LegalZoom Reports Third Quarter 2026 Financial Results
Full-year adjusted EBITDA guidance was lowered as customer acquisition pressure and investment spending weigh on the outlook.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Rhea-AI Summary
LegalZoom (Nasdaq: LZ) reported third-quarter 2026 revenue of $195.1 million, up 3% year over year, as subscription growth offset transaction weakness. Subscription revenue rose 11% to $139.7 million, while transaction revenue fell 14% to $55.5 million. Net income increased to $8.1 million from $4.5 million; diluted earnings per share rose to $0.05 from $0.02. Adjusted EBITDA, a non-GAAP profit measure, reached $50.0 million versus $46.3 million.
The company expects full-year revenue of $797 million–$803 million, retaining its $800 million midpoint, but lowered expected adjusted EBITDA to $180 million–$185 million from $190 million–$195 million. Quarterly operating cash flow fell 26% to $39.9 million. LegalZoom repurchased $14.6 million of shares during the quarter and ended September with $181.7 million in cash and no debt.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Hollow bars mark forward-looking points. How the balance works
Positive
- Moderate pointThird-quarter revenue rose 3% year over year to $195.1 million, above the guidance midpoint.
- Moderate pointThird-quarter net income rose 79% to $8.061 million; net margin increased from 2% to 4%.
- Moderate pointThird-quarter gross profit increased 8% to $138.063 million; gross margin rose to 71% from 67%.
- Moderate pointThird-quarter operating income increased to $13.544 million from $6.493 million a year earlier.
- Moderate pointThird-quarter adjusted EBITDA rose 8% to $50.045 million; its margin increased to 26% from 24%.
- Moderate point. Forward-looking: it has not happened yet and may not happen.Fourth-quarter revenue is expected at $190 million–$196 million, representing 1% year-over-year growth at the midpoint.
- Moderate point. Forward-looking: it has not happened yet and may not happen.Fourth-quarter adjusted EBITDA is expected at $48 million–$53 million, with 1% midpoint growth and a 26% margin.
- Moderate pointNine-month revenue increased 7% to $607.216 million; subscription revenue grew 12% to $403.230 million.
- Moderate pointNine-month gross profit increased 11% to $410.246 million; gross margin rose to 68% from 65%.
- Moderate pointNine-month net income rose 53% to $14.348 million; basic and diluted EPS increased to $0.08 from $0.05.
- Moderate pointNine-month adjusted EBITDA increased 8% to $132.405 million, with its margin unchanged at 22%.
- Moderate pointNine-month transaction units increased 3% year over year to 905,000.
11 minor points
- Minor pointThird-quarter subscription revenue grew 11% to $139.7 million, its sixth consecutive quarter of double-digit growth.
- Minor pointThird-quarter services combining human expertise with technology generated revenue growth of 17%, reaching 49% of total revenue.
- Minor pointThird-quarter diluted earnings per share increased to $0.05 from $0.02; basic EPS rose from $0.03.
- Minor pointThird-quarter non-GAAP net income rose 1% to $31.443 million; basic and diluted EPS increased to $0.19 from $0.17.
- Minor pointAverage revenue per subscription unit at September-end increased 9% year over year to $280.
- Minor pointThird-quarter technology and development expense fell to $14.297 million from $19.485 million a year earlier.
- Minor pointThird-quarter general and administrative expense fell to $33.313 million from $34.074 million a year earlier.
- Minor pointShare repurchases totaled $14.6 million in the quarter, with approximately $65.8 million remaining authorized at September 30.
- Minor pointSeptember-end debt outstanding was zero.
- Minor point. Forward-looking: it has not happened yet and may not happen.Full-year revenue is expected at $797 million–$803 million, narrowing the range while retaining approximately 6% midpoint growth.
- Minor pointNine-month stock-based compensation declined to $63.909 million from $88.763 million a year earlier.
Negative
- Major point. Forward-looking: it has not happened yet and may not happen.Full-year adjusted EBITDA guidance fell to $180 million–$185 million from $190 million–$195 million.
- Moderate pointThird-quarter business formations decreased 13% year over year to 110,000.
- Moderate pointSeptember-end subscription units declined 5% year over year to 1,854,000.
- Moderate pointThird-quarter operating cash flow fell 26% to $39.873 million from $54.226 million a year earlier.
- Moderate pointThird-quarter free cash flow declined 27% to $34.119 million from $46.990 million a year earlier.
