LZ 10-K & 10-Q changes, risk factors and insider trading

The majority of our transaction revenue is generated by providing business formation services to guide our customers through the transition from being aspiring business owners to launching their entities.customers. In 20242025 and 2023,2024, business formations represented the largest share of our total transaction orders. The number of business formations on our platform is subject to unpredictable declines or fluctuations as a result of a number of factors, many of which are out of our control, including an overall decline in the number of U.S. business formations, an economic slowing or downturn, a public health pandemic or epidemic, increased competition, regulatory obstacles, changes in law (including changes in tax laws and regulations), changes in the business environment fromdue to inflation, tariffs, interest rates, government assistance, increased compliance or operating costs (including wage and benefit pressures) and dissatisfaction with our services. In addition, the U.S. continues to experience significant political events that cast uncertainty on global financial and economic markets. Actions taken by the current Presidential administration have had and may continue to have a negative impact on the U.S. economy and the number of U.S. business formations. Declines in the overall number of U.S. business formations or the number of business formations on our platform have adversely affected, and may in the future adversely affect, our business, results of operations, financial condition or future prospects. To the extent the growth rate of new business formations declines, these impacts can be expected to intensify.

Our business depends substantially on our customers expanding their use of our platform, including converting our transactional customers toconverting into subscribers and our subscribers renewing their subscriptions with us

For the past few years, a significant amount of our revenue has been derived from our subscriptions for small businesses and individuals. In 2024,2025, approximately 64%65% of our revenue came from subscriptions. Subscriptions have primarily originated from transactional customers who opted to become subscribers. For us to maintain or improve our operating results, including our revenue growth rate, it is important that we convert transactional customers into subscribers, retain our existing subscribers and that our existing subscribers expand their use of our platform. However, subscriptions may be terminated at any time, and the rate at which we retain our subscribers may decline or fluctuate as a result of a number of factors, including subscribers’ satisfaction or dissatisfaction with our platform, the effectiveness of our customer support services, the quality and perceived quality of the services we provide, our pricing and the pricing of competing products or services, the lifecycle of our customers’ businesses and their evolving needs, and the effects of global economic conditions, regulatory changes and reductions in subscribers’ discretionary income and spending levels. As a result, we cannot accurately predict subscription renewal rates or the number of our existing or new customers that will subscribe to our subscription services, including whether customers will continue to subscribe at the same rate as they have historically. During 2024, we experienced a deceleration in our subscription revenue growth rate. If our subscription revenue growth rate does not improve or if we are unablecontinue to convert our transactional customers to subscribers, retain our existing subscribers or our existing subscribers do not expand the use of our platform,improve, our business, results of operations, financial condition and future prospects would be adversely affected. If the growth of our subscription business, including our subscription revenue growth rate, falls below the expectations of the public market, securities analysts or investors, the price of our common stock could also be harmed.

In the past, we have experienced significant growth in both operations and headcount, which placed increased demands on our management team and our administrative, operational and financial infrastructure. Our management team, including our new Chief Executive Officer,team has developed a strategy to continue growing our business. In addition, we acquired Formation Nation in February 2025, which we are now in the process of integrating into our operations. Our ability to manage this expected growth effectively and to continue to integrate newthe employees, operations and technologies of Formation Nation into our existing business will require us to continue to expand our operational and financial infrastructure, to improve our management controls and reporting systems and procedures and to continue to retain, attract, train, motivate and manage employees. Failure to effectively manage our growth could result in declines in service quality or customer satisfaction, increased costs, difficulties or delays in introducing new products or services or other operational difficulties. Any of these difficulties could adversely impact our brand and reputation, business, results of operations, financial condition or future prospects.

Our ability to achieve our growth strategy also impacts our ability to forecast our future operating results. If the assumptions regarding the growth of our business are incorrect or change in reaction to changes in our markets,change, our results of operations and financial condition could differ materially from our expectations, our business could suffer and the trading price of our stock may decline.

Fluctuations in our quarterly operating results and the price of our common stock may be particularly pronounced in the current global macroeconomic environment, including due to uncertainty caused by recessionary fears, elevatedinflation, inflationtariffs and interest rates and their respective impacts on consumer spending patterns, the success of existing small businesses and the formation of new small businesses. In addition, fluctuations in our quarterly operating results may cause those results to fall below our financial guidance or other projections, or the expectations of analysts or investors, which could cause the price of our common stock to decline. Fluctuations in our operating results could also cause a number of other problems. For example, analysts or investors may change their models for valuing our common stock, we could experience short-term liquidity issues, our ability to retain or attract key personnel may diminish, and other unanticipated issues may arise.

Our quarterly operating results may vary in the future and period-to-period comparisons of our operating results may not be meaningful. In addition, the seasonality of our business may change or become more pronounced over time, which could also cause our operating results to fluctuate. You should not rely on the results of any given quarter as an indication of future performance.

We will need to generate and sustain increased revenue levels in future periods in order to maintain or increase our level of profitability. If our revenue and gross profitprofits do not grow at a greater rate than our operating expenses, we will not be able to maintain or increase profitability and our business may be harmed. We may incur significant losses in the future for a number of reasons, including due to the risks and uncertainties described herein. Even if we are profitable, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to achieve sustained profitability would depress the value of our company and could impair our ability to raise capital, expand our business, diversify our product offerings, market our current and planned products, or continue our operations.

In addition, we intend to continue to add new products and services and enhance our existing products and services, both of which will require us to devote significant resources before we know whether such products or services will be successful. For instance, in Augustlate 20232025 we launched LZnew Books,concierge aofferings simplefor onlineDIFM accountingmanagement solution, and in November 2023 we launched a newof business licensecompliance offering.requirements. The success of any new products or services or enhancements to existing products or services depends on several factors, including timely completion, competitive pricing, adequate quality testing, introduction, integration with existing products and services, and market awareness and acceptance. We have in the past invested resources and introduced new products and services that have failed to produce the customer interest or results that we expected. We may fail to attract new customers or lose existing customers if current or future development efforts or services fail to meet customer expectations on a timely basis if at all. If we are unable to continue offering innovative solutions or if new or enhanced solutions fail to engage our customers, we may be unable to attract additional customers or retain our current customers, which may adversely affect our business, results of operations, financial condition or future prospects.

Our success depends on continuedour innovationability to provide innovative features that make our platform useful for existing and prospective customers. We have invested and intend to continue to invest resources in technology and development in order to continue improving the simplicity and effectiveness of our platform. We have also developed and introduced new and unproven services,services into our platform, including using technologies with which we have little or no prior development or operating experience, such as generative artificial intelligence, or AI. There is no assurance that our past or future investments in any changes or developments to our platform will provide us with the benefits we expect.

In addition, because our platform is available over the internet and on mobile networks, we need to regularly modify and enhance our platform to keep pace with changes in internet-related hardware, software, communications and database technologies and standards. We expect the number of people who access our platform through mobile devices, including smartphones and handheld tablets or computers, to increase. If we are not able to provide customers with the experience, solutions and functionality they want on mobile devices, we may not be able to attract or retain customers or convert our website traffic into customers and our business may be harmed. If we are unable to respond in a timely and cost-effective manner to these rapid technological developments and changes in standards,a timely and cost-effective manner, our platform may become less marketable, less competitive or obsolete, and our business, results of operations, financial condition and future prospects would be harmed. If new technologies emerge that are able tocan deliver competitive services at lower prices, more efficiently, more conveniently or more securely than LegalZoom, such technologies could adversely impact our ability to compete. Our platform must also integrate with a variety of network, hardware, mobile, and software platforms and technologies, and we need to frequently modify and enhance our services to adapt to changes and innovation in these technologies. Any failure of our platform to operate effectively with current or future infrastructure platforms and technologies could reduce the demand for our platform. If we are unable to respond to these changes in a cost-effective manner, our platform may become less marketable, less competitive or obsolete, and harm our business, results of operations, financial condition and future prospects may be adversely affected.operations.

We operate in a very competitive industry. We face intense competition from law firms, solo attorneys, online legal document services, legal plans, secretaries of state and other service providers. The online legal solutions market is evolving rapidly and is becoming increasingly competitive. New market entrants that provide technologies that improve the delivery of legal solutions, such as generative AI and machine learning, have increased and could alsocontinue to increase the level of competition in the market. Other companies that focus on the online legal services market or business formations, including law firms that may elect to pursue the online legal services market, can and do directly compete with us. Law firms and solo attorneys, who provide in-person consultations and are able to provide direct legal advice that we generally cannot offer due to laws and regulations regarding UPL, compete with us offline and have developed and may continue to develop competing online legal services. We also compete in the registered agent services business with several companies that target small businesses, and these competitors have extensive experience in this market. In addition, some U.S. state and federal agencies have increased their offerings to our target customers or otherwise made their offerings more attractive to our target customers, including through free and easy-to-use business formation services or other document filing portals. To the extent U.S. states and federal agencies continue to increase or enhance their offerings to our target customers, it could have a significant adverse effect on our business, financial condition or results of operations. To the extent we are unable to compete, our business, results of operations, financial condition or future prospects may be harmed.

Any of our existing competitors, or other potential competitors that have not yet entered the market, have developed and may continue to develop innovative and cost-effective services, including automated corporate formation document processing, that target our existing and potential customers. Some of our competitors and potential competitors are larger and have greater name recognition, longer operating histories, more established customer relationships, larger budgets, and significantly greater resources than we do. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or customer requirements. We expect to face increasing competition from offline and online legal services providers in our market, including through their use of generative AI, and our failure to effectively compete with these providers could result in revenue reductions, reduced margins, or loss of market share, any of which could have a material adverse effect on our business, results of operations, financial condition and future prospects.

We believe our brand has contributed to the success of our business and we have made substantial investments to build and strengthen our brand and reputation. Maintaining and enhancing the LegalZoom brand and our reputation is critical to growing and retaining our customer base. Regulatory proceedings, consumer claims, false and misleading advertising claims, litigation, customer complaints or negative publicity through word-of-mouth, social media outlets, blogs, and other third partythird-party sources related to our business practices, as well as customer care, data privacy or security issues, irrespective of their validity, could diminish confidence in our services and adversely affect our brand and reputation and our ability to attract and retain customers. In addition, our brand and reputation could be impacted by any damage or reputational harm to ourthe newly acquired Inc.Inc Authority and Nevada Corporate Headquarters brands.brands we acquired in February 2025.

