LegalZoom.com(LZ) - 2025 Q2 - Quarterly Results

Executive Summary LegalZoom's strong Q2 2025 results show accelerated revenue and subscription growth, leading to an increased full-year revenue outlook to 8% Introduction and Management Commentary LegalZoom achieved strong Q2 2025 results with accelerated revenue and subscription growth, prompting an increased full-year revenue outlook to 8% - LegalZoom accelerated revenue growth for the third consecutive quarter and delivered double-digit subscription growth two quarters ahead of plan, while maintaining strong profitability and a healthy balance sheet[4] - The company is raising its 2025 revenue growth outlook from 5% to 8% due to better-than-expected performance and traction in key focus areas, while maintaining Adjusted EBITDA margin expectations of 23%[4] Company Profile LegalZoom is a leading online platform for legal services, assisting individuals and small businesses with various legal needs through technology and attorney networks - LegalZoom is a leading online platform for legal services, transforming how individuals and small businesses navigate the legal system[21] - The platform combines intuitive technology with access to an independent attorney network or LegalZoom Legal Services (LZLS) law firm, offering tools and guidance for business formation, compliance, estate planning, and ongoing legal support[21] - With over two decades of experience and millions of customers served, LegalZoom helps individuals and small businesses manage legal needs with confidence[22] Second Quarter 2025 Performance Highlights LegalZoom exceeded Q2 2025 revenue outlook with 9% growth, driven by subscriptions, and significantly improved Adjusted EBITDA by 35% Key Financial and Operational Highlights LegalZoom exceeded Q2 revenue outlook with $192.5 million, up 9% year-over-year, and Adjusted EBITDA improved 35% to $39.0 million Second Quarter 2025 Revenue Highlights | Metric | Q2 2025 (Millions) | YoY Change | | :----------------- | :----------------- | :--------- | | Total Revenue | $192.5 | +9% | | Subscription Revenue | $119.9 | +10% | | Transaction Revenue | $72.6 | +6% | Second Quarter 2025 Profitability Highlights | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | YoY Change | | :--------------------- | :----------------- | :----------------- | :--------- | | Net (Loss) Income | $(0.3) | $1.3 (Income) | (120%) | | Net (Loss) Income Margin | <1% | 1% (Income) | (100%) | | Adjusted EBITDA | $39.0 | $28.9 | +35% | | Adjusted EBITDA Margin | 20% | 16% | +25% | Second Quarter 2025 Cash Flow Highlights | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | YoY Change | | :----------------------------- | :----------------- | :----------------- | :--------- | | Cash from Operating Activities | $39.1 | $27.2 | +44% |\ | Free Cash Flow | $31.6 | $17.4 | +82% | - Cash and cash equivalents ended the quarter at $217.0 million, compared to $142.1 million as of December 31, 2024[6][7] - Repurchased 2.2 million shares of common stock for a total cost of $20.4 million, at an average price of $9.33 per share[7] Detailed Financial Results and Key Metrics This section provides a comprehensive breakdown of LegalZoom's Q2 2025 financial performance, including revenue, profitability, cash flow, and key business metrics Revenue Performance LegalZoom's total Q2 2025 revenue increased 9% year-over-year to $192.5 million, primarily driven by a 10% rise in subscription revenue Revenue Performance (in thousands) | Metric | Q2 2025 (Thousands) | Q2 2024 (Thousands) | YoY Growth | YTD 2025 (Thousands) | YTD 2024 (Thousands) | YTD Growth | | :----------------- | :------------------ | :------------------ | :--------- | :------------------- | :------------------- | :--------- | | Total revenue | $192,509 | $177,362 | 9% | $375,619 | $351,576 | 7% | | Transaction revenue| $72,611 | $68,537 | 6% | $139,464 | $134,854 | 3% | | Subscription revenue| $119,898 | $108,825 | 10% | $236,155 | $216,722 | 9% | Profitability Metrics (GAAP & Non-GAAP) Q2 2025 saw a GAAP net loss of $0.3 million, but Non-GAAP net income surged 51% to $28.3 million, and Adjusted EBITDA grew 35% Profitability Metrics (in thousands, except percentages) | Metric | Q2 2025 (Thousands) | Q2 2024 (Thousands) | YoY Growth | YTD 2025 (Thousands) | YTD 2024 (Thousands) | YTD Growth | | :----------------------------- | :------------------ | :------------------ | :--------- | :------------------- | :------------------- | :--------- | | Gross profit | $125,111 | $113,753 | 10% | $241,661 | $219,583 | 10% | | Gross margin | 65% | 64% | 2% | 64% | 62% | 3% | | Net (loss) Income | $(266) | $1,314 | (120%) | $4,861 | $6,058 | (20%) | | Net (loss) income margin | —% | 1% | (100%) | 1% | 2% | (50%) | | Net (loss) Income per share — basic | $(0.00) | $0.01 | (100%) | $0.03 | $0.03 | —% | | Non-GAAP net income | $28,329 | $18,810 | 51% | $52,151 | $37,154 | 40% | | Non-GAAP net income per share — diluted | $0.15 | $0.10 | 50% | $0.29 | $0.20 | 45% | | Adjusted EBITDA | $38,965 | $28,912 | 35% | $75,977 | $56,814 | 34% | | Adjusted EBITDA margin | 20% | 16% | 25% | 20% | 16% | 25% | Cash Flow and Liquidity LegalZoom generated strong cash flow in Q2 2025, with operating cash increasing 44% to $39.1 million and free cash flow surging 82% to $31.6 million Cash Flow Performance (in thousands) | Metric | Q2 2025 (Thousands) | Q2 2024 (Thousands) | YoY Growth | YTD 2025 (Thousands) | YTD 2024 (Thousands) | YTD Growth | | :-------------------------------------- | :------------------ | :------------------ | :--------- | :------------------- | :------------------- | :--------- | | Net cash provided by operating activities | $39,139 | $27,245 | 44% | $89,842 | $61,440 | 46% | | Free cash flow | $31,609 | $17,372 | 82% | $72,934 | $42,089 | 73% | - Cash and cash equivalents were $217.0 million as of June 30, 2025, compared to $142.1 million as of December 31, 2024[7][25] Key Business Metrics Q2 2025 saw a 22% increase in subscription units and a 12% rise in Average Order Value, despite slight declines in transaction units Key Business Metrics (in thousands, except AOV, ARPU and percentages) | Metric | Q2 2025 | Q2 2024 | YoY Change | YTD 2025 | YTD 2024 | YTD Change | | :-------------------------------------- | :------ | :------ | :--------- | :------- | :------- | :--------- | | Transaction units | 278 | 292 | (5%) | 619 | 628 | (1%) | | Business formations | 131 | 134 | (2%) | 262 | 273 | (4%) | | Average order value (AOV) | $262 | $234 | 12% | $225 | $215 | 5% | | Subscription units at period end | 1,955 | 1,609 | 22% | 1,955 | 1,609 | 22% | | Average revenue per subscription unit (ARPU) at period end | $256 | $271 | (6%) | $256 | $271 | (6%) | Financial Outlook LegalZoom provides its financial guidance for the third quarter and full year 2025, reflecting continued revenue growth and strong Adjusted EBITDA margins Third Quarter and Full Year 2025 Guidance LegalZoom projects Q3 2025 revenue between $182M-$184M and Adjusted EBITDA of $44M-$46M, raising full-year revenue growth to 8% Third Quarter 2025 Outlook | Metric | Range | Midpoint YoY Growth | | :--------------------- | :------------------ | :------------------ | | Revenue | $182M to $184M | 9% | | Adjusted EBITDA | $44M to $46M | | | Adjusted EBITDA Margin | | 25% | Full Year 2025 Outlook | Metric | Outlook | Previous Outlook | | :--------------------- | :------------------ | :--------------- | | Revenue Growth | Approximately 8% YoY| 5% YoY | | Adjusted EBITDA Margin | Approximately 23% | 23% | Non-GAAP Financial Measures This section defines and reconciles non-GAAP financial measures, including Adjusted EBITDA, Non-GAAP net income, and free cash flow, for clarity Definition and Purpose of Non-GAAP Measures LegalZoom uses non-GAAP measures like Adjusted EBITDA and free cash flow to clarify core operating performance and liquidity, complementing GAAP results - Non-GAAP financial measures are used to better understand and evaluate core operating performance, provide useful information about financial performance and liquidity, and enhance the overall understanding of past performance and future prospects[14] - Adjusted EBITDA is defined as net income (loss) adjusted to exclude interest expense/income, income taxes, depreciation and amortization, other expense/income, stock-based compensation, and certain non-recurring items[15] - Non-GAAP net income is defined as net income (loss) adjusted to exclude amortization of acquired intangible assets, stock-based compensation expense, and certain non-recurring items, net of related income tax impacts[17] - Free cash flow is a liquidity measure defined as cash generated by operations after purchases of property and equipment, including capitalized internal-use software[18] - These non-GAAP measures should not be considered in isolation of, or as a substitute