- Moderate pointNine-month operating cash flow declined 12% to $126.702 million; free cash flow fell 9% to $108.783 million.
- Moderate pointNine-month business formations declined 3% to 377,000, and average order value fell 3% to $225.
8 minor points
- Minor point. Forward-looking: it has not happened yet and may not happen.Expected full-year adjusted EBITDA midpoint growth slowed to approximately 6% from 12%; midpoint margin fell to 23% from 24%.
- Minor point. Forward-looking: it has not happened yet and may not happen.Customer acquisition pressure is expected to continue through the remainder of 2026.
- Minor pointThird-quarter transaction revenue declined 14% year over year to $55.5 million.
- Minor pointThird-quarter transaction units fell 4% to 249,000, and average order value declined 12% to $222.
- Minor pointCash and cash equivalents declined to $181.7 million at September 30 from $203.1 million at December 31, 2025.
- Minor pointThird-quarter sales and marketing expense rose to $76.909 million from $67.835 million a year earlier.
- Minor pointNine-month non-GAAP net income declined 3% to $80.957 million, despite 2% growth in basic and diluted non-GAAP EPS.
- Minor pointAcquisition-related deferred consideration payments totaled $12.514 million during the first nine months of 2026.
News Explained
As of
Details
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Key Figures
- Q3 revenue
- $195.1 million, up 3% year-over-year
- Above the midpoint of company guidance
- Q3 subscription revenue
- $139.7 million, up 11% year-over-year
- Third quarter 2026
- Q3 net income
- $8.1 million
- Compared with $4.5 million in the same period in 2025
- Q3 Adjusted EBITDA
- $50.0 million
- 26% margin; at the midpoint of company guidance
- Q3 share repurchases
- $14.6 million
- $65.8 million remained under the authorization at September 30, 2026
- FY 2026 revenue outlook
- $797 million–$803 million
- 6% year-over-year growth at the midpoint
- FY 2026 Adjusted EBITDA outlook
- $180 million–$185 million
- 23% margin at midpoint; prior outlook was $190 million–$195 million and 24% margin
Previous Earnings Reports
-
Set the $190M–$195M 2026 Adjusted EBITDA outlook that the current release lowered.
24h Move is the share-price change in the day after each event; other market factors may also have contributed.
AI-generated analysis. How Rhea-AI works. Not financial advice.
- Revenue of
$195.1 million , up3% year-over-year, above the midpoint of the Company’s guidance range - Subscription revenue of
$139.7 million , up11% year-over-year, marking the sixth consecutive quarter of double digit-subscription revenue growth - Net income of
$8.1 million and net income margin of4% , with net income margin increasing approximately 180 basis points year-over-year - Adjusted EBITDA of
$50.0 million and Adjusted EBITDA margin of26% , at the midpoint of the Company’s guidance range, with Adjusted EBITDA margin increasing approximately 130 basis points year-over-year - Completed
$14.6 million of share repurchases in the quarter, with approximately$65.8 million remaining under the existing authorization as of September 30, 2026 - Ended the quarter with cash and cash equivalents of
$181.7 million and delivered$39.9 million in cash from operating activities and$34.1 million in free cash flow with no debt outstanding as of September 30, 2026 - Reiterating the midpoint of full-year 2026 revenue outlook of approximately
$800.0 million , or6% year-over-year growth, and narrowing the range to$797.0 –$803.0 million ; updating Adjusted EBITDA outlook to a range of$180.0 -$185.0 million , or Adjusted EBITDA margin of approximately23% at the midpoint, reflecting a challenging customer acquisition environment and continued investment behind LegalZoom’s growth priorities and channel diversification
MOUNTAIN VIEW, Calif., Nov. 04, 2026 (GLOBE NEWSWIRE) -- LegalZoom (Nasdaq: LZ), America’s #1 online legal services company, today announced results for its third quarter ended September 30, 2026.
"Revenue from human-in-the-loop subscription services grew
“Subscription growth continues to offset customer acquisition pressure, supporting an unchanged
Third Quarter 2026 Highlights
- Revenue was
$195.1 million for the quarter, up3% year-over-year.- Transaction revenue of
$55.5 million decreased14% year-over-year. - Subscription revenue of
$139.7 million grew11% year-over-year.
