | 100 % |
| Nine Months Ended September 30, 2026 Net income marginGAAP | 2 % | – | — % |
| Three Months Ended September 30, 2026 Net income per share — basicGAAP | $ 0.05 | – | 67 % |
| Three Months Ended September 30, 2026 Net income per share — dilutedGAAP | $ 0.05 | – | 150 % |
| Nine Months Ended September 30, 2026 Net income per share — basicGAAP | $ 0.08 | – | 60 % |
| Nine Months Ended September 30, 2026 Net income per share — dilutedGAAP | $ 0.08 | – | 60 % |
| Three Months Ended September 30, 2026 Non-GAAP net incomenon-GAAP | $31.44M | – | 1 % |
| Nine Months Ended September 30, 2026 Non-GAAP net incomenon-GAAP | $80.96M | – | (3) % |
| Three Months Ended September 30, 2026 Non-GAAP net income marginnon-GAAP | 16 % | – | – |
| Nine Months Ended September 30, 2026 Non-GAAP net income marginnon-GAAP | 13 % | – | – |
| Three Months Ended September 30, 2026 Non-GAAP net income per share — basicnon-GAAP | $ 0.19 | – | 12 % |
| Three Months Ended September 30, 2026 Non-GAAP net income per share — dilutednon-GAAP | $ 0.19 | – | 12 % |
| Nine Months Ended September 30, 2026 Non-GAAP net income per share — basicnon-GAAP | $ 0.47 | – | 2 % |
| Nine Months Ended September 30, 2026 Non-GAAP net income per share — dilutednon-GAAP | $ 0.46 | – | 2 % |
| Three Months Ended September 30, 2026 Adjusted EBITDAnon-GAAP | $50.05M | – | 8 % |
| Nine Months Ended September 30, 2026 Adjusted EBITDAnon-GAAP | $132.4M | – | 8 % |
| Three Months Ended September 30, 2026 Adjusted EBITDA marginnon-GAAP | 26 % | – | 8 % |
| Nine Months Ended September 30, 2026 Adjusted EBITDA marginnon-GAAP | 22 % | – | — % |
| Three Months Ended September 30, 2026 Net cash provided by operating activitiesGAAP | $39.87M | – | (26) % |
| Nine Months Ended September 30, 2026 Net cash provided by operating activitiesGAAP | $126.7M | – | (12) % |
| Three Months Ended September 30, 2026 Free cash flownon-GAAP | $34.12M | – | (27) % |
| Nine Months Ended September 30, 2026 Free cash flownon-GAAP | $108.8M | – | (9) % |
| Transaction units, Three Months Ended September 30, 2026other | 249 | – | (4) % |
| Business formations, Three Months Ended September 30, 2026other | 110 | – | (13) % |
| Average order value (AOV), Three Months Ended September 30, 2026other | $ 222 | – | (12) % |
| Subscription units at period endother | 1,854 | – | (5) % |
| Average revenue per subscription unit (ARPU) at period endother | $ 280 | – | 9 % |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Transaction revenueContinued pressure in customer acquisition. | $55.47M | – | (14) % |
| Subscription revenueScaling of higher-value growth initiatives and ongoing momentum from the partner channel. | $139.7M | – | 11 % |
Amounts quoted below without a unit are in thousands, as in the filing’s tables. Per-share figures are as printed.
Full year ending December 31, 2026 and fourth quarter ending December 31, 2026 outlook
- RevenueFull year: $797 million to $803 million, or 6% year-over-year growth at the midpoint. Fourth quarter: $190 million to $196 million, or 1% year-over-year growth at the midpoint.
- NoteFull-year Adjusted EBITDA: $180 million to $185 million, or approximately 6% year-over-year growth and a 23% margin at the midpoint.
- NoteFourth-quarter Adjusted EBITDA: $48 million to $53 million, a 1% year-over-year growth at the midpoint, and a 26% margin.
Capital returns
- Completed $14.6 million of share repurchases in the quarter.
- Approximately $65.8 million remaining under the existing authorization as of September 30, 2026.
- Repurchase of common stock for the nine months ended September 30, 2026: (103,223).
What drove it
- Revenue from human-in-the-loop subscription services grew 17% year-over-year and represented 49% of total revenue.
- Subscription revenue growth continued to offset customer acquisition pressure.
- Revenue outlook reflects scaling of higher-value growth initiatives and ongoing momentum from the partner channel.
- The company is investing in channel diversification, including partnerships, affiliates and AI channels.
- The company is investing in higher-value expert services and seasonal sales capabilities ahead of the first quarter peak in business formations.
Concerns
- Transaction revenue decreased 14% year-over-year to $ 55,473.
- Transaction units declined 4%, business formations declined 13%, and average order value declined 12%.
- Subscription units at period end declined 5% to 1,854.
- Net cash provided by operating activities declined 26% and free cash flow declined 27% year-over-year in the third quarter.
- Full-year Adjusted EBITDA outlook was reduced to $180 million to $185 million from $190 million to $195 million.
