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]

Financial Data and Key Metrics Changes - Total revenue reached $193 million, up 9% year over year, exceeding expectations [7][28] - Subscription revenue grew 10%, contributing approximately $120 million, achieving double-digit growth two quarters ahead of schedule [8][28] - Adjusted EBITDA margin improved to 20%, a 400 basis point increase year over year [9][33] - Free cash flow was $32 million, up 82% compared to $17 million for the same period in 2024 [10][34] Business Line Data and Key Metrics Changes - Subscription units increased by 22%, totaling approximately 2 million [29] - Transaction revenue increased by 6% to $73 million, with $8 million attributed to the Formation Nation acquisition [30][62] - Average order value rose to $262, up 12% year over year [31] Market Data and Key Metrics Changes - The company ended the quarter with cash and cash equivalents of $217 million, an increase of $7 million from Q1 2025 [35] - Deferred revenue increased by $2.8 million from Q1, reflecting typical seasonality and success in subscription initiatives [32] Company Strategy and Development Direction - The company aims to build a more consistent, predictable, and profitable business model resilient to economic cycles [6] - Focus areas include optimizing the subscription business, reorienting the go-to-market approach, and leveraging AI for customer service [10][11] - A strategic acquisition of Formation Nation is expected to enhance market position and brand messaging [22][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory despite macroeconomic volatility, attributing it to a more predictable subscription-driven business model [39] - The company raised its full-year revenue guidance from 5% to 8% growth, maintaining a 23% adjusted EBITDA margin outlook [10][39] - Management highlighted the importance of AI in enhancing service delivery and customer engagement [19][20] Other Important Information - The company is focusing on high-quality customers with long-term value potential, aiming to reduce exposure to short-term macro fluctuations [38] - The recent acquisition of Formation Nation has already delivered meaningful value and strengthened customer service capabilities [22][24] Q&A Session Summary Question: Confidence in raising full-year growth guidance - Management indicated that the predictable subscription-driven business model allows for greater operational control and confidence in growth despite macro volatility [45][46] Question: Financial aspects of AI partnerships - Management emphasized the critical role of AI in future strategies and partnerships, indicating that these collaborations will expand the addressable market [50][51] Question: Retention rates and bundled cohorts - The aggregated retention rate for the quarter was 59%, down from 60%, primarily due to the bundling of lower retention subscriptions [57][58] Question: Formation Nation's revenue contribution and seasonality - Formation Nation contributed $8 million in transaction revenue for the quarter, with expectations for similar or slightly lower contributions in the second half due to seasonality [61][62] Question: Success in attaching subscriptions to Formation Nation's customers - Management noted early success in cross-selling compliance offerings and other products to Formation Nation's customer base [71][72] Question: Investment areas impacting margins - Management highlighted investments in the concierge service and engagement initiatives aimed at reducing churn, which may impact margins in the short term [77][80]

Financial Performance - LegalZoom's GAAP revenue for Q2 2025 was $193 million, a 9% increase year-over-year[17] - Adjusted EBITDA for Q2 2025 was $39 million, representing a 20% margin, a 400 bps increase[17] - Subscription revenue for Q2 2025 reached $120 million, a 10% increase year-over-year[17] - Non-GAAP net income for Q2 2025 was $28 million, a 51% increase year-over-year[17] - Adjusted gross profit for Q2 2025 was $132 million, a 6% increase year-over-year, with a margin of 69%[17,47] - The company projects revenue growth of approximately 8% year-over-year for FY25 and anticipates an Adjusted EBITDA margin of approximately 23%[68] Market Opportunity and Strategy - LegalZoom operates in a large market with a total addressable market (SAM) of $51 billion[22] - The company estimates the Life & Business Planning SAM to be $13 billion and the Business Management SAM to be $15 billion[18,19] - LegalZoom estimates it holds approximately 9% market share in the digital formations market[18] - Three key focus areas are optimizing the subscription business, reorienting the go-to-market strategy, and leveraging AI to deliver expertise[29]