- Transaction revenue of
- Net income was
$8.1 million for the quarter, or4% of revenue, compared to a net income of$4.5 million , or2% of revenue, in the same period in 2025. - Adjusted EBITDA was
$50.0 million for the quarter, or26% of revenue, compared to$46.3 million , or24% of revenue, in the same period in 2025. - Non-GAAP net income was
$31.4 million for the quarter compared to$31.0 million in the same period in 2025. - Cash and cash equivalents were
$181.7 million as of September 30, 2026 compared to$203.1 million as of December 31, 2025. - 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. - Basic and diluted net income per share was
$0.05 for the quarter, compared to basic and diluted net income per share of$0.03 and$0.02 , respectively, for the same period in 2025. Basic and diluted Non-GAAP net income per share was$0.19 for the quarter, compared to basic and diluted Non-GAAP net income per share of$0.17 for the same period in 2025.
Key Business Metrics and Non-GAAP Financial Measures
(Unaudited, in thousands except AOV, ARPU and percentages)
| Three Months Ended September 30, | % Growth | Nine Months Ended September 30, | % Growth | |||||||||||||||||||
| (Decline) | (Decline) | |||||||||||||||||||||
| 2026 | 2025 | YOY | 2026 | 2025 | YOY | |||||||||||||||||
| Total revenue | $ | 195,146 | $ | 190,158 | 3 | % | $ | 607,216 | $ | 565,777 | 7 | % | ||||||||||
| Transaction revenue | $ | 55,473 | $ | 64,799 | (14 | )% | $ | 203,986 | $ | 204,263 | — | % | ||||||||||
| Subscription revenue | $ | 139,673 | $ | 125,359 | 11 | % | $ | 403,230 | $ | 361,514 | 12 | % | ||||||||||
| Gross profit | $ | 138,063 | $ | 127,887 | 8 | % | $ | 410,246 | $ | 369,548 | 11 | % | ||||||||||
| Gross margin | 71 | % | 67 | % | 6 | % | 68 | % | 65 | % | 5 | % | ||||||||||
| Net Income | $ | 8,061 | $ | 4,509 | 79 | % | $ | 14,348 | $ | 9,370 | 53 | % | ||||||||||
| Net income margin | 4 | % | 2 | % | 100 | % | 2 | % | 2 | % | — | % | ||||||||||
| Net Income per share — basic: | $ | 0.05 | $ | 0.03 | 67 | % | $ | 0.08 | $ | 0.05 | 60 | % | ||||||||||
| Net Income per share — diluted: | $ | 0.05 | $ | 0.02 | 150 | % | $ | 0.08 | $ | 0.05 | 60 | % | ||||||||||
| Net cash provided by operating activities | $ | 39,873 | $ | 54,226 | (26 | )% | $ | 126,702 | $ | 144,068 | (12 | )% | ||||||||||
| Non-GAAP Financial Measures | ||||||||||||||||||||||
| Non GAAP net income | $ | 31,443 | $ | 30,996 | 1 | % | $ | 80,957 | $ | 83,147 | (3 | )% | ||||||||||
| Non GAAP net income per share — basic: | $ | 0.19 | $ | 0.17 | 12 | % | $ | 0.47 | $ | 0.46 | 2 | % | ||||||||||
| Non GAAP net income per share — diluted: | $ | 0.19 | $ | 0.17 | 12 | % | $ | 0.46 | $ | 0.45 | 2 | % | ||||||||||
| Adjusted EBITDA | $ | 50,045 | $ | 46,323 | 8 | % | $ | 132,405 | $ | 122,300 | 8 | % | ||||||||||
| Adjusted EBITDA margin | 26 | % | 24 | % | 8 | % | 22 | % | 22 | % | — | % | ||||||||||
| Free cash flow | $ | 34,119 | $ | 46,990 | (27 | )% | $ | 108,783 | $ | 119,924 | (9 | )% | ||||||||||
| Key Business Metrics | ||||||||||||||||||||||
| Transaction units | 249 | 259 | (4 | )% | 905 | 878 | 3 | % | ||||||||||||||
| Business formations | 110 | 126 | (13 | )% | 377 | 388 | (3 | )% | ||||||||||||||
| Average order value (AOV) | $ | 222 | $ | 251 | (12 | )% | $ | 225 | $ | 233 | (3 | )% | ||||||||||
| Subscription units at period end | 1,854 | 1,959 | (5 | )% | 1,854 | 1,959 | (5 | )% | ||||||||||||||
| Average revenue per subscription unit (ARPU) at period end | $ | 280 | $ | 256 | 9 | % | $ | 280 | $ | 256 | 9 | % | ||||||||||
| Certain percentages may not recalculate due to rounding. | ||||||||||||||||||||||
Financial Guidance and Outlook
For the full year ending December 31, 2026, LegalZoom is reiterating the midpoint of its revenue outlook and updating its Adjusted EBITDA outlook as follows:
- Revenue is expected to be in the range of
$797 million to$803 million , or6% year-over-year growth at the midpoint. This compares to the Company’s previous outlook in the range of$795 million to$805 million , also approximately6% growth at the midpoint. LegalZoom’s outlook continues to reflect the scaling of its higher-value growth initiatives and ongoing momentum from its partner channel, partially offset by continued pressure in customer acquisition for the remainder of the year. - Adjusted EBITDA is expected to be in the range of
$180 million to$185 million , or approximately6% year-over-year growth and a23% margin at the midpoint. This compares to the Company’s previous Adjusted EBITDA outlook of$190 million to$195 million , or12% year-over-year growth, and a24% margin at the midpoint. Compared to the previous outlook, more than half of the change reflects continued investment in channel diversification, including partnerships, affiliates and AI channels, approximately one quarter reflects higher costs in paid customer acquisition channels, and the remainder reflects investment in higher-value expert services, as well as seasonal investment in sales capabilities ahead of the first quarter peak in business formations.