We are incorporating generative AI into some of our offerings, which may present both compliance risks and reputational risks

We have incorporated and intend to continue incorporating a number of generative AIAI-powered features into our platform and product offerings. ForThe instance,technologies underpinning these features are in September 2023 we announced the launch of Doc Assist, a document summarization product that uses generative AI to help small businesses review documents. This technology, which is a new and emerging technology that is in its early stages of commercialization,commercial presentsuse and present a number of risksregulatory, inherentlitigation, inethical, itsreputational, use.operational Generativeand financial risks. AI technologies, including the third-party large language models incorporated into our generative AIAI-powered offerings, canmay create accuracy issues, including flawed, incomplete, or inaccurate outputs and/or unintended biases and discriminatory outcomes. If the output, recommendations, content, or analyses that our AI applications, including Doc Assist,applications assist in producing are or are alleged to be deficientdeficient, inaccurate, biased or inaccuratediscriminatory, or if they are determined to constitute UPL, we could be subjected to competitive harm, potentiallegal legalor regulatory liability, and brand or reputational harm. Some AI scenarios may also present ethical issues. If we enable or offer AI solutions that are controversial because of their perceived or real impact on human rights, privacy, employment, or other social issues, we may experience brand or reputational harm. Additionally,Moreover, presentthe regulatory framework for AI is rapidly evolving as many federal, state, and futureforeign government regulationbodies relatedand toagencies have introduced or are considering additional laws and regulations. For example, the Colorado AI useAct and/or relatedCalifornia’s ethicsAI-related issueslaws may expose us to legal liability and/or increaseregulate the burdendevelopment and cost of research and development in this area, and failure to properly remediate AI usage or ethics issues may cause public confidence in AI to be undermined, which could slow adoptiondeployment of AI intechnologies. While new AI initiatives, laws, and regulations are emerging and evolving, what they ultimately will look like remains uncertain, and our solutions. Governments have passed and are likelyobligation to continuecomply towith passthem additionalcould lawsimpact regulatingour generativedevelopment, AI.offering Ourand use of thisAI technologytechnologies, couldentail significant costs, limit our ability to incorporate certain AI capabilities into our business, or result in additional compliance costs, regulatory investigations and actions, and lawsuits.

OurIn addition, our employees and personnel use generative AI technologies to perform certain functions of their work, and the disclosure and use of personal data in generative AI technologies is subject to various privacy laws and other privacy obligations. If we are unable to use generative AI, it could make our business less efficient and result in competitive disadvantages. Additionally,Further, sensitive information ofregarding the Company or ourits customers could be leaked, disclosed, or revealed as a result of or in connection with our employees’, personnel’s, or vendors’ use of generative AI technologies.

Our ability to maintain or increase customer traffic to our websites from internet search engines is not entirely within our control. We rely on both algorithmic and paid listing internet search results to drive customer traffic to our websites. Algorithmic listings are determined and displayed solely by a set of formulas designed by internet search engine companies. Internet search engines periodically revise their algorithms, methodologies and displays or incorporate AI into their platforms in ways that we cannot predict. Such changeschanges, including an increased prominence of AI on the search engine results page, have adversely affected, and may continue to adversely affect, the placement of our search result page ranking,ranking whichand couldthe reduceresulting traffic to our websites.websites, as well as our customer acquisition costs. In addition, we can purchase paid listings, which are displayed if particular words or terms are included in a customer’s internet search. We bid for paid listings against our competitors and third parties that may outbid us for preferred placement, which could adversely impact advertising efficiency and customer acquisition efforts. To the extent competition for paid listings increases or if paid listings prohibit the use of particular words or terms, we have in the past, and may again in the future, be required to increase our marketing expenses or reduce the number or prominence of these paid listings. If we reduce our internet search engine advertising, the number of customers who visit our websites could decline significantly. Additionally, changes in regulations or the business practices of third parties have in the past and could in the future limit our ability and the ability of search engines and social media platforms, including Google and Meta Platforms, to collect data from users and engage in targeted advertising, making them less effective in disseminating our advertisements to our target customers. The regulation of the use of cookies and other current online tracking and advertising practices or a loss in our ability to make effective use of services that employ such practices could adversely affect our business.

The introduction of new technology or changes in the way in which customers consume information on the internet, such as shifting preferences for AI chat platforms, has diminished and may continue to diminish the effectiveness of our current marketing practices. We have in the past and may in the future be required to adopt new approaches to marketing to respond to these shifts.shifts and our efforts to remain competitive with technology trends, including the use of new or improved technology such as AI powered search platforms or evolving creative user interfaces, may increase our costs but may not increase sales or attract consumers. Any inability to respond to these changes effectively and in a cost-effective manner, or any future reduction or loss of any of our current advertising channels, could adversely affect our ability to attract new customers, which could adversely affect our business, results of operations, financial condition and future prospects.

Our future success will depend upon our continued ability to identify, hire, develop, motivate and retain top talent. Competition for such talent is intense, particularly within the technology industry. To attract top talent, we have had to offer, and believe we will need to continue to offer, highly competitive compensation and benefit packages before we can validate the productivity of those employees, a practice which may not be sustainable and, even if sustainable, can be costly. Further, integration of employees and operations as a result of our acquisition of Formation Nation may present challenges, which could negatively affect our ability to retain and recruit personnel who are essential to our future success. We have from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining highly skilled employees with appropriate qualifications which may, among other things, impede our ability to execute our growth strategies or continue to operate our business in a satisfactory manner. In addition, our remoteflexible first work policy, which results in a predominantly remote workforce, has made it difficult to orient, train, develop, motivate, and engage with our employees and embed them into the LegalZoom culture. If we are not able to effectively attract or retain quality employees and manage both our domestic and international workforce, including if employee relations deteriorate, disruptions to the business will occur, our costs will increase, our ability to achieve our strategic objectives will be adversely impacted, our brand or reputation could suffer, and our business may be adversely affected. In addition, we have in the past, and may in the future, conduct reduction in workforce actions, which can lead to the elimination of roles causing unexpected adverse impacts on our business. These adverse impacts can include attrition beyond the intended reduction in workforce, delays in the development of new products or services due to gaps in knowledge transfer and new employee ramp up time, an increased risk of litigation, the distraction of employees, and reduced employee morale, any of which could also adversely affect our reputation as an employer and make it more difficult for us to hire new employees in the future.

We depend on, and anticipate we will continue to depend on, various third-party relationships to sustain and grow our business. For example, we currently partner with a variety of third-partiesthird parties to provide us with lead referrals and to provide our customers with tax solutions, website development, credit card and banking services, productivity tools and business insurance, among others. Our sales and customer experience depend on our ability to connect to, and integrate easily towith, such third partythird-party solutions. We have in the past and may in the future determine to exit certain partnership relationships. We may also fail to retain and expand partnership relationships for many reasons, including third parties’ failure to maintain, support, or secure their technology platforms in general, restrictions imposed by regulatory compliance, and our integrations in particular. Terminations of partnership relationships, whether voluntary or involuntary, have in the past and could again in the future result in disputes or litigation or harm our relationship with our customers, our reputation and brand, our business and results of operations, and our future prospects.

As we seekcontinue to add different types of partners to our partner ecosystem, it is uncertain whether theseany thirdnew partiesor current third-party partners will be successful in building integrations, co-marketing our solutions to provide a significant volume and quality of lead referrals and orders, or continuing to work with us as their own productsbusinesses evolve. Identifying and negotiating new and expanded partner relationships requires significant resources and we cannot guarantee that the parties with which we have relationships can or will continue to devote the resources necessary to operate and expand our platform. In addition, integrating third partythird-party technology can be complex, costly and time-consuming. Third parties may be unwilling to build integrations, and we may be required to devote additional resources to develop integrations for business applications on our own. The contracts applicable to third party development tools may be unfavorable and add costs or risks to our business or may require us to push additional contract terms to our customers that affect our relationship with our customers. Third parties we partner with, including providers of business applications with which we have integrations, may decide to compete with us or enter into arrangements with our competitors, resulting in such providers withdrawing support for our integrations. If we are unsuccessful in establishing or maintaining our relationships with third-parties, our ability to compete or our revenue, results of operations and future prospects may be adversely affected. Even if we are successful in establishing and maintaining these relationships with third parties, we cannot ensure that these relationships will result in increased usage of our platform or increased revenue. In addition, any failure of our solutions to operate effectively with these business applications could reduce the demand for our solutions and harm to our business and we may also be held responsible for obligations that arise from the actions or omissions of third parties. If we are unable to respond to these failures in a cost-effective manner, our solutions may become less marketable, less competitive or obsolete, and our results of operations may be negatively impacted.

Our reliance on third partythird-party providers could adversely affect our business

We also utilize third parties in connection with the fulfillment and distribution of our services, including the independent attorneys in our legal plan network and to support our registered agent and virtual mail subscription services. We also outsource certain operational functions, including certain sales andsales, customer service and fulfillment functions. As a result, we rely on third parties to ensure that our and our customers’ needs are sufficiently met. While we select third partythird-party providers carefully, we have limited control over their actions. If these third partythird-party providers encounter difficulties, or if we have difficulty communicating with them, our business operations could be adversely affected. This reliance on third partythird-party providers also subjects us to risks arising from the loss of control over processes, and potentially, termination of these services by the third parties. A failure of our third partythird-party providers to perform services in a satisfactory manner may have a significant adverse effect on our business. In addition, our platform interoperates with certain third partythird-party sites. As a result, our results may be affected by the performance of those parties and the interoperability of our platform with other sites. If certain third parties limit certain integration functionality, change their treatment of our services at any time, or experience quality issues, such as bugs and defects, our revenue, results of operations and future prospects may be adversely affected.

We also utilize various types of data, technology, intellectual property and services licensed or otherwise obtained from unaffiliated third parties in order to provide certain elements of our solutions. For example, we rely on cloud computing infrastructure, particularly from Amazon Web Services, or AWS, to host our platform and support our operations. We exercise limited, if any, control over these third parties, including AWS, which increases our vulnerability to problems with the services they provide for us and to security incidents or breaches affecting the data and information they hold or process on our behalf. Any errors, defects, bugs or other vulnerabilities in any third partythird-party data or other technology could result in errors in our solutions that could harm our business, damage our reputation and result in losses in revenue, and we could be required to undertake substantial additional research and expend significant development resources to fix any problems that arise. In addition, licensed data, technology, intellectual property and services may not continue to be available on commercially reasonable terms, or at all. Any loss of the right to use any of these services on commercially reasonable terms, or at all, could result in delays in producing or delivering our solutions until equivalent data, technology, intellectual property or services are identified and integrated, which delays could harm our business. In this situation we would be required to either redesign our solutions to function with such equivalent data, technology, intellectual property or services available from other parties or to develop these components or services ourselves, which would result in increased costs and potential delays in service. Furthermore, we might be forced to limit the features available in our current or future solutions. If we fail to maintain or renegotiate any of these data, technology or intellectual property licenses or services, we could face significant delays and diversion of resources in attempting to develop similar or replacement technology, or to license and integrate a functional equivalent of the relevant data, technology, intellectual property or service. The occurrence of any of these events may have an adverse effect on our business, financial condition, results of operations and future prospects.

