LegalZoom.com (LZ) investor relations material

Executive summary

• Q2 2026 revenue reached $205.3 million, up 7% year-over-year, driven by 11% subscription growth to $133.4 million, while transaction revenue declined 1% to $71.9 million.

• Adjusted EBITDA grew 18% to $45.9 million (22% margin), exceeding guidance; net income was $5.2 million (3% margin), reversing a prior year loss.

• Fifth consecutive quarter of double-digit subscription growth, with recurring revenue mix increasing to 65%.

• Workforce reduced by 13% to streamline operations, incurring $6 million in charges and targeting a more agile, AI-native structure.

• Ended Q2 with $167.2 million in cash, no debt, and $45.5 million in share repurchases completed.

Financial highlights

• Subscription revenue rose 11% to $133.4 million, now 65% of total revenue; transaction revenue was $71.9 million, down 1% year-over-year.

• Gross margin improved to 71% (non-GAAP) and 68% (GAAP), driven by automation and favorable subscription mix.

• Adjusted EBITDA margin reached 22%, with free cash flow of $33.7 million (16% margin), up 7% year-over-year.

• Net income for Q2 2026 was $5.2 million (3% margin), compared to a net loss in Q2 2025.

• Cash and cash equivalents at June 30, 2026 were $167.2 million, down from $203.1 million at year-end, mainly due to stock repurchases and acquisition payments.

Outlook and guidance

• Full-year 2026 revenue expected at $795–$805 million (6% growth at midpoint); Adjusted EBITDA forecasted at $190–$195 million (24% margin midpoint, 12% growth).

• Q3 2026 revenue guidance: $192–$196 million (2% growth at midpoint); Adjusted EBITDA: $49–$51 million (26% margin midpoint).

• Guidance reflects persistent Google search changes, increased uncertainty in traditional channels, and a more cautious view on customer acquisition.

• Ongoing investments in AI, partnerships, and subscription offerings are expected to drive long-term growth but may increase marketing costs and impact near-term margins.

• The restructuring plan is expected to be completed by year-end 2026, with most costs recognized in Q3 2026.