For the fourth quarter ending December 31, 2026 LegalZoom expects:
- Revenue in the range of
$190 million to$196 million , or1% year-over-year growth at the midpoint. - Adjusted EBITDA in the range of
$48 million to$53 million , a1% year-over-year growth at the midpoint, and a26% margin.
Webcast and Conference Call Information
A webcast and conference call to discuss third quarter 2026 results is scheduled for today, November 4, 2026, at 4:30 p.m. Eastern time/1:30 p.m. Pacific time. Those interested in participating in the conference call are invited to register Here.
A live audio webcast of the event will be available on the LegalZoom Investor Relations website: https://investors.legalzoom.com. An archived replay of the webcast also will be available shortly after the live event.
Forward-Looking Statements
This press release contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts contained in this press release may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this press release include, but are not limited to, statements regarding our quarterly and annual guidance and the drivers of such guidance.
The forward-looking statements in this press release are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including but not limited to the following: our dependence on business formations; our dependence on customers expanding the use of our platform, including converting our transactional customers to subscribers and our subscribers renewing their subscriptions with us; the impact of macroeconomic challenges or uncertainty on our business; our ability to remain profitable in the future; our ability to provide high-quality products and services, customer care and customer experience; our ability to continue to innovate and provide a platform that is useful to our customers and that meets our customers’ expectations; the competitive legal solutions market; our dependence on our brand and reputation; our ability to maintain and expand strategic relationships with third parties; our ability to hire and retain top talent and motivate our employees; risks and costs associated with complex and evolving laws and regulations; our ability to maintain effective internal control over financial reporting; and any factors discussed in the section titled “Risk Factors” included in our Quarterly Report on Form 10-Q for the three months ended June 30, 2026 filed with the Securities and Exchange Commission (the “SEC”) on August 5, 2026, as well as any factors in our subsequent filings with the SEC. The forward-looking statements in this press release are based upon information available to us as of the date of this press release, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should read this press release with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this press release, whether as a result of any new information, future events or otherwise.
About Non-GAAP Financial Measures
This press release includes non-GAAP financial measures including Adjusted EBITDA, Adjusted EBITDA margin, Non-GAAP net income, Non-GAAP net income margin, Non-GAAP net income per share and free cash flow. We use these non-GAAP financial measures to better understand and evaluate our core operating performance. We believe that these non-GAAP financial measures provide management and our investors with useful information about our financial performance and liquidity, enhance the overall understanding of our past performance and future prospects and allow for greater transparency with respect to important measures used by our management for financial and operational decision-making. We also believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry. 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.
We define Adjusted EBITDA as net income adjusted to exclude interest expense, interest income, provision for income taxes, depreciation and amortization, other expense (income), net, stock-based compensation and certain non-recurring income and expenses from time to time. We define Adjusted EBITDA margin as Adjusted EBITDA as a percentage of revenue.