•an acquisition may require us to incur charges or assume substantial debt or other liabilities, cause adverse tax consequences, expose us to claims and disputes by stockholders and third parties, including intellectual property claims and disputes, orand may not generate sufficient financial return to offset any additional costs and expenses related to thesuch acquisition;

•encountering difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or operations of anythe acquired company, particularly if key personnel of the acquired company decide not to work for us;

•the inability to retain personnel, key customers, distributors, vendors and other business partners of the acquired business;

•the issuance of a significant amount of equity securities in connection with any future acquisitions,acquisitions could dilute existing stockholders may be diluted and earnings per share may decrease.

We believe that focusing on the long-term best interests of our company and our consideration of our stakeholders more broadly, including our stockholders, customers, employees, partners, the communities in which we operate, and other stakeholders we may identify from time to time, is essential to the long-term success of our company and to long-term stockholder value. Therefore, we have made decisions, and may in the future make decisions, that we believe are in the long-term best interests of our company and our stockholders, even if such decisions may negatively impact the short- or medium-term performance of our business, results of operations, and financial condition or the short- or medium-term performance of our common stock. For example, our strategic execution priorities, which we believe will increase the predictability of our business, improve operational efficiencies and margins, and help us accelerate and sustain growth at scale, may result in short-term adverse impacts to our business and financial results. Our commitment to pursuing long-term value for our company and our stockholders, potentially at the expense of short- or medium-term performance, may materially adversely affect the trading price of our common stock, including by making owning our common stock less appealing to investors who are focused on returns over a shorter time horizon. Our decisions and actions in pursuit of long-term success and long-term stockholder value, which may include changes to our platform to enhance the experience of our customers, partners and the communities in which we operate, enabling equitable access to legal and compliance services, investing in our relationships with our customers, partners, and employees, investing in and introducing new services, or changing our approach to working with local or national jurisdictions on laws and regulations governing our business, may not result in the long-term benefits that we expect, in which case our business, results of operations, financial condition and the trading price of our common stock could be materially adversely affected.

Our operations and online services also rely on the continued functioning and accessibility of certain physical locations, including product fulfillment locations and data centers operated by AWS or other service providers. These physical locations are vulnerable to damage or interruption from natural disasters, adverse weather conditions, power losses, telecommunication failures, terrorist attacks, human errors or malfeasance, lockdown orders resulting from a public health pandemic or epidemic, break-ins and similar events. The occurrence of any of the foregoing events or other unanticipated problems at our facilities could result in lengthy interruptions in our services. We may not be able to efficiently relocate our fulfillment and delivery operations due to disruptions in service if one of these events occurs, and our insurance coverage may be insufficient to compensate us for such losses. Because the Los Angeles area,and Silicon Valley areas, where a large portion of our employees are located, isare in an earthquake fault zonezones and because both the Los Angeles area and Frisco, Texas, where a lot of our registered agent and virtual mail operations are currently located, are subject to the increased risk of wildfires, tornadoes and power outages, we are particularly sensitive to the risk of damage to, or total destruction of, our offices and two key fulfillment and delivery centers. Our insurance limits against any certain losses or expenses that may result from a disruption to our business due to earthquakes or wildfires may not be sufficient to cover all such losses or expenses, and the occurrence of either of these events could adversely affect our business, results of operations, financial condition and future prospects.

We accept payments from our customers primarily through credit and debit card transactions. Our customers generally pay for transactions in advance by credit or debit card except for certain services provided under installment plans where we allow customers to pay for their order in twothree or threetwelve equal payments. Acceptance and processing of credit and debit cards requires that we pay interchange and other fees. In addition, we rely on third parties to provide payment processing services, including the processing of our credit and debit card transactions, and to provide payment collection services. To the extent there are increases in payment processing fees, material changes in the payment ecosystem, such as large re-issuances of payment cards, delays in receiving payments from payment processors, loss of payment partners and/or disruptions or failures in our payment processing systems, including products we use to update payment information, our revenue, operating expenses and results of operation could be adversely impacted. For example, if our processing vendors have problems with our billing software or the billing software malfunctions, we could lose customers who subscribe to our legal plans, registered agent services and other subscription services, which could decrease our revenue. In addition, if our billing software fails to work properly and, as a result, we do not automatically charge our subscribers’ credit cards on a timely basis or at all, our revenue could be adversely affected.

We recognize revenue from paid subscriptions to our services over the respective term of the subscription period. For example, after a short introductory trial period, if any, subscribers can make a subscription commitment, with the upcoming subscription fee paid upon subscribing. As a result, much of our revenue is generated from the recognition of deferred revenue relating to subscriptions entered into during previous quarters. Consequently, shortfalls in demand for our services or declines in new or renewed subscriptions in any one quarter have in the past had, and may again in the future have, a small impact on the revenue that we recognize for that quarter but could negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales and potential changes in our pricing policies or rate of customer expansion or retention may not be fully reflected in our results of operations until future periods. In addition, a significant majority of our costs are expensed as incurred, while revenue is recognized over the life of the subscription agreement. As a result, growth in the number of customers could continue to result in our recognition of higher costs and lower revenue in the earlier periods of our subscription agreements. Finally,Further, our subscription-based revenue model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new customers and significant increases in the size of subscriptions with existing customers must be recognized over the applicable subscription term.

In addition, limitations or errors with respect to how we measure data or with respect to the data that we measure may affect our understanding of certain details of our business, which could affect our long-term strategies. If our financial and operating metrics are not accurate representations of our business, or if investors do not perceive our operating metrics to be accurate, or if we discover material inaccuracies in our metrics, our reputation may be harmed, and our business, results of operations, financial condition and future prospects could be adversely affected.

We have found material weaknesses in our internal control over financial reporting in the past and our prior material weakness related to our income tax provision resulted in the restatement of our unaudited condensed consolidated financial statements for the quarters and year-to-date periods ended March 31, 2022, June 30, 2022 and September 30, 2022.past. Although we remediated our material weaknesses and management concluded that our internal control over financial reporting was effective as of December 31, 2024,2025, we cannot assure you that there will not be additional material weaknesses in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations. In addition, any future material weaknesses could result in the loss of investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be negatively affected, and we could be subject to sanctions or investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which would also require additional financial and management resources. Failure to maintain effective control systems required of public companies could also restrict our future access to the capital markets.

The revolving facility that we entered into on July 2, 2021, oror, as amended from time to time, the 2021Amended Revolving Facility, contains affirmative and negative covenants, indemnification provisions and events of default. The affirmative covenants include, among others, administrative, reporting and legal covenants, in each case subject to certain exceptions. The negative covenants include, among others, limitations on our and certain of our subsidiaries’ abilities to carry out the following, in each case subject to certain exceptions:

The 2021Amended Revolving Facility also contains a financial covenant that requires us to maintain a total net first lien leverage ratio not to exceed 4.50:1.00 on the last day of any fiscal quarter during which our 2021 RevolvingAmended Facility usage exceeds 35% of the 2021 RevolvingAmended Facility capacity. As a result of the restrictions described above, we may be limited as to how we conduct our business and we may be unable to raise additional debt or equity financing to take advantage of new business opportunities. The terms of any future indebtedness we may incur could include more restrictive covenants. We cannot assure you that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders or amend the covenants.

Our ability to comply with the covenants and restrictions contained in the 2021Amended Revolving Facility may be affected by economic, financial and industry conditions beyond our control. The restrictions in the 2021Amended Revolving Facility may prevent us from taking actions that we believe would be in the best interests of our business and may make it difficult for us to execute our business strategy successfully or effectively compete with companies that are not similarly restricted. Our failure to comply with the restrictive covenants and other terms of our indebtedness could result in an event of default, which, if not cured or waived, could result in the lenders declaring all obligations, together with accrued and unpaid interest, immediately due and payable and take control of the collateral, potentially requiring us to renegotiate the 2021Amended Revolving Facility on terms less favorable to us and could also trigger cross-default provisions in other contracts, potentially resulting in serious consequences to our business, results of operations, financial condition and future prospects, including bankruptcy or insolvency. Even if the 2021Amended Revolving Facility is terminated, any additional debt that we incur in the future could subject us to similar or additional covenants.

In addition, the 2021Amended Revolving Facility also permits borrowings denominated in Euros, British pound sterling and other alternative currencies that may be approved by the administrative agent and revolving lenders. Such non-U.S. dollar-denominated debt may not necessarily correspond to the cash flow we generate in such currencies.

Any borrowings under the 2021 Revolving Facility will be subject to variable rates of interest and expose us to interest rate risk. Sharp changes in interest rates could adversely affect us if amounts are outstanding under the 2021 Revolving Facility. Further, if future rates based upon SOFR are higher or more volatile than USD LIBOR rates as historically determined, we may experience potential increases in interest rates on any variable rate debt, which could adversely impact our interest expense, results of operations and cash flows. In the future, we may enter into contractual arrangements designed to hedge our exposure to changes in interest rates. If we enter into derivative financial instruments to mitigate interest rate risk in the future, we may not maintain interest rate swaps, caps or other applicable financial instruments with respect to all of our indebtedness, and any financial instrument we enter into may not fully mitigate our interest rate risk, may prove disadvantageous or may create additional risks. If these hedging arrangements are unsuccessful, we may experience an adverse effect on our business, results of operations, financial condition and future prospects.

Unused U.S. federal net operating losses, or NOLs, for taxable years beginning before January 1, 2018, may be carried forward for 20 years to offset future taxable income, if any, until such unused NOLs expire. Under the 2017 Tax Cuts and Jobs Act, or the Tax Act, as modified by the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, U.S. federal NOLs incurred in taxable years beginning after December 31, 2017, can be carried forward indefinitely and are limited to 80% of taxable income. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards to offset its post-change income or taxes may be limited. We have completed a Section 382 study and have determined that none of our NOLs will expire solely due to Section 382 limitations. However, we may experience ownership changes in the future as a result of shifts in our stock ownership, some of which may be outside of our control. This could limit the amount of NOLs that we can utilize annually to offset future taxable income or tax liabilities. Subsequent ownership changes and changes to the U.S. tax rules in respect of the utilization of NOLs may further affect the limitation in future years. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. For example, California imposed limits on the usability of California NOLs to offset taxable income and certain business credits to offset California tax liabilities in tax years beginning after 2023 and before 2027.

