LegalZoom’s second quarter was marked by significant progress in its core subscription business and operational discipline, prompting a positive reaction from the market. Management attributed the performance to strong adoption of new compliance-focused offerings and enhancements to its bundled subscription tiers. CEO Jeffrey Stibel emphasized that the company’s “subscription strategy is working,” with improvements in product packaging, pricing, and personalization leading to higher engagement and retention, particularly in compliance-related services.
Is now the time to buy LZ? Find out in our full research report (it’s free).
LegalZoom (LZ) Q2 CY2025 Highlights:
- Revenue: $192.5 million vs analyst estimates of $182.6 million (8.5% year-on-year growth, 5.4% beat)
- Adjusted EPS: $0.15 vs analyst estimates of $0.15 (in line)
- Adjusted EBITDA: $38.97 million vs analyst estimates of $39.28 million (20.2% margin, 0.8% miss)
- Revenue Guidance for Q3 CY2025 is $183 million at the midpoint, above analyst estimates of $177.2 million
- EBITDA guidance for Q3 CY2025 is $45 million at the midpoint, in line with analyst expectations
- Operating Margin: -1.6%, down from 0.6% in the same quarter last year
- Subscription Units: 1.96 million, up 346,000 year on year
- Billings: $195.3 million at quarter end, up 9.2% year on year
- Market Capitalization: $1.93 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From LegalZoom’s Q2 Earnings Call
- Sang-Jin Byun (Jefferies) asked about the drivers behind increased full-year growth guidance amid macro volatility. CEO Jeffrey Stibel pointed to “a more predictable subscription-driven business” and diversification of growth sources.
- Patrick James McIlwee (William Blair) inquired about changes in retention rates and performance of bundled product cohorts. CFO Noel Watson explained that retention was impacted by lower-priced bundles, but core compliance products showed improving retention and engagement.
- Elizabeth Mary Elliott Porter (Morgan Stanley) questioned the ability to attach subscriptions to Formation Nation’s customer base. Stibel described early success in moving customers into subscription models and highlighted cross-sell and upsell opportunities with new DIFM and compliance products.
- Michael Peter McGovern (BofA) asked how AI partnerships might expand the addressable market and drive monetization. Stibel said collaborations would “open our aperture from the addressable market standpoint” by surfacing legal needs customers may not recognize.
- Matthew Dorrian Condon (Citizens) sought insight into how increased engagement is influencing product development and cross-sell strategies. Stibel responded that customer feedback informs the concierge suite roadmap, with seamless compliance solutions commanding higher willingness to pay.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) adoption rates and retention within new premium and DIFM subscription offerings, (2) the impact of AI-enabled partnerships on customer acquisition and engagement, and (3) ongoing integration and monetization of the Formation Nation business. Execution on these fronts, along with operational efficiency gains, will be important barometers for LegalZoom’s ability to sustain growth and profitability.
LegalZoom currently trades at $10.58, up from $8.38 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).
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