Adjusted EBITDA is one of the primary performance measures used by our management and our board of directors to understand and evaluate our financial performance and operating trends, including period-to-period comparisons, preparing and approving our annual budget and operational planning. In assessing our performance, we exclude certain expenses that we believe are not comparable period over period or that we believe are not indicative of our underlying operating performance. There are a number of limitations related to the use of Adjusted EBITDA rather than net income, which include that Adjusted EBITDA:
- may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure;
- does not reflect our capital expenditures, future requirements for capital expenditures or contractual commitments;
- excludes depreciation and amortization and, although these are non-cash expenses, the assets being depreciated may be replaced in the future;
- does not reflect changes in, or cash requirements for, our working capital needs;
- excludes stock-based compensation expense, which has been, and will continue to be, a significant recurring expense for our business and an important part of our compensation strategy; and
- does not reflect certain expenses that we do not consider representative of our underlying operating performance, but that reduce cash available to us.
We define Non-GAAP net income as net income adjusted to exclude amortization of acquired intangible assets, stock-based compensation expense and certain non-recurring income and expenses from time to time, net of related income tax impacts. We define net income margin as net income as a percentage of revenue. We define Non-GAAP net income margin as Non-GAAP net income as a percentage of revenue. We define Non-GAAP net income per share attributable to common stockholders as Non-GAAP net income divided by basic and diluted weighted-average common stock.
Free cash flow is a liquidity measure used by management in evaluating the cash generated by our operations after purchases of property and equipment including capitalized internal-use software. We believe free cash flow provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic opportunities, including investing in our business and strengthening our balance sheet, once our business needs and obligations are met. The usefulness of free cash flow as an analytical tool has limitations because it excludes certain items that are settled in cash, does not represent residual cash flow available for discretionary expenses, does not reflect our future contractual commitments, and may be calculated differently by other companies in our industry.
We are not providing a reconciliation for our non-GAAP outlook on a forward-looking basis (including the information under “Financial Guidance and Outlook” above), as we are unable to provide a meaningful calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing or amount of various items that would impact the most directly comparable forward-looking GAAP financial measure that have not yet occurred, are out of LegalZoom’s control and/or cannot be reasonably predicted. Forward-looking non-GAAP financial measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.
The tables in this press release contain more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.
LegalZoom
LegalZoom is a leading online platform for legal services, transforming how individuals and small businesses navigate the legal system. By combining intuitive technology with access to experienced attorneys, whether through our vast independent attorney network or our own law firm, we offer the tools and guidance people need to confidently manage everything from business formation and compliance to intellectual property protection and ongoing business management and legal support.
As AI reshapes how legal work gets done, LegalZoom is at the forefront of the human-in-the-loop approach, ensuring that the speed and efficiency of AI is always backed by the judgment and accountability of qualified professionals. With over two decades of experience and millions of customers served, LegalZoom helps individuals and small businesses navigate legal needs with confidence. For more information, please visit www.legalzoom.com.
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Investor Relations
