LegalZoom.com, Inc.

Welcome to LegalZoom's third quarter 2025 earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Madeline Crane, Head of Investor Relations. Please go ahead.

Thank you, Operator. Welcome to LegalZoom's third quarter 2025 earnings conference call. Joining me today is Jeff Steibel, 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 identified by the use of words such as believe, expect, plan, anticipate, will, intend, and similar expressions, and are not and should not be relied upon as a guarantee of future performance or results. Such forward-looking statements are based on management's assumptions and expectations and information available to us as of today's date. These forward-looking statements are also subject to risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties are referred to in the press release we issued today and in the risk factor section of our most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission. Except as required by law, we do not plan to publicly update or revise any forward-looking statements, whether as a result of any new information, future events, or otherwise. In addition, we will also discuss certain non-GAAP financial measures. We use non-GAAP measures in making decisions regarding our business, and we believe these measures provide helpful information to investors. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations of all non-GAAP measures to the most directly comparable GAAP measures are set forth in the investor relations section of our website at investors.legalzoom.com. I will now turn the call over to Jeff.

Good afternoon, Madeline, and welcome back. I want to thank you all for joining our third quarter earnings conference call. We are very pleased with our performance and the progress we've made against our key focus areas. Our third quarter results both validate the strategic shift we made to our subscription business and exemplify the outstanding execution by the team. The proof points we're seeing across the business give us confidence that we have transitioned beyond stabilizing the business, having now built a strong foundation for accelerated growth. Turning to highlights of our third quarter financial results, we achieved record third quarter revenue of $190 million, an increase of 13% year over year, well exceeding expectations. Subscription revenue also grew 13%, accelerating from the second quarter and marking our third consecutive quarter of sequential growth. Subscription revenue growth was again led by our compliance offerings, demonstrating the strong demand for our expanding compliance concierge product suite. Further, our compliance offerings continue to show encouraging improvement in first-year retention rates, demonstrating that more established customers are recognizing the incremental value of our premium products. Profitability remains strong, with an adjusted EBITDA margin of 24%, resulting from disciplined execution and continued efficiency gains. This is despite incremental investment in product and AI. We generated solid free cash flow of $47 million in the quarter, further strengthening our balance sheet and financial flexibility. With our strong third quarter performance and the momentum in our business, we are raising our full-year revenue growth outlook to 10%, effectively doubling our initial full-year guidance. We're maintaining our 23% adjusted EBITDA outlook as well. As we continue to identify cost savings, we plan to redeploy much of these gains into strategic investments that position the business for future growth. Turning now to our three strategic focus areas. When we initially laid out these key focus areas last summer, our objective was to attract quality share by strengthening our subscription business and offering greater value to customers. This strategy not only fueled our turnaround, it has allowed us to attract more established businesses, activating a larger portion of our SAM and helping us accelerate growth. Building on this progress, we are now expanding our focus area beyond business formation to serve existing businesses. We believe we are best positioned to capture this opportunity through our core competencies of technology and AI supported by our vast data set and large network of attorneys and other experts. We believe this positions us to capture a greater share of our serviceable addressable market by broadening our customer base and driving higher wallet share. Our goal is to activate the existing SMBs who today don't act on legal and compliance needs due to cost, access, or fear. We expect to achieve this goal through the continued introduction of higher value products and investments in AI, both in our people and in the tools that enhance productivity and decision making. This strategy is rooted in integrating human experts into the workflow at critical junctures that AI cannot fully address to ensure accuracy and customer confidence. Importantly, our AI tools will provide a level of customization to help businesses focus on their goals, while LegalZoom supports the backend. Turning now to the progress we've made across our three strategic focus areas. Our first focus area is delivering innovation across the subscription business. On our last call, we talked about the early success of our compliance concierge product offering, and we continue to see greater opportunities here. We were also in the testing phase for several new concierge products for SMBs, nonprofit, reinstatement, dissolution, and entity conversion concierge. Each of these high-end products afford customers the ability to offload their business's compliance needs. enabling them to focus on running their businesses. We saw encouraging signs of adoption across these offerings. Notably, we expect these products to carry profit margins at or above those that we typically see with DIY solutions. Additionally, via our sales center, we are testing the bundling of these Do It For Me services into a subscription-only formation product bundle. We've been testing two offerings. First, business concierge, which serves compliance and business expansion needs. And second, business concierge plus legal concierge, which adds access to our independent attorney network for additional legal guidance. The strong early adoption of these products demonstrates our ability to address the needs of the roughly 36 million existing small businesses with DIFN solutions that provide legal, accounting, and business guidance from professionals at a cost that is significantly lower than that of a traditional offline attorney, accountant, or business manager. As an example, traditional lawyers can charge $500 per hour or more, whereas our DIFM products are typically under $1,000 for an entire year, even when they include access to an attorney. It is also worth noting that our 1-800 Accountant Partnership continues to surpass our expectations. Given the strength of this partnership, we are looking at ways to deepen the relationship. For example, we will begin to test bundling their tax advice with our legal advice to create a seamless, easy to navigate, and economical way to support businesses. We expect this offering to fully roll out next year. This provides a