•changes in tax laws, tax treaties, and regulations or the interpretation of them, including the Inflation Reduction Act of 2022, or the IRA, and the TaxOne ActBig Beautiful Bill Act, or the OBBBA;

New tax laws, statutes, rules, regulations or ordinances could be enacted at any time. TaxFor reform remains a legislative priority forexample, the U.S.One governmentBig andBeautiful certainBill legislationAct, hasor alreadythe beenOBBBA, enacted.which Whilewas thereenacted isinto currentlaw uncertaintyin regardingJuly what2025, includes significant changes willto eventuallyfederal betax enacted,law. suchNew newtax lawslaws, including the OBBBA, may affect our operating results and financial conditions. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted differently, changed, modified, or repealed at any time. Any such enactment, interpretation, change, modification, or repeal could adversely affect us, possibly with retroactive effect. For example, the IRA imposes, among other rules, a 15% minimum tax on the book income of certain large corporations and a 1% excise tax on certain corporate stock repurchases. The imposition of the excise tax could increase the cost to us of making repurchases of our stock and cause us to reduce the number of our shares repurchased pursuant to our stock repurchase program. In addition, for certain research and experimental expenses incurred in taxable years beginning after December 31, 2021, the Tax Act requires the capitalization and amortization of such expenses over five years if incurred in the U.S. and fifteen years if incurred outside the U.S., rather than deducting such expenses currently.

Our business involves providing services that meet the legal and other needs of our customers and, as a result, we are subject to a variety of complex and evolving government laws, rules and regulations, including but not limited to, laws and regulations related to labor, advertising, sales and marketing, deceptive trade practices, our subscription offerings and related billing, renewal and cancellation practices, virtual mail, legal document processing services, registered agent services, our legal plans, electronic funds transfer, consumer protection, artificial intelligence, real estate, e-commerce, promotions, intellectual property (e.g., ownership, examination, registration and infringement), postal, anti-bribery and anti-corruption, insurance, foreign exchange controls and cash repatriation restrictions, anti-competition, environmental, health and safety, and other regulated activities. In recent years, there have been significant new and changing regulations in many of these areas and we expect continued heightened focus by the government on many of these areas. In addition, as we expand our products and services and evolve our business models, we may become subject to additional government regulation or increased regulatory scrutiny.

The scope of the federal, state and local laws and regulations to which we are subject is often vague and broad, and their applications and interpretations are often uncertain and conflicting. Compliance with these disparate laws and regulations requires us to structure our business and services differently in certain jurisdictions. Additionally, these laws and regulations are frequently evolving, and challenges to, changes in, or new interpretations of, such laws and regulations could restrict the types of products and services that we can offer or the prices we can charge or require us to significantly change the ways we currently structure our business and services. For instance, asin ofMarch 2025, the dateFinancial ofCrimes thisEnforcement filing,Network (FinCEN) issued an interim final rule removing the nationwiderequirement preliminaryfor injunctionU.S. againstcompanies enforcementto offile the Corporate Transparency Act’sa beneficial ownership information report rule is paused andunder the deadlineCorporate forTransparency complianceAct, iswhich extended.was However,first theadopted reportingin ruleSeptember remains2022. subject to legal challenges and the future of the CTA and its mandate to file beneficial ownership information with the Financial Crimes Enforcement Network, as well as our Beneficial Ownership Information Report offering, remains uncertain. TheseThe laws and regulations to which we are subject could also make it more difficult for us to convert our transactional customers to subscribers or attract new subscribers to grow our subscription services. We dedicate significant management time and expense to dealing with these issues and we expect that these issues will continue to be a significant focus as we expand into other services and jurisdictions.

Any failure or perceived failure by us to comply with applicable laws and regulations may subject us to regulatory inquiries, claims, suits and prosecutions. We have also incurred in the past, and expect to incur in the future, costs associated with responding to, defending, resolving, and/or settling proceedings, particularly those related to UPL, competitor claims, employee claims and the provision of our services more generally. We can give no assurance that we will prevail in such regulatory inquiries, claims, suits and prosecutions on commercially reasonable terms or at all. Responding to, defending and/or settling regulatory inquiries, claims, suits and prosecutions may be time-consuming and divert management and financial resources or have other adverse effects on our business. A negative outcome in any of these proceedings may result in claims, changes to or discontinuance of some of our services, potential liabilities or additional costs that could have a material adverse effect on our business, results of operations, financial condition, future prospects and brand.

We structure our relationships with the independent attorneys and independent accountants who participate in our and our partners' networks in a manner that we believe results in an independent contractor relationship, not an employee relationship. On the other hand, some of our tax offerings and our intellectual property offerings are currently fulfilled by our or our subsidiaries’ own employee accountants, tax professionals, lawyers and fulfillment staff. We also use contractors, temporary employees and/or consultants as part of our operations. An independent contractor is generally distinguished from an employee by his or her degree of autonomy and independence in providing services. A high degree of autonomy and independence is generally indicative of a contractor relationship, while a high degree of control is generally indicative of an employment relationship. Tax or other regulatory authorities may in the future challenge our characterization of the independent attorneys and accountants who participate in our and our partners' networks of these relationships,networks, or the other contractors and consultants used by us. If such regulatory authorities or state, federal or foreign courts were to determine that these attorneys, accountantsattorneys or other contractors and consultants are employees, and not independent contractors, we would be required to withhold income taxes, to withhold and pay social security, Medicare and similar taxes, to pay unemployment and other related payroll taxes and could face allegations of UPL or CPL. We would also be liable for unpaid past taxes and subject to penalties. As a result, any determination that these individuals are our employees could have a material adverse effect on our business, results of operations, financial condition and future prospects. It is also possible that we could face claims of joint employment from the independent professionals who participate in our partner networks or from individuals working as a consultant, temporary employee, or contractor, if they were to pursue employment claims against LegalZoom. If a joint employment relationship is found to exist, joint liability for any successful claims would also likely exist.

In the ordinary course of business, we collect and otherwise process information from and about our customers and others, which include personal information and other data. As a result, aspects of our business are subject to laws, rules, regulations and other obligations (such as contracts and privacy notices) relating to privacy and the collection, use and security of personal information. In the United States, federal, state and local governments have enacted or introduced comprehensive data privacy laws and regulations, including the California Consumer Privacy Act of 2018. Many other U.S. states have enacted, or have proposed enacting, similar comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices, conducting privacy and security assessments, obtaining consumer consent and affording residents with certain rights concerning their personal data. The exercise of these rights may impact our business and ability to provide our products and services. These state laws allow for statutory fines for noncompliance. Outside the U.S., an increasing number of laws, regulations and industry standards govern data privacy and security. For example, we are also subject to the European Union’s General Data Protection Regulation, or GDPR, with respect to some portions of activities. In addition, we are subject to the terms of our privacy policies and obligations to third-parties related to privacy, data protection and information security.

We currently have adopted a remote-firstflexible-first work policy, which permitsenables personnelflexibility to work remotely orand virtuallycollaborate indefinitelyin unless the nature of the personnel’s job requires their in-office presence.offices. This policy, which results in a predominantly remote workforce, poses additional data security risks to our information technology systems and data, as our personnel work from home and utilize network connections outside our premises. Additionally, future or past business transactions, acquisitions or integrations, including our recent acquisition of Formation Nation, could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies. Any of the previously identified or similar threats could cause a security breach or other interruption. A security breach or other interruption could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information.

Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. We may not have adequate insurance coverage for security incidents or breaches, including fines, judgments, settlements, penalties, costs, attorney fees and other impacts that arise out of such breaches. We cannot assure you that our cyber liability insurance coverage will be adequate to cover liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all. The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), could have an adverse effect on our business. Our risks are likely to increase as we continue to expand, grow our customer base, and process,process increasingly large amounts of sensitive information.

•announcements of technological innovations or new products or services offered by us or our competitors;

In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation.or other litigation or regulatory investigations. We may be the target of this type ofsuch litigation or investigations in the future.future, Securities litigation against uswhich could result in substantial costs and divert our management’s attention from other business concerns, which could adversely affect our business, results of operations, financial condition and future prospects.

LegalZoom is a leading online platform for legal services, transforming how individuals and small businesses navigate the legal system. By combining intuitive technology with access to experienced attorneys—whether through our vast independent attorney network or LegalZoomour Legal Services (LZLS)own law firm—we offer the tools and guidance people need to confidently manage everything from business formation and compliance to estateintellectual planningproperty protection and ongoing business management and legal support. We operate across all 50 states and in over 3,000 counties in the U.S. With over two decades of experience and millions of customers served, LegalZoom helps individuals and small businesses navigate legal needs with confidence.

•Our share of businesssmall formations.and medium-sized businesses (SMBs). In 2024,2025, business formations represented the largest share of our total transaction orders. Business formations act as an entrance point for many customers to the LegalZoom ecosystem, where they then often purchase a mix of transaction and subscription offerings alongside and after the initial formation transaction. In addition, we are expanding our go-to-market strategy to focus on emerging and established business, which we believe will decrease our dependence on business formations over time. As a result, our operating results depend on the continuation of new business formations in the U.S. and even more so, on our ability to increase our share of thesenew formations.business formations and to attract existing businesses to our platform.

•Ability to enhance customer lifetime value. Our future performance depends on our ability to integrate new products and services into our LegalZoom ecosystem and to increase recurring revenue through subscription offerings. As we continue to test new and existing products and services in order to optimize our productsubscription line-up,business, including by testing various commercialization strategies for thoseour offerings and introducing new, higher value DIFM subscription offerings, we have experienced and we expect to continue to experience increased volatility across our key business metrics. In addition, in an effort to enhance customer lifetime value, we intend to continue to invest in improving our customer experience, which includes investments in our educational content and improving our website and mobile experience.

Transaction revenue—Transaction revenue is primarily generated from our customized legal document services upon fulfillment of these services. Transaction revenue includes filing fees and is net of cancellations, promotional discounts, sales allowances and credit reserves. Tax preparation services are recognized at the point in time when the customer’s tax return is filed and accepted by the applicable government authority. We also earn fees from third-party providers fromin leadsconnection generatedwith tolead suchgeneration providersactivities, throughwhere ourreferred onlinecustomers legalpurchased platform.services that are transactional in nature.