| LegalZoom.com, Inc. Unaudited Condensed Consolidated Balance Sheets (In thousands, except par values) | ||||||||
| September 30, 2026 | December 31, 2025 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 181,702 | $ | 203,100 | ||||
| Accounts receivable, net of allowance | 23,860 | 20,589 | ||||||
| Prepaid expenses and other current assets | 22,536 | 18,234 | ||||||
| Total current assets | 228,098 | 241,923 | ||||||
| Property and equipment, net | 50,256 | 58,045 | ||||||
| Goodwill | 140,705 | 140,705 | ||||||
| Intangible assets, net | 13,322 | 18,152 | ||||||
| Operating lease right-of-use assets | 13,022 | 13,414 | ||||||
| Deferred income taxes | 21,435 | 31,884 | ||||||
| Other assets | 6,457 | 7,399 | ||||||
| Total assets | $ | 473,295 | $ | 511,522 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 36,307 | $ | 27,167 | ||||
| Accrued expenses and other current liabilities | 56,979 | 83,361 | ||||||
| Deferred revenue | 219,812 | 203,653 | ||||||
| Operating lease liabilities | 5,040 | 4,338 | ||||||
| Total current liabilities | 318,138 | 318,519 | ||||||
| Operating lease liabilities, non-current | 9,047 | 10,025 | ||||||
| Deferred revenue | 208 | 277 | ||||||
| Other liabilities | 10,734 | 10,819 | ||||||
| Total liabilities | 338,127 | 339,640 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, | — | — | ||||||
| Common stock, | 168 | 179 | ||||||
| Additional paid-in capital | 1,359,127 | 1,305,936 | ||||||
| Accumulated deficit | (1,224,473 | ) | (1,134,414 | ) | ||||
| Accumulated other comprehensive income | 346 | 181 | ||||||
| Total stockholders’ equity | 135,168 | 171,882 | ||||||
| Total liabilities and stockholders’ equity | $ | 473,295 | $ | 511,522 | ||||
| LegalZoom.com, Inc. Unaudited Condensed Consolidated Statements of Operations (In thousands, except per share amounts) | ||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenue | $ | 195,146 | $ | 190,158 | $ | 607,216 | $ | 565,777 | ||||||||
| Cost of revenue | 57,083 | 62,271 | 196,970 | 196,229 | ||||||||||||
| Gross profit | 138,063 | 127,887 | 410,246 | 369,548 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing | 76,909 | 67,835 | 234,426 | 198,793 | ||||||||||||
| Technology and development | 14,297 | 19,485 | 53,949 | 62,442 | ||||||||||||
| General and administrative | 33,313 | 34,074 | 94,913 | 110,291 | ||||||||||||
| Gain on sale of assets held for sale | — | — | — | (14,337 | ) | |||||||||||
| Total operating expenses | 124,519 | 121,394 | 383,288 | 357,189 | ||||||||||||
| Income from operations | 13,544 | 6,493 | 26,958 | 12,359 | ||||||||||||
| Interest expense | (77 | ) | (152 | ) | (879 | ) | (499 | ) | ||||||||
| Interest income | 1,427 | 2,139 | 4,702 | 5,691 | ||||||||||||
| Other (expense) income, net | (31 | ) | (102 | ) | 47 | 897 | ||||||||||
| Income before income taxes | 14,863 | 8,378 | 30,828 | 18,448 | ||||||||||||
| Provision for income taxes | 6,802 | 3,869 | 16,480 | 9,078 | ||||||||||||
| Net income | $ | 8,061 | $ | 4,509 | $ | 14,348 | $ | 9,370 | ||||||||
| Net income attributable to common stockholders—basic and diluted | ||||||||||||||||
| Net income per share — basic: | $ | 0.05 | $ | 0.03 | $ | 0.08 | $ | 0.05 | ||||||||
| Net income per share — diluted: | $ | 0.05 | $ | 0.02 | $ | 0.08 | $ | 0.05 | ||||||||
| Weighted-average shares used to compute net income per share: | ||||||||||||||||
| Weighted-average shares used to compute net income per share — basic: | 167,185 | 180,057 | 172,749 | 179,231 | ||||||||||||
| Weighted-average shares used to compute net income per share — diluted: | 168,942 | 186,731 | 175,323 | 185,329 | ||||||||||||
| LegalZoom.com, Inc. Unaudited Condensed Consolidated Statements of Cash Flows (In thousands) | ||||||||
| Nine Months Ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 14,348 | $ | 9,370 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 33,283 | 33,118 | ||||||
| Amortization of debt issuance costs | 143 | 161 | ||||||
| Amortization of right-of-use assets | 2,982 | 2,371 | ||||||
| Stock-based compensation | 63,909 | 88,763 | ||||||
| Gain on sale of assets held for sale | — | (14,337 | ) | |||||
| Gain on sale of available-for-sale debt security | — | (648 | ) | |||||
| Loss on disposal of property and equipment | 15 | 150 | ||||||
| Deferred income taxes | 10,482 | 5,504 | ||||||
| Change in fair value of other equity security | — | (302 | ) | |||||
