Q2 2026 LegalZoom.com Inc Earnings Call Transcript
Key Points
- LegalZoom.com Inc (LZ) delivered Q2 revenue of $205 million, up 7% year-over-year, and adjusted EBITDA of $46 million, up 18%, exceeding the high end of guidance.
- Subscription revenue grew 11% to $133 million, with human-in-the-loop subscriptions now representing 65% of subscription revenue and over 40% of total revenue.
- Partnership channel momentum is strong, with total order volumes from partnerships increasing to 11% of total orders, up from 4% a year ago, and new partners including USAA, AAA, PayPal, and Adobe.
- Traffic from AI platforms grew more than 250% quarter-over-quarter, accounting for approximately 3% of LLC formations traffic in June, with higher conversion rates than traditional organic search.
- Gross margin expanded approximately 250 basis points to 71%, driven by AI and automation efficiencies, and the company generated $34 million in free cash flow during the quarter.
- Brand awareness improved, with unaided awareness up 10% and aided awareness up 18% year-over-year, and over 70% of U.S. households are now familiar with LegalZoom.
- Google's shift to AI-powered search has reduced traditional search traffic and increased paid inventory costs, leading to lower business formation volume and a cautious full-year outlook.
- Full-year revenue guidance was lowered to $795-$805 million, reflecting a more cautious view of customer acquisition for the remainder of the year.
- Q3 revenue guidance of $192-$196 million implies only 2% year-over-year growth, with transaction revenue expected to decline high single to low double digits.
- The company reduced its workforce by approximately 13% as part of an organizational restructuring, which may impact morale and operational continuity.
- Subscription units declined 3% to approximately 1.9 million, reflecting an expected decline in lower-value subscriptions bundled within formation packages.
- Transaction revenue decreased 1% to $72 million, and business formations declined 5% to approximately 125,000, impacted by the search environment.
Good day, and thank you for standing by. Welcome to LegalZoomâs second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speakerâs presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. Youâll then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that todayâs conference is being recorded. I would now like to hand the call over to your first speaker today, Madeleine Crane, Head of Investor Relations. Please go ahead.
Thank you, operator. Welcome to LegalZoomâs second quarter 2026 earnings conference call. Joining me today is Jeff Stibel, our Chairman and Chief Executive Officer, and Noel Watson, our Chief Operating Officer and Chief Financial Officer. As a reminder, we will be making forward-looking statements on this call. These forward-looking statements can be
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