LegalZoom.com (LZ) Q1 2026 earnings summary

Executive summary

• Revenue grew 13% year-over-year in Q1 2026 to $207 million, driven by gains in both subscription and transaction revenue, with adjusted EBITDA of $36.5 million (18% margin) and net income of $1.1 million (1% margin), both down from the prior year.

• Focused on subscription-led, AI-enabled platform for small businesses, emphasizing high-value, human-in-the-loop offerings and strategic partnerships.

• Completed $43.5 million in share repurchases and ended the quarter with $183.2 million in cash and no debt.

• AI integration is enhancing customer experience, operational efficiency, and margin expansion.

• Business formations increased 8% and total transactions rose 10% year-over-year.

Financial highlights

• Subscription revenue grew 12% year-over-year to $130.2 million; transaction revenue rose 15% to $77 million.

• Gross profit increased 13% to $138 million, with gross margin steady at 64–67% (non-GAAP).

• Free cash flow was $41 million, nearly flat year-over-year; ended Q1 with $183 million in cash and no debt.

• Sales and marketing costs were $72–$78.7 million (35% of revenue), up 28–29% year-over-year.

• Non-GAAP net income was $22 million, with an 11% margin.

Outlook and guidance

• Raised full-year 2026 revenue outlook to $810–$830 million, representing 8% year-over-year growth at midpoint.

• Full-year adjusted EBITDA expected at $190–$200 million, or 13% growth at midpoint.

• Q2 2026 revenue guidance of $203–$207 million, with adjusted EBITDA of $40–$42 million.

• Margin expansion expected to accelerate in the back half of the year due to AI-driven efficiencies.

• Management expects continued volatility in key business metrics due to ongoing optimization of subscription offerings and evolving customer acquisition strategies.