Core Insights - LegalZoom.com achieved record revenue in the third quarter, with sales of $190.2 million, reflecting a 13% year-over-year growth [9] - The company raised its full-year 2025 revenue outlook to between $748 million and $752 million, indicating growth from 2024's $682 million [9] - Chief Legal Officer Nicole Miller sold 23,506 shares on November 18, 2025, which represented approximately 2.63% of her direct ownership [6] Company Overview - LegalZoom.com operates an online platform that simplifies legal and compliance processes for small businesses and individuals [5] - The company reported a total revenue of $727.48 million and a net income of $22.22 million for the trailing twelve months (TTM) [4] - The stock price increased by 16.22% over the past year, with a closing price of $9.41 on November 18, 2025 [4][6] Insider Transactions - Nicole Miller's sale of shares is consistent with her historical trading patterns, as it aligns with the median size of her previous open-market sales [6] - The sale followed a significant withholding of 203,571 shares on November 15, which was related to tax obligations from the vesting of restricted stock units [6][8] - Post-transaction, Miller retains 868,627 shares valued at approximately $8.2 million, maintaining a 0.49% stake in the company [6] Market Performance - LegalZoom's stock reached a 52-week high of $12.40 on November 6, 2025, contributing to the perception of the recent share sale as profit-taking [8] - Despite the positive performance, the current price-to-earnings ratio of 76 suggests that shares may be considered expensive at this time [10]

Core Insights - LegalZoom (LZ) has been previously rated as a hold due to concerns regarding weak Average Revenue Per User (ARPU) trends, transaction units, and soft retention metrics [1] Group 1: Company Performance - LegalZoom continues to execute well on its business strategies despite previous concerns [1] Group 2: Investment Perspective - The author emphasizes a diverse investment approach, incorporating fundamental, technical, and momentum investing strategies to enhance the investment process [1]

Core Insights - The Q3 earnings season of 2025 is negatively impacting the stock market, with investors requiring substantial justification for high valuations [1] Group 1: Market Performance - The current earnings season is seen as a negative catalyst for the stock market [1] - Investors are demanding significant support for elevated stock valuations [1] Group 2: Analyst Background - Gary Alexander has extensive experience in covering technology companies and has worked in Silicon Valley, providing insights into industry trends [1] - He has been a contributor to Seeking Alpha since 2017 and has been featured in various web publications [1]

Core Insights - LegalZoom's shares increased by 6.8% following the release of strong third-quarter financial results that exceeded revenue expectations and provided a positive outlook for the next quarter [1][2] Financial Performance - LegalZoom reported revenue of $190.2 million for the third quarter, marking a 12.8% increase year-over-year, surpassing Wall Street forecasts [2] - The company's revenue guidance for the fourth quarter is set at $184 million at the midpoint, approximately 4% above analyst expectations [2] - GAAP earnings per share were $0.02, aligning with expectations, although subscription units fell short of estimates [2] Market Reaction - LegalZoom's stock has shown volatility, with 14 movements greater than 5% in the past year, indicating that the market views the recent news as significant but not fundamentally altering its perception of the company [4] - The stock has risen 42.9% since the beginning of the year, currently trading at $10.81 per share, close to its 52-week high of $11.18 reached in August 2025 [6]

Core Insights - LegalZoom reported quarterly earnings of $0.17 per share, missing the Zacks Consensus Estimate of $0.20 per share, representing an earnings surprise of -15.00% [1] - The company posted revenues of $190.16 million for the quarter ended September 2025, exceeding the Zacks Consensus Estimate by 3.55% and showing a year-over-year increase from $168.6 million [2] - LegalZoom's stock has increased by approximately 32.1% since the beginning of the year, outperforming the S&P 500's gain of 15.1% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.21 on revenues of $176.54 million, and for the current fiscal year, it is $0.71 on revenues of $735.91 million [7] - The estimate revisions trend for LegalZoom was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Industrial Services industry, to which LegalZoom belongs, is currently ranked in the bottom 26% of over 250 Zacks industries, suggesting potential challenges for stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Data and Key Metrics Changes - The company achieved record third-quarter revenue of $190 million, reflecting a 13% year-over-year increase, exceeding expectations [5][23] - Subscription revenue also grew by 13%, marking the third consecutive quarter of sequential growth [6][22] - Adjusted