LegalZoom Exceeds Expectations with Strong Revenue Growth, Improved Margins, and Strategic Acquisitions

LegalZoom reported Q2 revenue of $193mln, up 9% YoY, and a 20% adjusted EBITDA margin, a 400 basis point increase from last year. The company showcased strong growth, improved margins, and successful strategic initiatives, despite challenges with retention rates and ARPU. LegalZoom also announced new AI partnerships and raised its full-year revenue growth guidance.

LegalZoom.com, Inc. (NASDAQ: LZ) reported its second-quarter 2025 financial results, showcasing a 9% year-over-year (YoY) revenue increase to $192.5 million, which surpassed analyst expectations. The company's adjusted EBITDA margin improved significantly to 20%, a 400 basis point increase from the previous year. Despite facing challenges with retention rates and average revenue per user (ARPU), LegalZoom's strong performance reflects its robust market position and strategic initiatives.

The company's subscription revenue increased by 10% YoY to $119.9 million, driven by initiatives to expand the subscription business. This growth underscores LegalZoom's effective revenue strategies and commitment to recurring revenue streams. The company's free cash flow nearly doubled to $31.6 million, indicating improved operational efficiency [3].

LegalZoom's strategic execution and focused strategy have driven this growth. The company's subscription-first approach provides more predictable, recurring revenue streams compared to transaction-based models. This strategy is paying off, with subscription units growing 22% to nearly 2 million units, despite a 6% decline in ARPU to $256 [3].

The company's improved outlook suggests that its investments in subscription growth are bearing fruit, while maintaining discipline on costs. LegalZoom's strong Q2 results, combined with accelerating growth and improved profitability, signal a promising future for the company.

LegalZoom also announced new partnerships with AI leaders Perplexity and OpenAI, aiming to integrate advanced AI capabilities into its offerings. These partnerships are expected to enhance product offerings and drive customer acquisition, positioning the company at the forefront of technological innovation.

Despite the minor net loss of $0.3 million compared to net income of $1.3 million in Q2 2024, the adjusted metrics paint a more positive picture. The company's balance sheet remains strong, with significant cash on hand and share repurchases totaling $20.4 million during the quarter [3].

LegalZoom ended Q2 with $217.0 million in cash and cash equivalents, up from $142.1 million at year-end 2024. The company raised its 2025 revenue growth outlook from 5% to 8% while maintaining its adjusted EBITDA margin expectations of 23% [2].

In summary, LegalZoom's earnings call reflects a company on a positive trajectory, with strong revenue growth and strategic initiatives driving its success. While challenges with retention rates and ARPU persist, the company's innovative approaches and strategic acquisitions provide a solid foundation for future growth. Investors and market watchers will likely view LegalZoom's performance and outlook favorably, given the company's demonstrated ability to adapt and thrive in a competitive market.

References:
[1] https://www.tipranks.com/news/company-announcements/legalzooms-earnings-call-highlights-growth-and-innovation
[2] https://www.ainvest.com/news/legalzoom-beats-q2-revenue-expectations-raises-2025-outlook-2508/
[3] https://investors.legalzoom.com/news-releases/news-release-details/legalzoom-reports-strong-second-quarter-2025-financial-results