LegalZoom.com (NASDAQ:LZ) Posts Earnings Results

Key Points

• LegalZoom reported quarterly EPS of $0.19, matching estimates, while revenue of $195.15 million exceeded forecasts and rose 2.6% year over year. Subscription revenue increased 11% to $140 million, and adjusted EBITDA grew 8% to $50 million.
• The company kept its full-year revenue midpoint at $800 million but lowered its adjusted EBITDA outlook to $180 million–$185 million, citing weaker customer-acquisition economics and investment spending. Management expects Q4 transaction revenue to decline at a mid-teens rate.
• Search headwinds pressured transactions: transaction revenue fell 14%, business formations declined 13%, and average order value dropped 12%. LegalZoom is pursuing partnerships, AI marketing, and expanded services to diversify customer acquisition and grow recurring revenue.

LegalZoom.com (NASDAQ:LZ - Get Free Report) announced its earnings results on Wednesday. The company reported $0.19 earnings per share (EPS) for the quarter, meeting analysts' consensus estimates of $0.19, FiscalAI reports. LegalZoom.com had a return on equity of 15.83% and a net margin of 2.13%. The company had revenue of $195.15 million for the quarter, compared to analyst estimates of $193.83 million. During the same period in the prior year, the company posted $0.17 EPS. LegalZoom.com's quarterly revenue was up 2.6% on a year-over-year basis.

Here are the key takeaways from LegalZoom.com's conference call:

• Third-quarter revenue rose 3% to $195 million, while adjusted EBITDA increased 8% to $50 million, a 26% margin. Subscription revenue grew 11% to $140 million, and human-in-the-loop subscriptions reached 49% of revenue, up approximately 17% year over year.
• LegalZoom maintained its full-year revenue midpoint of $800 million but cut its adjusted EBITDA outlook to $180 million–$185 million, citing tougher customer-acquisition economics and targeted investments. Management expects transaction revenue to decline at a mid-teens rate in Q4.
• Search headwinds weighed on transactions: revenue fell 14%, formations declined 13% to about 110,000, and transaction average order value dropped 12%. Subscription units were down 5%, although retention held steady at 57% and the subscription base grew slightly excluding certain lower-value products.
• The company is investing in partnerships, affiliates, AI advertising, and expanded Business Manager services to diversify acquisition and build recurring customer relationships; those investments are pressuring near-term profitability. Management cited early traction, including doubled Q3 sales through Chase Offers versus Q2 and nearly 50% quarter-over-quarter growth in AI referral traffic, while noting AI volumes remain small.

LegalZoom.com Price Performance

Shares of LZ stock traded up $0.21 on Wednesday, hitting $6.91. 4,008,864 shares of the stock traded hands, compared to its average volume of 2,451,164. The company's fifty day moving average is $6.14 and its 200 day moving average is $6.54. LegalZoom.com has a 1-year low of $5.22 and a 1-year high of $12.40. The company has a market capitalization of $1.18 billion, a PE ratio of 51.46, a PEG ratio of 1.26 and a beta of 1.16.

Wall Street Analyst Weigh In

LZ has been the subject of a number of research analyst reports. Wall Street Zen upgraded shares of LegalZoom.com from a "hold" rating to a "buy" rating in a research note on Saturday, September 26th. JPMorgan Chase & Co. downgraded shares of LegalZoom.com from an "overweight" rating to a "neutral" rating and reduced their price objective for the company from $8.00 to $7.00 in a research note on Thursday, August 6th. Weiss Ratings lowered shares of LegalZoom.com from a "hold (c-)" rating to a "sell (d+)" rating in a report on Thursday, October 29th. Finally, William Blair downgraded shares of LegalZoom.com from an "outperform" rating to a "market perform" rating in a research report on Thursday, August 6th. Five investment analysts have rated the stock with a Hold rating and three have issued a Sell rating to the stock. According to data from MarketBeat.com, LegalZoom.com currently has an average rating of "Reduce" and a consensus price target of $7.30.

Insiders Place Their Bets

In other LegalZoom.com news, CFO Noel Watson sold 416,371 shares of the stock in a transaction on Thursday, August 20th. The shares were sold at an average price of $5.91, for a total transaction of $2,460,752.61. Following the sale, the chief financial officer directly owned 1,491,430 shares of the company's stock, valued at approximately $8,814,351.30. This represents a 21.82% decrease in their ownership of the stock. The sale was disclosed in a document filed with the Securities & Exchange Commission, which is available at the SEC website. Also, insider Nicole Miller sold 43,996 shares of the stock in a transaction on Monday, August 17th. The stock was sold at an average price of $5.51, for a total transaction of $242,417.96. Following the sale, the insider directly owned 976,932 shares in the company, valued at $5,382,895.32. This trade represents a 4.31% decrease in their ownership of the stock. The SEC filing for this sale provides additional information. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. The sale was made to cover tax withholding obligations related to the vesting of equity awards. In the last ninety days, insiders sold 577,475 shares of company stock valued at $3,375,197. 7.40% of the stock is currently owned by corporate insiders.

LegalZoom.com Company Profile

LegalZoom.com, Inc is an online platform that provides legal, compliance and tax-related products and services to individuals, families and small businesses. The company's platform is designed to make common legal and administrative processes more accessible through digital tools, guided services and access to independent professionals.

LegalZoom's offerings include business formation services for limited liability companies and corporations, registered-agent services, annual compliance support, business licensing and trademark services.

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