or an alternative to, measures prepared and presented in accordance with GAAP, and have limitations such as potential differences in calculation by other companies and exclusion of significant cash or recurring expenses[14][16][18][23] Adjusted EBITDA Reconciliation The reconciliation of net income to Adjusted EBITDA shows that Adjusted EBITDA for Q2 2025 was $39.0 million, a 35% increase, adjusted for stock-based compensation and other non-recurring items Reconciliation of Net (Loss) Income to Adjusted EBITDA (in thousands, except percentages) | Metric | Q2 2025 (Thousands) | Q2 2024 (Thousands) | YTD 2025 (Thousands) | YTD 2024 (Thousands) | | :-------------------------------------- | :------------------ | :------------------ | :------------------- | :------------------- | | Net (loss) income | $(266) | $1,314 | $4,861 | $6,058 | | Interest expense | 165 | 112 | 347 | 173 | | Interest income | (2,069) | (2,315) | (3,552) | (5,202) | | (Benefit from) provision for income taxes | (278) | 2,046 | 5,209 | 5,276 | | Depreciation and amortization | 11,339 | 8,426 | 21,745 | 16,096 | | Other income, net | (652) | (11) | (999) | (104) | | Stock-based compensation | 30,638 | 18,915 | 60,394 | 33,771 | | Transaction-related expenses (1) | — | — | 1,543 | — | | Gain on sale of assets held for sale | — | — | (14,337) | — | | Restructuring costs (2) | 88 | 425 | 766 | 746 | | Adjusted EBITDA | $38,965 | $28,912 | $75,977 | $56,814 | | Adjusted EBITDA margin | 20% | 16% | 20% | 16% | - Transaction-related expenses for 2025 are related to the acquisition of Formation Nation[31] - Restructuring costs for 2025 and 2024 are related to the reduction of U.S. headcount[32] Non-GAAP Net Income Reconciliation Non-GAAP net income for Q2 2025 increased 51% to $28.3 million, adjusted for amortization, stock-based compensation, and tax effects Reconciliation of Net (Loss) Income to Non-GAAP Net Income (in thousands, except per share amounts) | Metric | Q2 2025 (Thousands) | Q2 2024 (Thousands) | YTD 2025 (Thousands) | YTD 2024 (Thousands) | | :-------------------------------------- | :------------------ | :------------------ | :------------------- | :------------------- | | Net (loss) income | $(266) | $1,314 | $4,861 | $6,058 | | Amortization of acquired intangible assets | 2,381 | 1,271 | 4,028 | 2,541 | | Stock-based compensation | 30,638 | 18,915 | 60,394 | 33,771 | | Transaction-related expenses (1) | — | — | 1,543 | — | | Restructuring costs (2) | 88 | 425 | 766 | 746 | | Gain on sale of assets held for sale | — | — | (14,337) | — | | Income tax effects (3) | (4,512) | (3,115) | (5,104) | (5,962) | | Non-GAAP net income | $28,329 | $18,810 | $52,151 | $37,154 | | Non-GAAP net income margin | 15% | 11% | 14% | 11% | | Non-GAAP net income per share — diluted | $0.15 | $0.10 | $0.29 | $0.20 | - Transaction-related expenses for 2025 are related to the acquisition of Formation Nation[33] - Restructuring costs for 2025 and 2024 are related to the reduction of U.S. headcount[34] - The estimated income tax effect of the non-GAAP pre-tax adjustments is determined by applying the statutory rate of the originating jurisdiction[34] Free Cash Flow Reconciliation Free cash flow for Q2 2025 significantly increased to $31.6 million, reflecting strong operating cash generation offset by capital expenditures Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow (in thousands) | Metric | Q2 2025 (Thousands) | Q2 2024 (Thousands) | YTD 2025 (Thousands) | YTD 2024 (Thousands) | | :-------------------------------------- | :------------------ | :------------------ | :------------------- | :------------------- | | Net cash provided by operating activities | $39,139 | $27,245 | $89,842 | $61,440 | | Purchase of property and equipment | (7,530) | (9,873) | (16,908) | (19,351) | | Free cash flow | $31,609 | $17,372 | $72,934 | $42,089 | Unaudited Condensed Consolidated Financial Statements This section presents LegalZoom's unaudited condensed consolidated balance sheets, statements of operations, and cash flows for the reported periods Condensed Consolidated Balance Sheets As of June 30, 2025, total assets grew to $543.0 million, driven by cash, goodwill, and intangibles, with corresponding increases in liabilities and equity Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | | :------------------------------ | :------------------------ | :---------------------------- | | Cash and cash equivalents | $217,035 | $142,064 | | Total current assets | $254,561 | $191,223 | | Goodwill | $139,570 | $63,318 | | Intangible assets, net | $21,926 | $8,653 | | Total assets | $543,030 | $373,883 | | Deferred revenue (current) | $213,908 | $174,643 | | Total current liabilities | $326,507 | $265,582 | | Total liabilities | $348,978 | $280,626 | | Total stockholders' equity | $194,052 | $93,257 | Condensed Consolidated Statements of Operations Q2 2025 revenue rose 9% to $192.5 million, but increased operating expenses led to a net loss of $0.3 million compared to prior year income Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Q2 2025 (Thousands) | Q2 2024 (Thousands) | YTD 2025 (Thousands) | YTD 2024 (Thousands) | | :-------------------------------------- | :------------------ | :------------------ | :------------------- | :------------------- | | Revenue | $192,509 | $177,362 | $375,619 | $351,576 | | Cost of revenue | $67,398 | $63,609 | $133,958 | $131,993 | | Gross profit | $125,111 | $113,753 | $241,661 | $219,583 | | Sales and marketing | $69,580 | $60,130 | $130,958 | $113,883 | | Technology and development | $21,635 | $25,798 | $42,957 | $49,755 | | General and administrative | $36,996 | $26,679 | $76,217 | $49,744 | | Total operating expenses | $128,211 | $112,607 | $235,795 | $213,382 | | (Loss) income from operations | $(3,100) | $1,146 | $5,866 | $6,201 | | Net (loss) income | $(266) | $1,314 | $4,861 | $6,058 | | Net (loss) income per share — diluted | $(0.00) | $0.01 | $0.03 | $0.03 | Condensed Consolidated Statements of Cash Flows YTD 2025 operating cash flow increased 46% to $89.8 million, with investing activities including an acquisition and financing from employee stock plans Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | YTD 2025 (Thousands) | YTD 2024 (Thousands) | | :-------------------------------------- | :------------------- | :------------------- | | Net cash provided by operating activities | $89,842 | $61,440 | | Net cash used in investing activities | $(26,818) | $(19,351) | | Net cash provided by (used in) financing activities | $11,800 | $(148,981) | | Net increase in cash and cash equivalents | $74,971 | $(106,924) | | Cash and cash equivalents, at end of the period | $217,035 | $118,795 | - Key adjustments to reconcile net income to operating cash flow include stock-based compensation ($60.4 million) and depreciation and amortization ($21.7 million)[29] - Investing activities included $48.5 million for an acquisition (Formation Nation) and $37.1 million from the sale of assets held for sale[29][31][33] - Financing activities included $20.4 million for common stock repurchases and $44.7 million from proceeds from issuance of stock under employee stock plans[29] Additional Information This section provides details on the webcast, forward-looking statements, and investor contact information Webcast and Conference Call Information LegalZoom scheduled a webcast and conference call for August 7, 2025, to discuss Q2 results, with access details on its Investor Relations website - A webcast and conference call to discuss second quarter 2025 results is scheduled for August 7, 2025, at 4:30 p.m. Eastern time/1:30 p.m. Pacific time[10] - A live audio webcast of the event will be available on the LegalZoom Investor Relations website: https://investors.legalzoom.com, with an archived replay available shortly after[10] Forward-Looking Statements Disclaimer This press release contains forward-looking statements subject to risks and uncertainties, and investors are cautioned against undue reliance without public updates - The press release contains forward-looking statements intended to be covered by safe harbor provisions, identifiable by terms such as 'expects,' 'plans,' 'anticipates,' or similar expressions[11] - Forward-looking statements involve known and unknown risks, uncertainties, and other important factors that may cause actual results to be materially different, including dependence on business formations, customer expansion, macroeconomic challenges, and competitive markets[12] - Investors are cautioned not to unduly rely upon these statements, and the company does not plan to publicly update or revise any forward-looking statements except as required by applicable law[13] Investor Contact For investor relations inquiries, LegalZoom provides a dedicated email contact - Investor Relations contact: investor@legalzoom.com[23]