LegalZoom Q2 2025 slides: revenue growth accelerates, subscription model strengthens

LegalZoom.com Inc (NASDAQ:LZ) presented its second quarter 2025 results on August 7, highlighting accelerating revenue growth and continued expansion of its subscription business. The online legal services provider reported 9% year-over-year revenue growth, up from 5% in the previous quarter, driven by strong performance in its subscription segment.

Quarterly Performance Highlights

LegalZoom reported total revenue of $193 million for Q2 2025, representing a 9% increase compared to the same period last year. Subscription revenue, which has become an increasingly important part of the company’s business model, grew 10% year-over-year to $120 million. Transaction (JO:NTUJ) revenue also showed improvement, rising 6% to $73 million.

As shown in the following chart of quarterly performance metrics:

While the company reported a small GAAP net loss of $0.3 million compared to a $1.3 million profit in the prior year, non-GAAP net income surged 51% to $28 million. Adjusted EBITDA reached $39 million with a 20% margin, representing a significant 400 basis point improvement year-over-year.

The financial snapshot below illustrates the company’s Q2 performance across key metrics:

LegalZoom’s subscription business continues to be a major focus, with the company reporting 1.77 million subscription units and average revenue per user (ARPU) of $263. This segment now represents a substantial portion of the company’s overall revenue.

The following chart shows the subscription revenue trend:

Strategic Initiatives

LegalZoom outlined three key strategic focus areas in its presentation: optimizing its subscription business, reorienting its go-to-market strategy, and leveraging AI to deliver expertise.

The company is expanding its suite of "Do-It-For-Me" (DIFM) customizable offerings aimed at high-quality customers, with solutions like "Compliance Concierge" designed to deepen customer engagement and drive higher lifetime value.

A significant component of LegalZoom’s strategy involves AI integration. The company is pursuing AI initiatives across three objectives: internal enablement, intelligent fulfillment, and innovation. These efforts include equipping teams with AI tools, automating fulfillment processes, and revolutionizing the customer experience with AI-powered products.

As illustrated in this slide on AI strategy:

LegalZoom has also formed strategic partnerships with AI companies, including OpenAI and Perplexity, to demonstrate how AI-powered agents can provide personalized access to legal guidance. These collaborations aim to drive visibility and expand the company’s reach.

Market Opportunity (SO:FTCE11B)

LegalZoom emphasized the significant market opportunity in online legal and compliance services. The company estimates its serviceable addressable market (SAM) at $51 billion, with LegalZoom currently holding approximately 9% market share as of February 2024.

The presentation highlighted the fragmented nature of the legal services industry, noting that only about 4% of legal services in the U.S. are delivered online, and 35% of solo practitioners don’t even have a website. Traditional attorneys also struggle with customer satisfaction, as evidenced by a negative 61 Net Promoter Score.

The following chart breaks down the market opportunity by segment:

LegalZoom’s leadership position is supported by impressive statistics: 4.8 million businesses formed since inception, 4.4 million estate planning solutions delivered, and 2.0 million active legal and compliance subscriptions.

Forward-Looking Statements

For the third quarter of 2025, LegalZoom expects revenue between $182 million and $184 million, with Adjusted EBITDA of $44-$46 million. For the full fiscal year 2025, the company projects approximately 8% year-over-year revenue growth and an Adjusted EBITDA margin of around 23%.

Management expects double-digit subscription revenue growth in the second half of the year, reinforcing the company’s commitment to expanding its recurring revenue streams.

Detailed Financial Analysis

LegalZoom has made significant progress in optimizing its cost structure. Sales and marketing expenses as a percentage of revenue decreased from 40% to 29% year-over-year, reflecting improved efficiency in customer acquisition.

Transaction revenue, which includes business formations and other services like trademark filings and estate planning solutions, showed moderate growth of 6% year-over-year. The company reported 482,000 business formations and 1.12 million total transaction units for the quarter, with an average order value (AOV) of $219.

The company’s overall non-GAAP expenses represented 80% of revenue in Q2 2025, with cost of revenue at 31%, sales and marketing at 33%, technology and development at 8%, and general and administrative expenses at 8%.

LegalZoom’s financial position continues to benefit from the February 10, 2025 acquisition of Formation Nation, Inc., which has contributed to the company’s growth since that date. This acquisition aligns with LegalZoom’s strategy to expand its offerings and market presence.

Following the earnings presentation, LegalZoom’s stock traded at $8.37, down 2.22% for the day but still significantly higher than its 52-week low of $5.56. The stock had previously surged 14.48% after the Q1 2025 earnings release, reflecting growing investor confidence in the company’s strategy and execution.

Full presentation:

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