LegalZoom.com Q2 Earnings Call Highlights

LegalZoom.com Q2 Earnings Call Highlights

Revenue rose 7% year over year to $205 million, while adjusted EBITDA increased 18% to $46 million. Subscription revenue grew 11% to $133 million and represented 65% of total revenue. AI-generated search answers reduced organic traffic and made paid search more expensive, contributing to a 5% decline in business formations. LegalZoom is expanding partnerships and AI distribution, with AI-platform traffic up more than 250% quarter over quarter. The company lowered its full-year revenue forecast to $795 million–$805 million while raising adjusted EBITDA guidance to $190 million–$195 million. A 13% workforce reduction is expected to generate about $14 million in annualized savings.

LegalZoom.com NASDAQ: LZ reported second-quarter revenue of $205 million, up 7% from a year earlier and in line with its guidance, while adjusted EBITDA increased 18% to $46 million and exceeded the high end of its outlook. Chairman and CEO Jeff Stibel said the company’s results reflected continued growth in subscription services, investments in artificial intelligence and efforts to diversify customer acquisition beyond traditional search. However, management also said recent changes to Google’s search experience created pressure on traffic, customer acquisition and business formation volume, prompting LegalZoom to reduce its full-year revenue outlook.

Subscription revenue rose 11% year over year to $133 million and represented 65% of total revenue, up 300 basis points from the prior-year period. The company said this was its fifth consecutive quarter of double-digit subscription growth. Stibel said human-in-the-loop subscription services, which combine technology with professional support, grew about 20% year over year and accounted for 65% of subscription revenue. Those offerings represented more than 40% of total company revenue. The company’s service offerings include Registered Agent and Virtual Mail subscriptions, while its expert-led offerings include legal plans, intellectual-property-related services and Business Manager, formerly called Do It For Me Concierge. LegalZoom said it saw increased use of legal plans as it bundled legal subscriptions with certain formation packages. Customer utilization of legal plans rose more than 35% year over year during the quarter, according to Stibel. Chief Operating Officer and Chief Financial Officer Noel Watson said average revenue per user increased 5%, primarily due to pricing in human-in-the-loop offerings. Subscription units, however, declined 3% to about 1.9 million as the company shifted away from lower-value subscriptions bundled with formation packages. Transaction revenue declined 1% to $72 million. LegalZoom processed approximately 125,000 business formations, down 5% from a year earlier, while transaction units increased 1% to roughly 281,000, supported by annual report filing volumes from compliance customers.

Management said Google’s expanded use of AI-generated answers has reduced clicks from informational search queries and increased competition for paid search inventory. Stibel characterized the development as a “structural shift” in Google search that was particularly noticeable in the back half of the second quarter. Watson said performance following the initial decline had remained relatively consistent through the current quarter. LegalZoom’s outlook assumes the current search environment continues through the end of 2026, with...