Subscription revenue—Subscription revenue is generated primarily from subscriptions to our registered agent, compliance packages, attorney advice, legal forms, tax and accounting, virtual mail and e-signatureeSignature services, and software-as-a-service, or SaaS, accounting solution subscriptions and SaaS subscriptions in the U.K.subscriptions. We generally recognize revenue from our subscriptions ratably over the subscription term. Subscription terms generally range from thirty days to one year. Subscription revenue also includes amounts earned from third-party providers in connection with lead generation activities, where referred customers purchased services that are subscription in nature. Subscription revenue includes the transaction price allocated to bundled free trials for our subscription services and is net of promotional discounts, cancellations, sales allowances and credit reserves and payments to third-party service providers such as legal plan law firms.

Cost of revenue includes all costs of providing and fulfilling our services. Cost of revenue primarily includes government filing fees, costs of fulfillment, customer care, including the cost of credentialed professionals for tax, and payroll services, and related benefits, including stock-based compensation, and costs of independent contractors for document preparation, telecommunications and data center costs, amortization of acquired developed technology, depreciation and amortization of network computers, equipment and internal-use software, printing, shipping and handling charges, credit and debit card fees, allocated overhead, legal document kit expenses, and sales and use taxes. We defer direct and incremental costs primarily related to government filing fees incurred prior to the associated service meeting the criteria for revenue recognition. These contract assets are recognized as cost of revenue in the same period the related revenue is recognized.

Gross profit, or revenue less cost of revenue, and gross margin, or gross profit as a percentage of revenue, have been and will continue to be affected by various factors, primarily the mix between transaction and subscription revenue. Our long-term gross margin expansion is also expected to be driven by automation improvements and digitization efforts. Further, our acquisitions of other companies have negatively impacted our gross margin in the past, and any such future acquisitions could have a similar effect. Our gross margin could fluctuate from period to period due to fulfillment rates and seasonality.

Our operating expenses consist primarily of sales and marketing, technology and development, general and administrative expenses, and to a lesser extent, impairments of goodwill, long-lived assets, other assets and othergain assets.on sale of assets held for sale.

WeCustomer intendacquisition media spend has historically been highest in the first quarter of the year to align with business formation seasonality and we expect this trend to continue to invest in sales and marketing to drive additional revenue, further penetrate our expanding addressable market, and build on our digital brand leadership and awareness. We anticipate that sales and marketing expenses will continue to be our largest operating expense category for the foreseeable future.

Interest expense consists primarily of amortization of debt issuance costs related to our Amendedamended and Restatedrestated Creditcredit and Guarantyguaranty Agreement,agreement, oror, 2021as amended, the Amended Revolving Facility.Facility as well as interest incurred on the deferred cash consideration associated with the acquisition of Formation Nation.

We expect interest expense to remain insignificant in the near term as we have no outstanding indebtedness. However, we would incur interest expense in the longer term should we draw down on our 2021Amended Revolving Facility or incur other indebtedness.

In addition to the measures presented in our consolidated financial statements, we regularly monitor the following financial and operating metrics to evaluate the growth of our business, measure the effectiveness of our marketing efforts, identify trends, formulate financial forecasts and make strategic decisions:decisions. For the year ended December 31, 2025, Formation Nation is included in the key business metrics below starting on February 10, 2025, the date we acquired Formation Nation. Prior periods have not been recast.

We experienced a 17%4% decreaseincrease in business formation transactions during the year ended December 31, 20242025 compared to the year ended December 31, 2023,2024, primarily due to aformations challengingdriven macroeconomicby environmentour andFormation theNation exit of certain partner channel relationships in the third quarter of 2023.acquisition. Overall U.S. business formations declinedgrew 5%by 9% during the year ended December 31, 2024,2025 compared to the year ended December 31, 2023,2024, based on a review of U.S. Census data revealing new applications for EINs.

The below table sets forth the number of transactions for the years ended December 31, 20242025 and 2023 2024:

We experienced ana 8%1% increasedecrease in the number of transactions during the year ended December 31, 20242025 compared to the year ended December 31, 2023,2024, primarily from the introductiondecline of ourin beneficial ownership information report infilings December 2023 and tofollowing a lesserFinCEN extentruling anon increaseMarch in21, other2025 smallthat businesseliminated relatedthis transactions,filing includingrequirement annualfor reportsU.S. and corporate dissolutions. These increases werecompanies, partially offset by the decreaseinclusion of transactions from our Formation Nation acquisition and an increase in businessannual formationsreport discussed above.filings.

Average order value decreasedincreased by 8% during the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024. The decreaseincrease in average order value was primarily driven by a higherdecrease mixin the volume of lower priced small business-related transactions, includinglower-value beneficial ownership information reports,report andfilings, aas reductionwell in the fees earned from third-party providers from leads generated for such providers throughas our onlineacquisition platforms.of Formation Nation, which includes higher-value DIFM business formation services.

We achieved 14%10% growth in the number of subscription units from December 31, 20232024 to December 31, 2024,2025, primarily driven by an increase in formscompliance, andlegal e-signatureadvisory and accounting solution subscriptions resulting from the bundling of these products into certain business formation offeringsofferings, andas well as an increase in compliancevirtual subscriptions.mail Growthsubscriptions inand the inclusion of subscription units as of December 31, 2024 was partially offset by the discontinuation of new customer acquisition forfrom our taxFormation offering.Nation acquisition.

On a sequential basis, the number of subscription units as of December 31, 20242025 increaseddecreased 3%1% from 1,7171,959 thousand subscription units as of September 30, 2024.2025.

ARPU declinedincreased 5%by 1% as of December 31, 20242025 as compared to December 31, 20232024 driven primarily by pricingthe changesacquisition of Formation Nation in February 2025, partially offset by our prior discontinuation of new customer acquisition for our tax offerings as well as a shift in mix towards our lower priced subscription offerings, including forms and eSignature, accounting solutions, and legal advisory subscriptions, due to ourthe compliancebundling relatedof subscriptionsthese andproducts virtualinto mailcertain subscriptions.business formation offerings. On a sequential basis, ARPU as of December 31, 20242025 wasincreased flat sequentially4% compared to September 30, 2024.2025.

We define annual small business retention rate as the percentage of small business subscription units active as of the last day of the quarter one year ago that were still active subscriptions 12 months later. Small business subscription units represent our subscriptions targeted at our small business customers and include subscriptions for our registered agent and compliance services, our tax solutions,solution, our virtual mail, forms and eSignature solutions and our small business legal advisory plan and subscriptions acquired through our purchase of Earth Class Mail Inc. and Revvsales Inc.,plan, and exclude subscriptions from our enterprise customers, our prior operations in the U.K. and our consumer legal advisory plan. Annual small business retention rate includes both monthly and annual subscription units and reflects all subscription unit attrition, including as a result of actual business failures of certain of our customers. Our annual small business retention rate as of December 31, 20242025 was approximately 63%.58% which was impacted by the anniversary of the bundling of annual forms and eSignature subscriptions into certain business formation offerings, which are typically lower retaining.

The followingtable tablebelow sets forth our consolidated statement of operations data for each of the periods indicated. The period-to-period comparison of financial results should not be considered as a prediction or indicative of our future results.

Stock-based compensation expense increased for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily due to time-baseda restrictedfull stockyear units,of orexpense RSUs,recognition RSUsin 2025 for our awards with performance andconditions marketas well as those with market-based conditions, andor, RSUscollectively, with market conditionsPSUs, granted in 2024, compared to eligiblea employeespartial and membersyear of our senior leadership teamexpense in 2024. Refer to Note 14 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

The 3%11% increase in total revenue for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 was driven by an increase in subscription revenue. Subscription revenue was 64%65% and 62%64% of total revenue for the yearyears ended December 31, 20242025 and 2023,2024, respectively, and transaction revenue was 36%35% and 38%36% of total revenue for the yearyears ended December 31, 20242025 and 2023,2024, respectively.

Subscription revenue increased 6%13% year-over-year for the year ended December 31, 20242025 primarily due to approximately $18.2 million in revenue from subscriptions derived from our acquisition of Formation Nation in February 2025, as well as an 11% increase in revenue from compliance-related subscriptionssubscriptions, an increase in revenue from our virtual mail offering and legalrevenue advisoryearned subscriptions,from the 1-800 Accountant partnership entered into in December 2024. Subscription revenue growth was partially offset by theour prior discontinuation of new customer acquisition for our tax offerings and the exit of certain channel partner relationships in the third quarter of 2023.offering.

The increase in gross profit was driven by a $21.2$74.2 million increase in revenue partially offset by a $0.8$17.9 million increase in cost of revenue as discussed above.revenue.

Sales and marketing expenses for the year ended December 31, 20242025 decreasedincreased by $3.2$54.1 million primarilylargely due to a $15.4$20.0 million reductionincrease in payroll and related benefits,benefits partiallyresulting offsetfrom byan aincrease $12.2in average sales and marketing headcount primarily related to our Formation Nation acquisition, an $18.0 million increase in customer acquisition mediamarketing spend.spend, Thean decrease$8.7 million increase in payrollstock-based compensation expense, and relateda benefits$5.5 wasmillion largelyincrease in depreciation and amortization expense primarily due to decreasedthe salesamortization andof marketingintangible headcount.assets. Customer acquisition mediamarketing spend was $157.6$175.6 million and $145.3$157.6 million for the year ended December 31, 20242025 and 2023,2024, respectively, asprimarily we continueddue to investlower inperformance expandingmarketing ourspend customerduring basethe andyear buildingended ourDecember digital31, brand leadership and awareness.2024.

Technology and development expenses for the year ended December 31, 20242025 increaseddecreased primarily due to ana increasedecrease in payroll and related benefits largely due to increaseda decrease in average technology and development headcount including a $4.5 million decrease in stock-based compensation expense during the year ended December 31, 2024.2025.

Interest expense consists primarily of amortization of debt issuance costs related to our 2021Amended Revolving Facility.Facility as well as interest incurred on the deferred cash consideration associated with the acquisition of Formation Nation.

InterestThe change in interest income consistswas ofprimarily due to interest income generated from our money market investments.investments for the year ended December 31, 2025.

The change in other income (expense),income, net, between 20242025 and 20232024 was primarily due to changeschange in foreignfair currencyvalue movementsof relatedother toequity oursecurity intercompanyof loans$0.3 whichmillion wereand denominatedgain inon Britishsale Poundof Sterling,available-for-sale ordebt GBP.security of $0.8 million.