| Unrealized foreign exchange loss | 275 | 58 | ||||||
| Other | — | 102 | ||||||
| Changes in operating assets and liabilities, net of effects of business combination: | ||||||||
| Accounts receivable | (3,273 | ) | (11,659 | ) | ||||
| Prepaid expenses and other current assets | (4,342 | ) | (897 | ) | ||||
| Other assets | 814 | 1,003 | ||||||
| Accounts payable | 9,928 | 1,923 | ||||||
| Accrued expenses and other liabilities | (15,107 | ) | 1,425 | |||||
| Operating lease liabilities | (2,869 | ) | (1,791 | ) | ||||
| Income tax payable | 22 | 246 | ||||||
| Deferred revenue | 16,092 | 29,508 | ||||||
| Net cash provided by operating activities | 126,702 | 144,068 | ||||||
| Cash flows from investing activities | ||||||||
| Acquisition, net of cash acquired | — | (48,468 | ) | |||||
| Purchase of property and equipment | (17,919 | ) | (24,144 | ) | ||||
| Proceeds from sale of available-for-sale debt security | — | 1,507 | ||||||
| Proceeds from sale of assets held for sale | — | 37,051 | ||||||
| Net cash used in investing activities | (17,919 | ) | (34,054 | ) | ||||
| Cash flows from financing activities | ||||||||
| Repayment of capital lease obligations | — | (2 | ) | |||||
| Payment of deferred consideration from business acquisition | (12,514 | ) | — | |||||
| Payment of debt issuance costs | — | (841 | ) | |||||
| Share repurchase costs (excise tax) | — | (1,264 | ) | |||||
| Repurchase of common stock | (103,223 | ) | (37,621 | ) | ||||
| Shares surrendered for settlement of minimum statutory tax withholding | (14,841 | ) | (19,965 | ) | ||||
| Proceeds from issuance of stock under employee stock plans | 518 | 44,662 | ||||||
| Net cash used in financing activities | (130,060 | ) | (15,031 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (121 | ) | 107 | |||||
| Net (decrease) increase in cash and cash equivalents | (21,398 | ) | 95,090 | |||||
| Cash and cash equivalents, at beginning of the period | 203,100 | 142,064 | ||||||
| Cash and cash equivalents, at end of the period | $ | 181,702 | $ | 237,154 | ||||
Adjusted EBITDA and Adjusted EBITDA Margin
The following table presents a reconciliation of net income to Adjusted EBITDA for each of the periods indicated (unaudited):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| (in thousands, except percentages) | ||||||||||||||||
| Reconciliation of net income to Adjusted EBITDA | ||||||||||||||||
| Net income | $ | 8,061 | $ | 4,509 | $ | 14,348 | $ | 9,370 | ||||||||
| Interest expense | 77 | 152 | 879 | 499 | ||||||||||||
| Interest income | (1,427 | ) | (2,139 | ) | (4,702 | ) | (5,691 | ) | ||||||||
| Provision for income taxes | 6,802 | 3,869 | 16,480 | 9,078 | ||||||||||||
| Depreciation and amortization | 10,872 | 11,373 | 33,283 | 33,118 | ||||||||||||
| Other expense (income), net | 31 | 102 | (47 | ) | (897 | ) | ||||||||||
| Stock-based compensation | 18,999 | 28,369 | 63,909 | 88,763 | ||||||||||||
| Transaction-related expenses(1) | 863 | — | 1,467 | 1,543 | ||||||||||||
| Gain on sale of assets held for sale | — | — | — | (14,337 | ) | |||||||||||
| Restructuring costs(2) | 5,767 | 88 | 6,788 | 854 | ||||||||||||
| Adjusted EBITDA | $ | 50,045 | $ | 46,323 | $ | 132,405 | $ | 122,300 | ||||||||
| Net income margin | 4 | % | 2 | % | 2 | % | 2 | % | ||||||||
| Adjusted EBITDA margin | 26 | % | 24 | % | 22 | % | 22 | % | ||||||||
| (1) | For 2025, transaction-related expenses are primarily related to our acquisition of Formation Nation. For 2026, transaction-related expenses are related to the evaluation and pursuit of strategic transactions. |
| (2) | For 2026 and 2025, restructuring costs are related to the reduction of our global headcount. |
Non-GAAP Net Income, Non-GAAP Net Income Margin and diluted Non-GAAP Net Income Per Share
The following table presents a reconciliation of net income to Non-GAAP net income for each of the periods indicated (unaudited):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||
| Reconciliation of net income to Non-GAAP net income | ||||||||||||||||
| Net income | $ | 8,061 | $ | 4,509 | $ | 14,348 | $ | 9,370 | ||||||||
| Amortization of acquired intangible assets | 1,610 | 2,163 | 4,830 | 6,191 | ||||||||||||
| Stock-based compensation | 18,999 | 28,369 | 63,909 | 88,763 | ||||||||||||
| Transaction-related expenses(1) | 863 | — | 1,467 | 1,543 | ||||||||||||
| Restructuring costs(2) | 5,767 | 88 | 6,788 | 854 | ||||||||||||