EBITDA margin remained strong at 24%, despite increased investments in product and AI [6][26] - Free cash flow for the quarter was $47 million, up 114% compared to the same period in 2024 [26][27] - The company raised its full-year revenue growth outlook to 10%, effectively doubling its initial guidance [6][28] Business Line Data and Key Metrics Changes - Subscription units increased to approximately 1.96 million, a 14% increase year-over-year, driven by bundling solutions [23] - Transaction revenue increased by 12% to $65 million, largely due to the acquisition of Formation Nation [24] - Average order value rose to $251, up 11% year-over-year, driven by higher-priced concierge services [25] Market Data and Key Metrics Changes - The company noted a 25% year-over-year increase in its partner channel for the third quarter [15] - The partnership with 1-800 ACCOUNTANT continues to exceed expectations, with plans to bundle tax advice with legal advice [12][19] Company Strategy and Development Direction - The company is focusing on expanding its subscription business and enhancing value for customers, particularly existing small businesses [8][9] - There is a strategic shift towards integrating AI with human expertise to improve service offerings [16][18] - The company aims to diversify its service offerings beyond business formation to include compliance and tax services [12][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macroeconomic uncertainties by diversifying its revenue streams [63][65] - The company is optimistic about the long-term potential of its business, particularly in serving both new and established small businesses [29] Other Important Information - The company has made organizational changes to better integrate AI into its product offerings, including appointing a new Senior Vice President for Product [19][20] - The company repurchased approximately 1.8 million shares during the quarter, reflecting a strong cash position [27] Q&A Session Summary Question: How is pricing and bundling contributing to subscription growth? - Management indicated that pricing and bundling are important levers for growth, with competitors also raising prices in response [30] Question: Can you elaborate on the White Glove concierge offering? - The offering combines expertise from attorneys and accountants to address customer needs effectively, focusing on compliance and other services [32][34] Question: What is the contribution of Formation Nation to revenues? - Formation Nation contributed approximately $9 million to transaction revenue and over $5.5 million to subscription revenue during the quarter [47] Question: How is the partnership with 1-800 ACCOUNTANT structured? - The partnership is designed to ensure a minimum revenue threshold with a revenue share on top, focusing on highly accretive products [50] Question: What insights can you share about the future of AI in legal services? - Management believes that while AI will play a significant role, human expertise will remain essential for providing legal advice and services [56][59] Question: How much of the recent performance is macro-driven versus internal initiatives? - Management emphasized that while macro factors are considered, the focus is on diversifying and insulating the business from such influences [62][65]

Business Performance - LegalZoom reported a 12% increase in business formation transactions for the three months ended September 30, 2025, totaling 126,000 compared to 113,000 in the same period of 2024 [124]. - The number of transactions increased by 2% to 259,000 for the three months ended September 30, 2025, driven by the Formation Nation acquisition and an increase in Annual Report filings [126]. - Total revenue for the three months ended September 30, 2025, was $190,158,000, representing a 13% increase from $168,599,000 in the same period of 2024 [160]. - Subscription revenue increased by 13% to $125,359,000, driven by approximately $5.6 million from the acquisition of Formation Nation and a 10% increase in compliance-related subscriptions [165]. - Transaction revenue rose by 12% to $64,799,000, primarily due to $9.1 million from Formation Nation and increased revenue from Annual Report and Trademark filings [164]. - Total revenue for the nine months ended September 30, 2025 was $565.8 million, a 9% increase from $520.2 million in 2024, with subscription revenue accounting for 64% of total revenue [177]. - Transaction revenue increased by 6% year-over-year, primarily due to $23.4 million from the acquisition of Formation Nation [178]. - Subscription revenue grew by 10% year-over-year, driven by $12.5 million from the acquisition of Formation Nation and a 7% increase in compliance-related subscriptions [179]. Financial Metrics - Average order value rose by 11% to $251 for the three months ended September 30, 2025, compared to $227 in the same period of 2024 [130]. - Average revenue per subscription unit (ARPU) decreased by 3% to $256 as of September 30, 2025, compared to $264 in 2024, attributed to a shift towards lower-priced subscription offerings [136]. - The annual small business retention rate was approximately 57% as of September 30, 2025, influenced by the bundling of lower-retaining subscriptions into business formation offerings [138]. - Gross profit for the three months ended September 30, 2025, was $127,887,000, reflecting a 12% increase from $113,884,000 in the prior year [168]. - Net income for the three months ended September 30, 2025, was $4,509,000, down from $11,051,000 in the same period of 2024 [160]. - The adjusted EBITDA for the nine months ended September 30, 2025, was $122.3 million, with an adjusted EBITDA margin of 22% [216]. - Adjusted EBITDA decreased from $47.1 million for the three months ended September 30, 2024 to $46.3 million for the three months ended September 30, 2025, primarily due to a $15.5 million increase in operating expenses [218]. - Adjusted EBITDA increased from $103.9 million for the nine months ended September 30, 2024 to $122.3 million for the nine months ended September 30, 2025, driven by a $45.6 million increase in revenue [219]. - Free cash flow increased from $64.1 million for the nine months ended September 30, 2024 to $119.9 million for the nine months ended September 30, 2025, primarily due to a $51.0 million increase in net cash provided by operating activities [222]. Expenses and Costs - Cost of revenue for the three months ended September 30, 2025, was $62,271,000, a 14% increase from $54,715,000 in 2024, mainly due to a $5.7 million rise in filing fees [166]. - Operating expenses for the three months ended September 30, 2025, totaled $121,394,000, compared to $97,615,000 in 2024, with sales and marketing expenses being the largest category [160]. - Stock-based compensation expense increased to $28,369,000 for the three months ended September 30, 2025, compared to $15,715,000 in 2024, due to new RSUs granted [161]. - Sales and marketing expenses for the three months ended September 30, 2025 increased by $21.5 million, a 47% increase year-over-year, primarily due to a $10.3 million rise in customer acquisition marketing spend [169]. - Technology and development expenses decreased by $3.7 million, or 16%, for the three months ended September 30, 2025, mainly due to a reduction in headcount [170]. - General and administrative expenses rose by $5.9 million, or 21%, for the three months ended September 30, 2025, driven by a $13.1 million increase in stock-based compensation [171]. - Cost of revenue increased by $9.5 million, or 5%, for the nine months ended September 30, 2025, mainly due to a $11.5 million rise in filing fees related to the Formation Nation acquisition [181]. - General and administrative expenses for the nine months ended September 30, 2025 increased by $32.4 million, or 42%, primarily due to a $39.1 million rise in stock-based compensation [185]. Cash Flow and Liquidity - As of September 30, 2025, the company had cash and cash equivalents of $237.2 million, an increase of $95.1 million from December 31, 2024, primarily due to stock option exercises and cash from operating activities [192]. - Net cash provided by operating activities for the nine months ended September 30, 2025, was $144.1 million, up from $93.1 million in the same period of 2024 [204]. - The company reported a net income of $9.4 million for the nine months ended September 30, 2025, with stock-based compensation and other non-cash expenses totaling $114.8 million [206]. - Net cash used in investing activities was $34.1 million, primarily due to the acquisition of Formation Nation for $48.5 million and $24.1 million in property and equipment purchases [208]. - The company utilized $15.0 million in financing activities, mainly for $37.6 million in stock repurchases and a $20.0 million settlement of RSU tax withholding [210]. - The company has a stock repurchase program with approximately $112.0 million remaining for future repurchases as of September 30, 2025 [196]. - The Amended Revolving Facility provides for $100.0 million in available borrowings, with no outstanding borrowings as of September 30, 2025 [197]. - The company anticipates that its available cash and cash equivalents will be sufficient to meet operational cash needs for at least the next twelve months [194]. Economic and Market Factors - LegalZoom's future performance is expected to be influenced by macroeconomic factors, the share of small and medium-sized businesses, and the ability to combine AI with human expertise [119][120]. - The company continues to monitor the impacts of the evolving macroeconomic environment on its business operations [120]. - Inflation has not had a material effect on the company's business, but significant inflationary pressures could harm its financial condition and results of operations [230]. - The foreign currency transaction gain was immaterial during the nine months ended September 30, 2025, with a 10% adverse change in foreign exchange rates expected to be immaterial [228][229]. - The company does not expect to be exposed to fluctuations in interest rates for the foreseeable future due to no outstanding debt subject to interest rate risk [227].