- The company cited a challenging customer acquisition environment and higher costs in paid customer acquisition channels.
What to watch
- Fourth-quarter revenue guidance of $190 million to $196 million, or 1% year-over-year growth at the midpoint.
- Fourth-quarter Adjusted EBITDA guidance of $48 million to $53 million and a 26% margin.
- Whether higher-value growth initiatives, the partner channel, and channel diversification sustain subscription revenue growth.
- Customer acquisition pressure, including costs in paid customer acquisition channels.
- Transaction units, business formations, average order value, subscription units at period end, and ARPU.
Balance sheet and cash flow
- Cash and cash equivalents were $181.7 million as of September 30, 2026 compared to $203.1 million as of December 31, 2025.
- No debt outstanding as of September 30, 2026.
- Cash flows provided by operating activities were $39.9 million for the quarter ended September 30, 2026 compared to $54.2 million in the same period in 2025.
- Free cash flow was $34.1 million for the quarter ended September 30, 2026 compared to $47.0 million in the same period in 2025.
- Purchase of property and equipment for the nine months ended September 30, 2026: (17,919).
- Net cash used in financing activities for the nine months ended September 30, 2026: (130,060).
Analysis
LegalZoom reported $195.1 million of third-quarter revenue, up 3% year-over-year, with subscription revenue of $139.7 million growing 11% and transaction revenue of $55.5 million declining 14%. Management said subscription growth continued to offset customer acquisition pressure. Human-in-the-loop subscription services grew 17% year-over-year and represented 49% of total revenue, according to the company.
The revenue mix supported stronger profitability metrics. Gross margin was 71%, compared with 67% in the same period in 2025. GAAP net income was $8.1 million, compared with $4.5 million, while Adjusted EBITDA was $50.0 million, compared with $46.3 million. The resulting Adjusted EBITDA margin was 26%, compared with 24%. Non-GAAP net income increased 1% to $31.4 million.
Demand indicators outside the subscription revenue line were weaker. Transaction units fell 4%, business formations fell 13%, and average order value fell 12%. Subscription units at period end were 1,854, down 5%, while ARPU at period end increased 9% to $280. Cash generation also declined, with cash from operating activities of $39.9 million versus $54.2 million and free cash flow of $34.1 million versus $47.0 million.
Capital allocation remained active: LegalZoom completed $14.6 million of share repurchases during the quarter and had approximately $65.8 million remaining under its authorization as of September 30, 2026. The company ended the quarter with $181.7 million of cash and cash equivalents and no debt outstanding. For the full year, LegalZoom narrowed revenue guidance to $797 million to $803 million while maintaining 6% growth at the midpoint, but reduced Adjusted EBITDA guidance to $180 million to $185 million from $190 million to $195 million. Management attributed the revision to channel-diversification investment, higher paid customer acquisition costs, investment in expert services, and seasonal sales-capability investment.
Management, verbatim
Revenue from human-in-the-loop subscription services grew 17% year-over-year and now represents 49% of total revenue. These results give us confidence to accelerate our investment in bringing expert support into the customer relationship from the first purchase, pairing AI with accountable expertise to make our services more useful.
Jeff Stibel, Chairman and Chief Executive Officer of LegalZoom
Subscription growth continues to offset customer acquisition pressure, supporting an unchanged $800 million midpoint for our full-year revenue outlook. Our updated Adjusted EBITDA outlook reflects the cost of that environment and our continued investment in channel diversification and the sales and service capabilities behind our higher-value offerings. With $181.7 million in cash and no debt, we have the financial capacity to fund these priorities.
Noel Watson, Chief Operating Officer and Chief Financial Officer
Not in the filing
stated, not guessed- Prior-quarter comparisons for reported operating metrics
- GAAP operating income margin
- Quarterly debt balance sheet line item
- GAAP reconciliation for full-year and fourth-quarter non-GAAP guidance
- Separate prior earnings release outlook for a like-for-like actual-versus-prior-guidance comparison
Written by an AI language model 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 checked against the filing text, and a metric whose value, prior period and change do not add up is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. 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 (Nasdaq:LZ) filed a Form 8‑K reporting its third‑quarter 2026 financial results and revising its outlook.
Ticker impact
LegalZoom disclosed Q3 2026 results and updated full-year revenue and Adjusted EBITDA guidance.
likely modest pressure as investors price in slower revenue growth and higher costs
The company reaffirmed full-year revenue at $800M while narrowing the range and updated Adjusted EBITDA outlook, indicating tighter margins.
Market effects
online legal services sector may see valuation adjustments as guidance narrows
U.S. tech equities could experience slight downside pressure
limited to investors tracking SaaS and subscription‑based business models
Counterpoint
The updated guidance may be overly conservative; upside potential if subscription growth accelerates
Key entities
- ExecutiveJeff Stibel
Chairman and CEO of LegalZoom
- ExecutiveNoel Watson
COO and CFO of LegalZoom