TheThere $4.4was a $3.9 million favorable changeincrease in ourthe provision for income taxes in 20242025 as compared to 2023 was2024 primarily due to lowerhigher non-deductiblenondeductible stock-basedtax compensation,benefits lower shortfalls onfrom stock-based compensation and alower decreaseresearch inand unrecognizeddevelopment tax benefitscredits for the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024.

We fund our operations and capital expenditures from cash flows from operating activities. Our primary requirements for liquidity and capital are to finance working capital, capital expenditures and general corporate purposes. At December 31, 2024,2025, our principal sources of liquidity were cash and cash equivalents of $142.1$203.1 million, which consisted of cash on deposit with banks and money market funds, of which approximately $3.3$4.4 million related to our foreign subsidiaries. Our cash and cash equivalents decreasedincreased by $83.7$61.0 million from December 31, 20232024 to December 31, 2024,2025, primarily asdue to cash provided by operating activities, proceeds from stock option exercises primarily by former executive officers in the first quarter of 2025, and proceeds from the sale of a resultproperty held for sale, partially offset by repurchases of our common stock, cash paid for the acquisition of Formation Nation, cash paid for shares surrendered for settlement of minimum statutory tax withholding, and purchases of property and equipment and stock repurchases, partially offset by cash provided by operating activities during the year. Subsequent to year end, we used $50.1 million of cash in connection with our acquisition of all of the outstanding equity interests of Formation Nation.equipment.

We currently anticipate that our available cash, cash equivalents and cash provided by operating activities will be sufficient to meet our operational cash needs for at least the next twelve months and in the foreseeable future. We have the ability to supplement our liquidity needs with borrowings under our 2021Amended Revolving Facility. In addition, we previously announced our intention to sell our operating headquarters in Austin, Texas, which is discussed in more detail in Note 4 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. During the fourth quarter of 2024, we entered into a purchase and sale agreement for the sale of this property for a purchase price of $37.8 million, which is expected to close on March 31, 2025.

We have historically considered the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested, and accordingly no taxes have been provided on such earnings. We continue to evaluate our plans for reinvestment or repatriation of unremitting foreign earnings and have not changed our previous indefinite reinvestment determination following the enactment of the 2017 Tax Cuts and Jobs Act.earnings. We have not repatriated funds to the U.S. to satisfy domestic liquidity needs, nor do we anticipate the need to do so. If we determine that all or a portion of our foreign earnings are no longer indefinitely reinvested, we may be subject to foreign withholding taxes and U.S. state income taxes.

In October 2023, our board of directors approved a stock repurchase program,program pursuantauthorizing to which our management is authorized tothe repurchase up to $100.0 million of shares of our common stock from time to time. In May 2024,2025, our board of directors approved a $75.0$100.0 million increase in theour stock repurchase programprogram, and in November 2024, our board of directors approved an additional $40.0 million increase inbringing the stockaggregate repurchaseamount program.authorized to $315.0 million. At December 31, 2024,2025, approximately $50.0$69.5 million remained available for future repurchases of our common stock under the stock repurchase program. In addition, in February 2026, our board of directors approved an additional $100.0 million increase in our stock repurchase program, bringing the aggregate amount authorized to $415.0 million. For additional information regarding our stock repurchase programs,program, refer to Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities,” and Note 13 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

2021 Revolving Facility

On July 2, 2021, we entered into oura $150.0 million 2021amended Revolvingand Facilityrestated credit and guaranty agreement with JPMorgan Chase Bank, N.A., as the administrative agent. TheOn 2021July 14, 2025, we entered into an amendment to the amended and restated credit and guaranty agreement that, among other things, decreased the revolving loan commitments to $100.0 million and extended the maturity date of the revolving loan commitments to July 14, 2030. We refer to the amended and restated credit and guaranty agreement, as amended from time to time, as the Amended Revolving Facility,Facility. asThe amended,Amended Revolving Facility provides for the issuance of up to $20.0 million of letters of credit as well as borrowings on same-day notice, referred to as swingline loans, in an amount of up to $10.0 million. At December 31, 2024,2025, we had no borrowings outstanding and $150.0$100.0 million was available for use under our 2021Amended Revolving Facility.

Subject to the satisfaction of certain criteria, we will be able to increase the 2021Amended Revolving Facility by an amount equal to the sum of (i) the greater of $90.0 million and 75% of consolidated last twelve months cash earnings before interest expense, tax, depreciation and amortization, or LTM CEBITDA, plus (ii) unused amounts under the general debt basket (i.e., an amount equal to the greater of $50.0 million and an equivalent percentage of consolidated LTM CEBITDA), plus (iii) an unlimited amount so long as we are in pro forma compliance with the Financial Covenant (as defined below), in each case, with the consent of the lenders participating in the increase.

We are required to pay a commitment fee in respect of unutilized commitments under the 2021Amended Revolving Facility. The commitment fee is, initially, 0.35% per annum. The commitment fee is subject to a reduction of 0.10% if the total net first lien leverage ratio does not exceed 3.50 to 1.00 and an additional reduction of 0.05% if the total net first lien leverage ratio does not exceed 1.00 to 1.00. We are also required to pay customary letter of credit fees and agency fees. AtU.S. Decemberdollar 31,borrowings 2024,under the interest rate applicable to the 2021Amended Revolving Facility wasbear subject to a 1.0% floor and wasinterest at a rate per annum equal to, at the borrower’s option, either (a) the Secured Overnight Financing Rate, or Term SOFR, plus a margin ranging from 2.00% to 1.25% or (b) a margin ranging from 1.00% to 0.25% plus the greatesthighest of: (i) the administrative agent’s prime rate;rate, (ii) the federalFederal funds effectiveFunds rate plus 1/20.50% of 1.0%; andor (iii) the secured overnight financing rate, or SOFR, plus a 0.10% credit spread adjustment to the SOFR benchmark, or Adjusted Term SOFR, plus 1.00%; provided that if the Adjustedone-month Term SOFR isplus less than zero, the Adjusted Term SOFR shall be deemed to be zero.1%. The interest rate margins under the 2021Amended Revolving Facility are subject to one reduction of 0.25%, a second reduction of 0.25% and a further reduction of 0.25% ifeach theupon achieving total net first lien leverage ratioratios does not exceedof 3.50 to 1.00, 2.50 to 1.00 and 2.501.00 to 1.00, respectively.

A significant portion of our transaction revenue is generated by providing business formation services to our customers. The number of business formations on our platform is subject to unpredictable declines or fluctuations as a result of a number of factors, many of which are out of our control, including an overall decline in the number of U.S. business formations, economic slowdowns or downturns, public health events, increased competition, regulatory obstacles, changes in law (including changes in tax laws and regulations), inflation, tariffs, interest rates, government assistance, increased compliance or operating costs (including wage and benefit pressures) and customer dissatisfaction. In addition, emerging technologies, including generative AI and AI-powered platforms, are changing how customers discover and engage with our services. These technologies have reduced and may continue to reduce organic traffic to our platform by enabling customers to obtain information or complete certain formation-related tasks without using our services. As a result, our traditional customer acquisition channels may continue to become less effective. We are diversifying our customer acquisition channels and expanding our go-to-market strategy, including through strategic partnerships and collaborations with third parties, including AI platforms. However, these efforts are evolving, may not be successful, and may not offset potential declines in our traditional channels. Further, the U.S. continues to experience significant political events that cast uncertainty on global financial and economic markets. Actions taken by the current Presidential administration have had and may continue to have a negative impact on the U.S. economy and the number of U.S. business formations. Declines in the overall number of U.S. business formations or the number of business formations on our platform have adversely affected, and may in the future adversely affect, our business, results of operations, financial condition or future prospects. To the extent the growth rate of overall U.S. business formations declines, these impacts can be expected to intensify.

For the past few years, a significant amount of our revenue has been derived from our subscriptions for small businesses and individuals. In 2025 and the threesix months ended MarchJune 31,30, 2026, approximately 65% and 63%,64%, respectively, of our revenue came from subscriptions. Subscriptions have primarily originated from transactional customers who opted to become subscribers. For us to maintain or improve our operating results, including our revenue growth rate, it is important that we convert transactional customers into subscribers, retain our existing subscribers and that our existing subscribers expand their use of our platform. However, subscriptions may be terminated at any time, and the rate at which we retain our subscribers may decline or fluctuate as a result of a number of factors, including subscribers’ satisfaction or dissatisfaction with our platform, the effectiveness of our customer support services, the quality and perceived quality of the services we provide, our pricing and the pricing of competing products or services, the lifecycle of our customers’ businesses and their evolving needs, the effects of global economic conditions, regulatory changes and reductions in subscribers’ discretionary income and spending levels. As a result, we cannot accurately predict subscription renewal rates or the number of our existing or new customers that will subscribe to our subscription services, including whether customers will continue to subscribe at the same rate as they have historically. During 2025, we experienced a deceleration in our subscription revenue growth rate. If our subscription revenue growth rate does not continue to improve, our business, results of operations, financial condition and future prospects would be adversely affected. If the growth of our subscription business, including our subscription revenue growth rate, falls below the expectations of the public market, securities analysts or investors, the price of our common stock could also be harmed.

Our future quarterly results of operations may fluctuate significantly due to a wide range of factors, which makes our future results difficult to predict

•seasonal variations, including those related to orders placed, sales and marketing and other activities or other seasonal fluctuations in our results of operations that are out of our control;

Since inception, we have incurred an accumulated deficit and may incur net losses in the foreseeable future. As of MarchJune 31,30, 2026, we had an accumulated deficit of $1,177.1$1,217.9 million.

In order to increase revenue and maintain profitability, we must attract new customers and retain existing customers. The quality and value of our services, customer care and customer experience, as well as the quality and accuracy of the services provided by the independent attorneys who participate in our and our partner’s networks, are critical to the success of our business and our ability to attract and retain customers. The failure or perceived failure of our customer support and fulfillment services and/or these independent attorneys to satisfy customer expectations could impede our ability to attract and retain customers.

In addition, we intend to continue to add new products and services and enhance our existing products and services, both of which will require us to devote significant resources before we know whether such products or services will be successful. For instance, in late 2025 we launched new conciergebusiness manager offerings for the DIFM management of business compliance requirements. The success of any new products or services or enhancements to existing products or services depends on several factors, including timely completion, competitive pricing, adequate quality testing, introduction, integration with existing products and services, and market awareness and acceptance. We have in the past invested resources and introduced new products and services that have failed to produce the customer interest or results that we expected. We may fail to attract new customers or lose existing customers if current or future development efforts or services fail to meet customer expectations on a timely basis if at all. If we are unable to continue offering innovative solutions or if new or enhanced solutions fail to engage our customers, we may be unable to attract additional customers or retain our current customers, which may adversely affect our business, results of operations, financial condition or future prospects.