| Gain on sale of assets held for sale | — | — | — | (14,337 | ) | |||||||||||
| Income tax effects(3) | (3,857 | ) | (4,133 | ) | (10,385 | ) | (9,237 | ) | ||||||||
| Non-GAAP net income | 31,443 | 30,996 | 80,957 | 83,147 | ||||||||||||
| Net income margin | 4 | % | 2 | % | 2 | % | 2 | % | ||||||||
| Non-GAAP net income margin | 16 | % | 16 | % | 13 | % | 15 | % | ||||||||
| Net income per share — basic | $ | 0.05 | $ | 0.03 | $ | 0.08 | $ | 0.05 | ||||||||
| Net income per share — diluted | $ | 0.05 | $ | 0.02 | $ | 0.08 | $ | 0.05 | ||||||||
| Non-GAAP net income per share — basic | $ | 0.19 | $ | 0.17 | $ | 0.47 | $ | 0.46 | ||||||||
| Non-GAAP net income per share — diluted | $ | 0.19 | $ | 0.17 | $ | 0.46 | $ | 0.45 | ||||||||
| Weighted-average shares used to compute net income per share — basic | 167,185 | 180,057 | 172,749 | 179,231 | ||||||||||||
| Weighted-average shares used to compute net income per share — diluted | 168,942 | 186,731 | 175,323 | 185,329 | ||||||||||||
| Weighted-average shares used to compute Non-GAAP net income per share — basic | 167,185 | 180,057 | 172,749 | 179,231 | ||||||||||||
| Weighted-average shares used to compute Non-GAAP net income per share — diluted | 168,942 | 186,731 | 175,323 | 185,329 | ||||||||||||
| (1) | For 2025, transaction-related expenses are primarily related to our acquisition of Formation Nation. For 2026, transaction-related expenses are related to the evaluation and pursuit of strategic transactions. |
| (2) | For 2026 and 2025, restructuring costs are related to the reduction of our global headcount. |
| (3) | The estimated income tax effect of the non-GAAP pre-tax adjustments is determined by applying the statutory rate of the originating jurisdiction, if applicable. |
The following table shows the computation of basic and diluted Non-GAAP net income per share (unaudited):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||
| (in thousands, except per share amounts) | ||||||||||||
| Non-GAAP net income and Non-GAAP net income per share: | ||||||||||||
| Non-GAAP net income | $ | 31,443 | $ | 30,996 | $ | 80,957 | $ | 83,147 | ||||
| Reconciliation of denominator for net income per share to Non-GAAP net income per share: | ||||||||||||
| Weighted-average shares used to compute net income per share — basic: | 167,185 | 180,057 | 172,749 | 179,231 | ||||||||
| Effect of potentially dilutive securities: | ||||||||||||
| Options to purchase common stock | 31 | 84 | 33 | 56 | ||||||||
| RSUs and PSUs | 1,719 | 6,523 | 2,535 | 6,009 | ||||||||
| Employee stock purchase plan | 7 | 67 | 6 | 33 | ||||||||
| Weighted-average common stock used in computing Non-GAAP net income per share — diluted | 168,942 | 186,731 | 175,323 | 185,329 | ||||||||
| Non-GAAP net income per share — basic | $ | 0.19 | $ | 0.17 | $ | 0.47 | $ | 0.46 | ||||
| Non-GAAP net income per share — diluted | $ | 0.19 | $ | 0.17 | $ | 0.46 | $ | 0.45 | ||||
Free Cash Flow
The following table presents a reconciliation of net cash provided by operating activities to free cash flow (unaudited):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| (in thousands) | ||||||||||||||||
| Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow | ||||||||||||||||
| Net cash provided by operating activities | 39,873 | 54,226 | 126,702 | 144,068 | ||||||||||||
| Purchase of property and equipment | (5,754 | ) | (7,236 | ) | (17,919 | ) | (24,144 | ) | ||||||||
| Free cash flow | $ | 34,119 | $ | 46,990 | $ | 108,783 | $ | 119,924 | ||||||||
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What were LegalZoom's third-quarter 2026 revenue and earnings?
LegalZoom reported revenue of $195.1 million and net income of $8.1 million for the quarter ended September 30, 2026. Revenue grew 3% year over year, while net income increased from $4.5 million. Basic and diluted earnings per share were both $0.05.
Why did LegalZoom lower its full-year 2026 adjusted EBITDA outlook?
LegalZoom attributes the reduction to investment spending and higher paid customer acquisition costs. More than half of the change reflects channel diversification investment, including partnerships, affiliates and AI channels. Approximately one quarter reflects higher paid acquisition costs; the remainder reflects investment in expert services and seasonal sales capabilities ahead of the first-quarter business formation peak.