Financial Performance - LegalZoom's Q3 2025 revenue reached $190 million, a 13% increase year-over-year[17] - The company's Q3 2025 Non-GAAP Net Income was $31 million, up 4% year-over-year[17,77] - Adjusted EBITDA for Q3 2025 was $46 million, representing a 24% margin[17] - Subscription revenue in Q3 2025 grew by 12% year-over-year to $125 million[17,49] - Transaction revenue for Q3 2025 was $65 million, a 12% increase year-over-year[17,55] Market Opportunity and Strategy - LegalZoom operates in a large $51 billion market for life & business planning, business management, and expert assistance[19,21] - The company aims to optimize its subscription business, reorient its go-to-market strategy, and leverage AI to deliver expertise[29] - LegalZoom has 2 million active legal & compliance subscriptions[21] Financial Guidance - LegalZoom projects Q4 2025 total revenue to be between $182 million and $186 million and adjusted EBITDA between $46 million and $48 million[68] - For the full year 2025, LegalZoom anticipates total revenue of $748 million to $752 million and adjusted EBITDA of $168 million to $170 million, with an adjusted EBITDA margin of approximately 23%[68]

Financial Performance - LegalZoom reported record third quarter revenue of $190.2 million, representing a 13% year-over-year increase[5]. - Subscription revenue reached $125.4 million, also up 13% year-over-year, driven by growth in compliance offerings[5]. - Net income for the quarter was $4.5 million, a decrease of 59% compared to $11.1 million in the same period in 2024, resulting in a net income margin of 2%[6]. - Adjusted EBITDA was $46.3 million, down 2% from $47.1 million in the same period in 2024, with an adjusted EBITDA margin of 24%[6]. - Revenue for the three months ended September 30, 2025, was $190,158,000, representing a 12.5% increase from $168,599,000 in the same period of 2024[29]. - Gross profit for the nine months ended September 30, 2025, was $369,548,000, up from $333,467,000 in 2024, indicating an increase of 10.8%[29]. - Net income for the three months ended September 30, 2025, was $4,509,000, a decrease of 59.1% compared to $11,051,000 in the same period of 2024[29]. - Adjusted EBITDA for the nine months ended September 30, 2025, was $122,300,000, compared to $103,910,000 in 2024, reflecting an increase of 17.6%[33]. - Non-GAAP net income for Q3 2025 was $30,996,000, compared to $29,699,000 in Q3 2024, reflecting a year-over-year increase of 4.4%[35]. - Non-GAAP net income margin for Q3 2025 was 16%, down from 18% in Q3 2024[35]. - Basic Non-GAAP net income per share for Q3 2025 was $0.17, unchanged from Q3 2024[37]. - Diluted Non-GAAP net income per share for Q3 2025 was $0.17, also unchanged from Q3 2024[37]. - The company reported a net income of $4,509,000 for Q3 2025, a decrease from $11,051,000 in Q3 2024, reflecting a decline of 59%[35]. Cash Flow and Liquidity - Cash flow from operating activities was $54.2 million, a 72% increase from $31.6 million in the same period in 2024[6]. - Free cash flow for the quarter was $47.0 million, up 114% from $22.0 million in the same period in 2024[6]. - LegalZoom ended the quarter with cash and cash equivalents of $237.2 million, up from $142.1 million as of December 31, 2024[6]. - Cash and cash equivalents at the end of the period on September 30, 2025, were $237,154,000, up from $142,064,000 at the beginning of the period[31]. - The company reported a net cash provided by operating activities of $144,068,000 for the nine months ended September 30, 2025, compared to $93,053,000 in 2024, an increase of 55%[31]. - Net cash provided by operating activities for the nine months ended September 2025 was $144,068,000, compared to $93,053,000 for the same period in 2024, an increase of 55%[38]. - Free cash flow for Q3 2025 was $46,990,000, significantly higher