LEGALZOOM.COM, INC. (LZ)·Q2 2025 Earnings Summary

Executive Summary

• LegalZoom delivered a clean top-line beat and raised FY25 revenue growth guidance. Q2 revenue was $192.5M (+9% y/y) vs S&P Global consensus $182.5M*, while non‑GAAP diluted EPS was $0.15 vs $0.149*; GAAP EPS was ~$0.00 as restructuring and non‑cash items offset operating gains .*
• Mix shift and new “do‑it‑for‑me” Concierge offerings powered subscription growth (+10% y/y) and AOV (+12% y/y) despite y/y ARPU pressure (–6%); Adjusted EBITDA margin held at 20% as management prioritized investment in high‑touch products . On the call, management highlighted unit growth and investment behind Concierge offerings and Formation Nation integration .
• Guidance raised: FY25 revenue growth lifted to ~8% (from 5%) with Adjusted EBITDA margin held at ~23%; Q3 guide: revenue $182–$184M (≈+9% y/y) and Adjusted EBITDA $44–$46M (25% margin at midpoint) .
• Near‑term catalysts: continued subscription acceleration, brand/marketing flywheel, and AI initiatives (OpenAI ChatGPT collaboration) supporting product and engagement narrative .

What Went Well and What Went Wrong

What Went Well

• Subscription engine accelerated: Subscription revenue +10% y/y to $119.9M; subscription units +22% y/y to 1,955k; Adjusted EBITDA +35% y/y to $39.0M with margin up 400 bps y/y to 20% .
• Strategic progress and confidence: “We accelerated revenue growth for the third consecutive quarter and delivered double digit subscription growth two quarters ahead of plan…” (Jeff Stibel, CEO) . Management raised FY25 revenue growth outlook to ~8% while maintaining ~23% Adjusted EBITDA margin .
• Cash generation and capital returns: Q2 cash from operations $39.1M (+44% y/y) and FCF $31.6M (+82% y/y); repurchased 2.2M shares for $20.4M at $9.33 avg; cash ended at $217.0M .

What Went Wrong

• GAAP profitability muted: Q2 posted a small GAAP net loss ($0.3M; ~0% margin) vs $1.3M profit in Q2’24 as opex increased y/y with investments and integration; GAAP operating income turned to a loss (–$3.1M) vs +$1.1M in Q2’24 .
• ARPU pressure and units decline: ARPU fell 6% y/y to $256 as mix shifted to lower‑priced bundled subscriptions, though it improved 2% q/q; transaction units fell 5% y/y and business formations dipped 2% y/y as the company emphasized higher‑quality customers . Management cautioned that initial cohorts tied to bundling saw lower renewal rates, expecting moderation ahead .
• BOIR headwind: CFO flagged that BOIR‑related revenue declined and formation volumes decreased in line with focus on higher‑quality customer acquisition; transaction revenue grew 6% to ~$73M aided by ~$8M from Formation Nation .

Financial Results

Consolidated P&L and Cash Flow (USD, $M unless noted)

Commentary:

• Q2 revenue +5.1% q/q and +9.0% y/y; non‑GAAP EPS improved q/q despite higher investment levels; GAAP EPS flat at ~$0.00 due to opex and non‑cash items .
• Adjusted EBITDA steady at 20% margin q/q (up 400 bps y/y) as reinvestment paced subscription momentum .

Revenue Mix

KPIs

Actuals vs S&P Global Consensus (Q2 2025)

*Values retrieved from S&P Global.

Guidance Changes

Additional context: Q2 actual revenue surpassed prior Q2 guidance of $181–$185M and Adjusted EBITDA $37–$41M issued on May 7 .

Earnings Call Themes & Trends

Management Commentary

• “We 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.” — Jeff Stibel, CEO .
• “As a result of our better‑than‑expected performance and the traction we are gaining across our key focus areas, we are raising our 2025 revenue growth outlook from 5% to 8% while maintaining our Adjusted EBITDA margin expectations of 23%.” — Noel Watson, COO & CFO .
• On strategy and product: “Last quarter, we launched our most comprehensive subscription suite... the Concierge Plan, a full‑service white glove suite... driven by artificial and human intelligence...” — Jeff Stibel .
• On AI: “Our message, technology when you want it, human support when you need it, reinforces the principle behind AI augmented expertise.” — Jeff Stibel . LegalZoom announced a collaboration with OpenAI’s ChatGPT agents to provide personalized legal guidance .

Q&A Highlights

• Investment trade‑offs: When asked about margin upside, management noted increased investment to scale Concierge/DIFM offerings for higher‑value customers, tempering near‑term margin expansion despite revenue upside .
• Mix and ARPU: CFO discussed strong unit growth from bundled forms/eSignature/bookkeeping in higher‑end formation SKUs but lower renewal rates for initial cohorts, implying ARPU pressure near term and moderation ahead .
• Formation Nation impact: Management detailed ~$8M transaction revenue benefit, redeployment of a Formation Nation sales center to higher‑end LegalZoom products, and brand positioning (LegalZoom premium vs Inc Authority discount/free) .

Estimates Context

• Q2 actuals vs S&P Global consensus: Revenue $192.5M vs $182.5M* (+5.5% beat); Primary EPS $0.15 vs $0.149* (in‑line to slight beat). Company reports and guides on Adjusted EBITDA; S&P “EBITDA” refers to GAAP EBITDA, which is not directly comparable to reported Adjusted EBITDA .*
• Implications: Street models likely raise FY25 revenue growth assumptions from ~5% toward management’s ~8% outlook; EPS revisions should modestly track given maintained margin guide and increased investment cadence.*

*Values retrieved from S&P Global.

Key Takeaways for Investors

• Top‑line momentum is improving faster than expected: three straight quarters of accelerating growth, a strong Q2 beat, and a raised FY25 revenue outlook (to ~8%) point to a strengthening demand and product mix story .
• The strategy is shifting from one‑off formations to durable, higher‑value subscription solutions: Concierge/DIFM offerings and branding are designed to drive stickier relationships and higher LTVs, albeit with near‑term ARPU noise and investment needs .
• Cash generation is solid with a strong balance sheet: $31.6M Q2 FCF and $217M cash provide ample flexibility for continued investment and buybacks .
• Watch ARPU and renewals: ARPU down 6% y/y reflects bundling and mix; management expects growth moderation as early cohorts mature—renewal/upsell dynamics are the next proof points .
• Integration synergies are tangible: Formation Nation added ~$8M to Q2 transaction revenue and is being leveraged to drive higher‑end product sales and brand segmentation .
• AI narrative is becoming a differentiator: Collaboration with OpenAI’s ChatGPT agents and “AI‑augmented expertise” positioning should support customer acquisition and product value over time .
• Near‑term trading lens: Revenue beat + guidance raise are clear positives; expect focus on Q3’s higher margin guide (25%) vs full‑year 23% and on evidence that Concierge adoption/renewals sustain subscription growth and expand ARPU sequentially .

Notes on sources:

• We read the full Q2’25 earnings press release and prior quarter press releases. An 8‑K 2.02 for Q2’25 did not appear in our document index; the press release contained full GAAP/non‑GAAP detail – – –.
• The Q2’25 earnings call transcript was referenced via public transcript aggregators when the internal document retrieval failed .