Any of our existing competitors, or other potential competitors that have not yet entered the market, have developed and may continue to develop innovative and cost-effective services, including automated corporate formation document processing, that target our existing and potential customers. Some of our competitors and potential competitors are larger and have greater name recognition, longer operating histories, more established customer relationships, larger budgets,relationships and significantly greater resources than we do. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or customer requirements. We expect to face increasing competition from offline and online legal services providers in our market, including through their use of AI, and our failure to effectively compete with these providers could result in revenue reductions, reduced margins, or loss of market share, any of which could have a material adverse effect on our business, results of operations, financial condition and future prospects.

We believe our brand has contributed to the success of our business and we have made substantial investments to build and strengthen our brand and reputation. Maintaining and enhancing the LegalZoom brand and our reputation is critical to growing and retaining our customer base. Regulatory proceedings, consumer claims, false and misleading advertising claims, litigation, customer complaints or negative publicity through word-of-mouth, social media outlets, blogs, and other third party sources related to our business practices, as well as customer care, data privacy or security issues, irrespective of their validity, could diminish confidence in our services and adversely affect our brand and reputation and our ability to attract and retain customers. In addition, our brand and reputation could be impacted by any damage or reputational harm to the Inc. Authority and Nevada Corporate Headquarters brands we acquired in February 2025.

We have incorporated and intend to continue incorporating a number of AI-powered features into our platform and product offerings. The technologies underpinning these features are in the early stages of commercial use and present a number of regulatory, litigation, ethical, reputational, operational and financial risks. AI technologies, including the third-party large language models incorporated into our AI-powered offerings, may create accuracy issues, including flawed, incomplete, or inaccurate outputs and/or unintended biases and discriminatory outcomes. If the output, recommendations, content, or analyses that our AI applications assist in producing are or are alleged to be deficient, inaccurate, biased or discriminatory, or if they are determined to constitute UPL, we could be subjected to competitive harm, legal or regulatory liability, and brand or reputational harm. Some AI scenarios may also present ethical issues. If we enable or offer AI solutions that are controversial because of their perceived or real impact on human rights, privacy, employment, or other social issues, we may experience brand or reputational harm. Moreover, the regulatory framework for AI is rapidly evolving as many federal, state, and foreign government bodies and agencies have introduced or are considering additional laws and regulations. For example, the Colorado AI Act and California’s AI-related laws regulate the development and deployment of AI technologies. While new AI initiatives, laws, and regulations are emerging and evolving, what they ultimately will look like remains uncertain, and our obligation to comply with them could impact our development, offering and use of AI technologies, entail significant costs, limit our ability to incorporate certain AI capabilities into our business, or result in regulatory investigations and actions, and lawsuits.

In addition, our employees and personnel use AI technologies to perform certain functions of their work, and the disclosure and use of personal data in AI technologies is subject to various privacy laws and other privacy obligations. Further, sensitive information regarding the Company or its customers could be leaked, disclosed, or revealed as a result of or in connection with our employees’, personnel’s, or vendors’the use of AI technologies.technologies by our employees or vendors.

Our ability to attract new customers and retain existing customers dependdepends in large partlargely on the success of our marketing channels. The primary marketing channels that generate traffic for our websites include search engine marketing, social media and other digital channels, television and our sales team.

TheWe introductionhave of new technology or changes in the way in which customers consume information on the internet, such as shifting preferences for AI chat platforms, has diminishedbeen and may continue to diminish the effectiveness of our current marketing practices. We have in the past and may in the futureagain be required to adopt new marketing approaches in response to marketing to respond to these shifts andin ourhow customers consume information online. These efforts to remain competitive with technology trends, including the use of new or improved technology such as AI powered search platforms or evolving creative user interfaces, may increase our costs butwithout maya notcorresponding increase in sales or attractcustomer customers.acquisition. Any inability to respond to these changes effectively and in a cost-effective manner,effectively, or any future reduction or loss of any of our current advertising channels, could adversely affect our ability to attract new customers,customers whichand, couldin adversely affectturn, our business, results of operations, financial conditioncondition, and future prospects.

Our future success will depend upon our continued ability to identify, hire, develop, motivate and retain top talent. Competition for such talent is intense, particularly within the technology industry. To attract top talent, we have had to offer, and believe we will need to continue to offer, highly competitive compensation and benefit packages before we can validate the productivity of those employees, a practice which may not be sustainable and, even if sustainable,and can be costly. We have from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining highly skilled employees with appropriate qualifications which may, among other things, impede our ability to execute our growth strategies or continue to operate our business in a satisfactory manner. In addition, our flexible first work policy, which results in a predominantly remote workforce, has made it difficult to orient, train, develop, motivate, and engage with our employees and embed them into the LegalZoom culture. If we are not able to effectively attract or retain quality employees and manage both our domestic and international workforce, including if employee relations deteriorate, disruptions to the business will occur, our costs will increase, our ability to achieve our strategic objectives will be adversely impacted, our brand or reputation could suffer, and our business may be adversely affected. In addition, we have in the past, and may in the future, conduct reduction in workforce actions, which can lead to the elimination of roles causing unexpected adverse impacts on our business. These adverse impacts can include attrition beyond the intended reduction in workforce, delays in the development of new products or services due to gaps in knowledge transfer and new employee ramp up time, an increased risk of litigation, the distraction of employees, and reduced employee morale, any of which could also adversely affect our reputation as an employer and make it more difficult for us to hire new employees in the future.

In addition, if we cannot attract additional, qualified independent attorneys to participate in our legal planattorney network to service the needs of our legal plan subscribers and attorneys to support our attorney assisted legal offerings, or if these attorneys encounter regulatory issues that prevent them from being able to service thethese needscustomer of our customers,needs, we may not be able grow and maintain our legal plan subscription business or other assisted legal solutions and, as a result, our business, revenue, results of operations and future prospects may be adversely affected.

We depend on, and anticipate we will continue to depend on, various third party relationships to sustain and grow our business. For example, we currently partner with a variety of third parties to provide us with lead referrals and to provide our customers with tax solutions, website development, credit card and banking services, productivity tools and business insurance, among others. Our sales and customer experience depend on our ability to connect to, and integrate easily with such third-party solutions. We have in the past and may in the future determine to exit certain partnership relationships. We may also fail to retain and expand partnership relationships for many reasons, including third parties’ failure to maintain, support, or secure their technology platforms in general, restrictions imposed by regulatory compliance, and our integrations in particular. Terminations of partnership relationships, whether voluntary or involuntary, have in the past and could again in the future result in disputes or litigation or harm our relationship with our customers, our reputation and brand, our business and results of operations, and our future prospects.

We also utilize third parties in connection with the fulfillment and distribution of our services, including the independent attorneys inthat support our legal plan network and toother parties that support our registered agent and virtual mail subscription services. We also outsource certain operational functions, including certain sales, customer service and fulfillment functions. As a result, we rely on third parties to ensure that our and our customers’ needs are sufficiently met. While we select third party providers carefully, we have limited control over their actions. If these third party providers encounter difficulties, or if we have difficulty communicating with them, our business operations could be adversely affected. This reliance on third party providers also subjects us to risks arising from the loss of control over processes, and potentially, termination of these services by the third parties. A failure of our third party providers to perform services in a satisfactory manner may have a significant adverse effect on our business. In addition, our platform interoperates with certain third party sites. As a result, our results may be affected by the performance of those parties and the interoperability of our platform with other sites. If certainthese third parties limit certain integration functionality, change their treatment of our services at any time, or experience quality issues, such as bugs and defects, our revenue, results of operations and future prospects may be adversely affected.

We also utilize various types of data, technology, intellectual property and services licensed or otherwise obtained from unaffiliated third parties in order to provide certain elements of our solutions. For example, we rely on cloud computing infrastructure, particularly from Amazon Web Services, or AWS, to host our platform and support our operations. We exercise limited, if any, control over these third parties, including AWS, which increases our vulnerability to problems with the services they provide for us and to security incidents or breaches affecting the data and information they hold or process on our behalf. Any errors, defects, bugs or other vulnerabilities in any third party data or other technology could result in errors in our solutions that could harm our business, damage our reputation and result in losses in revenue, and we could be required to undertake substantial additional research and expend significant development resources to fix any problems that arise. In addition, licensed data, technology, intellectual property and services may not continue to be available on commercially reasonable terms, or at all. Any loss of the right to use any of these data, technology or intellectual property licenses or services on commercially reasonable terms, or at all, could result in delays in producing or delivering our solutions until equivalent data, technology, intellectual property or services are identified and integrated, which delays could harm our business. In this situation we would be required to either redesign our solutions to function with such equivalent data, technology, intellectual property or services available from other parties or to develop these components or services ourselves, which would result in increased costs and potential delays in service. Furthermore, we might be forced to limit the features available in our current or future solutions. If we fail to maintain or renegotiate any of these data, technology or intellectual property licenses or services, we could face significant delays and diversion of resources in attempting to identify or develop similar or replacement technology, or to license and integrate a functional equivalent of the relevant data, technology, intellectual property or service. The occurrence of any of these events may have an adverse effect on our business, financial condition, results of operations and future prospects.

The acquisition of Formation Nation and anyAny future acquisitions or investments may divert our management’s attention, result in additional dilution to our stockholders or adversely affect our operating results

We have in the past acquired or invested in businesses, products or technologies that we believed could complement or expand our current platform, enhance our technical capabilities or otherwise offer growth opportunities. In February 2025, we acquired Formation Nation, and we may in the future seek to acquire or invest in additional businesses, products or technologies. The risks and uncertainties we face in connection with the recent acquisition of Formation Nation or any future acquisitions or investments, whether or not they are consummated, include, but are not limited to:

In addition, limitations or errors with respect to how we measure data or with respect to the data that we measureitself may affect our understanding of certain details of our business, which could affect our long-term strategies. If our financial and operating metrics are not accurate representations of our business, or if investors do not perceive our operating metrics to be accurate, or if we discover material inaccuracies in our metrics, our reputation may be harmed, and our business, results of operations, financial condition and future prospects could be adversely affected.

In addition, the Amended Revolving Facility also permits borrowings denominated in Euros, British pound sterling and other alternative currencies that may be approved by the administrative agent and revolving lenders. SuchAny such non-U.S. dollar-denominated debt may not necessarily correspond to the cash flow we generate in such currencies.