than $21,975,000 in Q3 2024, representing a 113% increase[38]. Guidance and Future Outlook - LegalZoom expects fourth quarter revenue to be in the range of $182 million to $186 million, indicating a 14% year-over-year growth at the midpoint[8]. - The company raised its full-year 2025 revenue guidance to approximately $748 million to $752 million, reflecting a 10% year-over-year growth at the midpoint[14]. Assets and Liabilities - Total assets increased to $551,104,000 as of September 30, 2025, from $373,883,000 as of December 31, 2024, marking a growth of 47.5%[27]. - Total liabilities rose to $349,183,000 as of September 30, 2025, compared to $280,626,000 at the end of 2024, an increase of 24.4%[27]. - The company’s deferred revenue as of September 30, 2025, was $213,807,000, up from $174,643,000 at the end of 2024, indicating a growth of 22.4%[27]. Expenses - Sales and marketing expenses for the three months ended September 30, 2025, were $67,835,000, a significant increase of 46.6% from $46,287,000 in the same period of 2024[29]. - Total stock-based compensation for the nine months ended September 2025 was $88,763,000, compared to $49,486,000 in the same period of 2024, an increase of 79%[35]. - The company incurred restructuring costs of $88,000 in Q3 2025, down from $5,917,000 in Q3 2024[36]. Subscription Metrics - The number of subscription units at period end was 1,959, a 14% increase compared to 1,717 in the same period in 2024[7]. - LegalZoom reported a net cash provided by operating activities of $144,068,000 for the nine months ended September 30, 2025, compared to $93,053,000 in 2024, an increase of 55%[31].

Core Insights - LegalZoom reported a record third quarter revenue of $190.2 million, reflecting a 13% year-over-year growth, driven by a strong performance in subscription revenue [5][6][7] - The company is optimistic about its strategic shift, focusing on expanding services to the existing 36 million small businesses in the U.S. by integrating AI and technology with human expertise [2][5] - LegalZoom has raised its full-year 2025 revenue guidance, anticipating approximately 10% year-over-year growth at the midpoint [2][9] Financial Performance - Revenue for the third quarter was $190.2 million, up 13% from $168.6 million in the same period last year [5][7] - Subscription revenue reached $125.4 million, also a 13% increase year-over-year, primarily due to growth in compliance offerings [5][6] - Net income for the quarter was $4.5 million, a decline from $11.1 million in Q3 2024, resulting in a net income margin of 2% compared to 7% in the previous year [5][6][7] - Adjusted EBITDA was $46.3 million, down from $47.1 million in Q3 2024, with an adjusted EBITDA margin of 24% compared to 28% in the same period last year [5][6][7] Cash Flow and Liquidity - LegalZoom ended the quarter with cash and cash equivalents of $237.2 million, an increase from $142.1 million at the end of 2024 [5][6] - The company generated $54.2 million in cash from operating activities, significantly up from $31.6 million in Q3 2024 [6][7] - Free cash flow for the quarter was $47.0 million, compared to $22.0 million in the same period last year, indicating a 114% increase [6][7] Business Metrics - Transaction revenue was $64.8 million, a 12% increase year-over-year, while total transaction units grew by 2% [6][7] - Average order value (AOV) increased to $251, up 11% from $227 in Q3 2024 [7] - Subscription units at the end of the period reached 1,959, a 14% increase from 1,717 in the previous year [7] Future Outlook - For Q4 2025, LegalZoom expects revenue in the range of $182 million to $186 million, representing a 14% year-over-year growth at the midpoint [9] - The full-year revenue guidance is now set between $748 million to $752 million, reflecting a 10% year-over-year growth at the midpoint [9]