competitive advantage because we have learned that many of the questions asked of our legal advisors are actually tax related. and vice versa. This speaks strongly to our ability to diversify our business model and capture more of our SAM by entering near adjacencies such as tax and accounting. This brings us to our second strategic focus area, reorienting our go-to-market strategy. Our go-to-market strategy is focused on positioning LegalZoom as the trusted legal brand for small businesses. We launched a highly successful marketing campaign in May, technology when you want it, human support when you need it, reinforcing the principle behind AI augmented expertise. We believe this campaign helped to drive aided and unaided awareness, both of which improved sequentially from the second quarter. We continue to shift our marketing spend away from SEM to brand marketing and other initiatives. By the end of Q3, we delivered a double-digit increase in return on ad spend, or ROAS, as compared to before the launch of the new brand campaign. It is clear that our message is resonating with SMEs and the strategy is working. Building on this momentum, we plan to continue to reinvest cost savings we've realized elsewhere into brand marketing. And as we move toward activating a larger portion of our SAM opportunity through diversification, our new campaign scheduled for later this year will hone in on existing SMBs. We are also expanding visibility through strategic partnerships and driving new customers through growth in our channel partner program. As a reminder, last quarter we announced two collaborations of our legal support with Perplexity and OpenAI. This quarter, we are deepening our relationship with OpenAI and have become the first online legal services provider for SMBs to sign an enterprise deal with the firm. Among other areas, we will be collaborating with OpenAI to further integrate our product experience into their platform, so expect to hear more on this in the near future. Our comprehensive efforts, including the modernization of our affiliate platform, The development of an embedded flow that allows partners to seamlessly integrate LegalZoom's business legal services and the establishment of new strategic partnerships have successfully fueled a roughly 25% year-over-year increase in our partner channel for the third quarter. Shifting to our progress in leveraging artificial and human intelligence to deliver expertise to our customers, our strategic priority is to use AI to augment human expertise and create a more personalized experience. Our OpenAI deal mentioned previously is a step in that direction, as were our earlier collaborations with Perplexity and OpenAI. One of the key tenets of this strategy is to leverage AI to create higher-value do-it-for-me offerings that improve compliance and efficiency. This area in particular is critical in our shift to addressing the needs of existing and established SMBs. Last quarter, we talked about introducing the capability to autofile compliance requirements. Our first release was a state annual report product. We've been rolling this out on a state-by-state basis, and we expect to have roughly 80% coverage by the end of the year. We've also developed AI tools to augment our experts and to drive internal efficiencies. Our AI voice training call simulator increases agent efficiency and shortens onboarding time. We also deployed a LegalZoom Salesforce wizard to reduce customer response times. And our AI trademark classifier now automates processes that were previously manual. In addition, we've worked with 1-800-Accountant to launch an AI-driven appointment center, which will deploy under our partnership for the upcoming tax year. Lastly, as part of our commitment to our AI strategy, we've made an organizational change that I believe will help us to advance product innovation through the integration of AI and human expertise. As part of this change, we're instituting AI mandatory standards including training, testing, and utilization across the entire organization. We've also reorganized our teams to ensure that AI sits alongside our human experts and becomes deeply integrated into how we deploy technology and product. To effectuate this, Aaron Steibel now serves as our Chief Business and Customer Officer, where he will oversee technology, product, sales, and service, creating division at LegalZoom that fully integrates the customer, the expert, and our artificial intelligence work. We believe that under this unified vision, from development to customer delivery, we can leverage Aaron's deep experience and comprehensive track record of building technology platforms that drive a rich customer experience throughout the product cycle. As a reminder, Aaron has held similar previous roles at Dun & Bradstreet. including divisional chief technology officer and head of the small and medium-sized business unit. As part of this change, our former CTO Prathik Savoy is no longer with the company. This was not an easy decision. However, we believe this is the right move to deliver on what we believe is an outstretched opportunity in human and artificial intelligence to transform our business long-term. With our more direct focus on driving AI-specific technology into our products, we're also announcing that Matt Heumann has joined the company as Senior Vice President and Head of Products. Matt joins LegalZoom from Amazon, where he served as Head of Alexa Subscriptions Growth, most recently leading the subscription launch of Alexa Plus, an AI-driven personal assistant. Matt brings more than 30 years of experience in the software and technology industry. with deep knowledge of AI and customer-centric digital innovation. We believe his expertise will be instrumental in accelerating LegalZoom's ability to leverage AI and human expertise to increase value for customers. In addition, to drive our momentum forward, we continue to bolster and expand our sales and service organization. To enhance cross-sell and up-sell opportunities while elevating customer engagement, we've appointed Julie Mann as Vice President of Sales and Service. Julie brings nearly 20 years of experience building and scaling high-growth technology-driven teams, having led organizations and companies such as TapChat, Expedia, and Optimizely. She excels at creating systems that drive velocity, operational discipline, and world-class team performance. for data-driven leadership and expertise at the intersection of human and artificial intelligence will further accelerate our sales momentum. We are very confident that this organizational realignment will both accelerate and broaden our ability to deliver AI-powered technology when customers want it and high-touch human-powered service when they need it. In closing, we've never been more energized about the future of LegalZoom. With a fully aligned organization, a strong balance sheet, and accelerating growth, we are poised for even greater success and to unlock the next chapter of value creation. I'd like to thank the entire team for their efforts. Your dedication continues to drive our success. I'll now turn the call over to Noel to discuss our third quarter results and outlook in more detail. Noel?