We structure our relationships with the independent attorneys and independent accountants who participate in our and our partners' networks in a manner that we believe results in an independent contractor relationship, not an employee relationship. On the other hand, some of our intellectual property offerings are currently fulfilled by our or our subsidiaries’ own lawyers and fulfillment staff. We also use contractors, temporary employees and/or consultants as part of our operations. An independent contractor is generally distinguished from an employee by his or her degree of autonomy and independence in providing services. A high degree of autonomy and independence is generally indicative of a contractor relationship, while a high degree of control is generally indicative of an employment relationship. Tax or other regulatory authorities may in the future challenge our characterization of the independent attorneys who participate in our networks, or the other contractors and consultants used by us. If such regulatory authorities or state, federal or foreign courts were to determine that these attorneys or other contractors and consultants are employees, and not independent contractors, we would be required to withhold income taxes, to withhold and pay social security, Medicare and similar taxes, to pay unemployment and other related payroll taxes and could face allegations of UPL or CPL. We would also be liable for unpaid past taxes and subject to penalties. As a result, any determination that these individuals are our employees could have a material adverse effect on our business, results of operations, financial condition and future prospects. It is also possible that we could face claims of joint employment from the independent professionals who participate in our partner networks or from individuals working as a consultant, temporary employee, or contractor, if they were to pursue employment claims against LegalZoom. If a joint employment relationship is found to exist, joint liability for any successful claims would also likely exist.

•our ability to successfully implement our strategic execution priorities;

Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the prevailing market price of our common stock. At MarchJune 31,30, 2026, holders of approximately 55 million shares of our common stock are entitled to rights pursuant to an investors’ rights agreement, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. If one or more of these holders of our common stock sells a large number of shares by exercising their registration rights, it has in the past and may in the future adversely affect the market price for our common stock. In addition, if we file a registration statement for the purposes of selling additional shares to raise capital and are required to include shares held by these holders pursuant to the exercise of their registration rights, our ability to raise capital may be impaired.

Based upon shares of our common stock outstanding as of MarchJune 31,30, 2026, our executive officers, directors and other affiliates, in the aggregate, own shares, directly or indirectly, representing approximately 21% of our outstanding common stock. If our executive officers, directors and affiliates acted together, they may be able to significantly influence matters requiring stockholder approval, including the election and removal of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. The concentration of voting power and transfer restrictions could delay or prevent an acquisition of our company on terms that other stockholders may desire or result in the management of our company in ways with which other stockholders disagree.

•Our share of small and medium-sized businesses (SMBs). In the three months ended March 31, 2026 and 2025, business formations represented the largest share of our total transaction orders. Business formations act as an entrance point for many customers to the LegalZoom ecosystem, where they then often purchase a mix of transaction and subscription offerings alongside and after the initial formation transaction. However, AI-drivenchanges that Google is making, including changes in search is reshaping customer acquisition dynamicsalgorithms and the prioritization of AI-generated summaries within the search experience, as well as the ways in which Google chooses to enforce its policy regarding the advertisement of federal filings, are reshaping how potential customers find and engage with LegalZoom. AsWe have seen these changes result in a result,reduction in organic traffic and a higher emphasis on paid search, and we expect these customer acquisition dynamics to continue to evolve. In response, we are diversifyingcontinuing to optimize our go-to-market and customer acquisition strategy, including by diversifying our marketing investments across media channels viaand increasing our level of brand marketing, which may result in an increase in our marketing costs. We are also expanding beyond traditional search through strategic partnerships and collaborations, including with AI platforms,platforms and expanding our go-to-market strategy to focus on both higher intent customers andother emerging and established business.channels. Over time, we expect partnershipspartnership-driven and AI-platform channels to driverepresent a greater share of high-value customer acquisition.acquisition, and we are investing accordingly. As a result, our operating results depend on the continuation of new business formations in the U.S. and even more so, on our ability to attract new and existing businesses to our platform via various acquisition channels.

•Ability to enhance customer lifetime value. Our future performance depends on our ability to integrate new products and services into our LegalZoom ecosystem and to increase recurring revenue through subscription offerings. We are continuing to optimize our subscription business, including by testing various commercialization and pricing strategies for our offerings and introducing new, higher value, full-service do-it-for-me (“DIFM”) subscription offerings, including our business manager (formerly concierge) suite of offerings. As a result, we have experienced and we expect to continue to experience increased volatility across our key business metrics.

•Ability to integrate augmented legal expertise. We believe that the future of legal and small business services involves a combination of AI and human expertise. We aim to utilizescaling AI to drive efficiency and scale, while relyingstrategically onintegrating our teamhuman-in-the-loop of concierge managers and our independent network of attorneysofferings to provide the judgment and trust that customers need. These offerings have two layers: experts (which includes our business managers and our independent network of attorneys) and service (which includes our virtual mail and registered agent providers). The extent to which we are able to combine AI with our human expertise in order to drive cost efficiencies and increase the consumption of our DIFMhigher-value offerings will impact our future results of operations.

The below table sets forth the number of business formations for the three and six months ended MarchJune 31,30, 2026 and 2025:

We experienced an 8% increase in business formation transactions duringDuring the three months ended MarchJune 31,30, 20262026, we experienced a 5% decrease in business formation transactions compared to the three months ended MarchJune 31,30, 2025,2025 primarily due to the impact of changing customer acquisition dynamics partially offset by an increase in formations through our partnership channel as well as the inclusion of a full quarter ofbusiness formations fromdriven Formationby Nation.strategic partnerships.

The below table sets forth the number of transactions for the three and six months ended MarchJune 31,30, 2026 and 2025:

We experienced a 10%1% increase in the number of transactions during the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025, primarily due to an increase in Annual Report filings within our compliance offerings as a result of filing automation and an increase in business formations. The increase wasautomation, partially offset by athe declinedecrease in beneficialbusiness ownership information report filings following a Financial Crimes Enforcement Network (“FinCEN”) ruling on March 21, 2025 that eliminated this filing requirement for U.S. companies.formations.

The below table sets forth the average order value for the three and six months ended MarchJune 31,30, 2026 and 2025:

Subscriptions typically range from 30 days to one year in duration and the vast majority of our new subscriptions originate from business formation orders and have an annual term. Our customers can have multiple subscriptions at the end of a period. For example, a popular combination for a new small business owner is attorney advice and registered agent subscriptions.

The below table sets forth the number of subscription units as of MarchJune 31,30, 2026 and 2025:

TheWe numberexperienced ofa 3% decrease in subscription units was flat from MarchJune 31,30, 2025 to MarchJune 31,30, 2026.2026 Thisdue was primarily driven byto a decrease in accounting, forms, e-Signatureforms and eSignature subscriptions as well as accounting solutions and a decrease in registered agent subscriptions, partially offset by an increase in legal advisory subscriptions from the bundling of this subscription into certain business formation offerings, as well as increases in compliance subscriptions, legal advisory subscriptions, subscriptions from our partnership channel and virtual mail subscriptions.

The below table sets forth ARPU as of MarchJune 31,30, 2026 and 2025:

ARPU increased 4%5% as of MarchJune 31,30, 2026 compared to MarchJune 31,30, 2025 benefiting from pricing initiatives on our registered agent subscriptions, partially offset by a shift in mix towards our lower priced subscription offerings, including Formsforms and eSignature and accounting solutions, due to the bundling of these products into certain business formation offerings.

On a sequential basis, ARPU as of MarchJune 31,30, 2026 decreasedincreased 1%3% compared to DecemberMarch 31, 2025.2026.

We define annual small business retention rate as the percentage of small business subscription units active as of the last day of the quarter one year ago that were still active subscriptions 12 months later. Small business subscription units represent our subscriptions targeted at our small business customers and include subscriptions for our registered agent and compliance services, our tax solution, our virtual mail, forms and eSignature solutions and our small business legal advisory plan, and exclude subscriptions from our enterprise customers, our prior operations in the U.K., Formation Nation and our consumer legal advisory plan. Annual small business retention rate includes both monthly and annual subscription units and reflects all subscription unit attrition, including as a result of actual business failures of certain of our customers. Our annual small business retention rate as of MarchJune 31,30, 2026 was approximately 57% which was impacted by lower retaining annualsubscriptions formsbundled andinto e-Signatureour subscriptions.formation offerings.

We expect interest expense to remain insignificant in the near term as we have no outstanding indebtedness. However, we would incur interest expense in the longer term should we draw downborrow on our Amended Revolving Facility or incur other indebtedness.

Other (expense) income, net

Other (expense) income, net consists of realized and unrealized foreign currency gains and losses.

Our provision for (benefit from) income taxes consists of current and deferred federal, state and foreign income taxes.

Stock-based compensation expense decreased for the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025, primarily due to lower expense from performance-basedperformance stock units (“PSUs”), including certain awards with market conditions,conditions granted in prior periods, as well as a reduction inlower expense from time-based restricted stock units (“RSUs”). See Note 8 to our unaudited condensed consolidated financial statements and Note 14 to our consolidated financial statements included in our 2025 Annual Report on Form 10-K for additional information.

Comparison of the Three Months Ended MarchJune 31,30, 2026 and 2025

The increase in total revenue for the three months ended MarchJune 31,30, 2026 compared to the three months ended June 30, 2025 was primarily driven by thecontinued increasesgrowth in both subscription and transaction revenue. Subscription revenue wasrepresented 63%65% and 62% of total revenue for the three months ended MarchJune 31,30, 2026 and 20252025, respectively. Transaction revenue represented 35% and transaction revenue was 37%38% of total revenue for the three months ended MarchJune 31,30, 2026 and 2025.2025, respectively.

Subscription revenue increased 12%11% year-over-year for the three months ended MarchJune 31,30, 2026 primarily due to a 17%39% increase in revenue from our legal advisory subscriptions due to the bundling of this subscription into certain business formation offerings, an 11% increase in revenue from our registered agent subscriptions due to an increase incertain pricing ofinitiatives for these subscriptions and a 25%an increase in revenue from our legal advisory subscriptions from the bundling of this subscription into certain formationcompliance offerings. Subscription revenue growth was partially offset by our prior discontinuation of new customer acquisition for our tax offering.

Gross profit for the three months ended MarchJune 31,30, 2026 increased by $15.7$14.8 million compared to the three months ended MarchJune 31,30, 2025 due to a $23.7$12.8 million increase in revenue and ana $8.0$2.0 million increasedecrease in cost of revenue.

Sales and marketing expenses for the three months ended MarchJune 31,30, 2026 increased by $17.3$9.3 million primarily due to a $10.8$5.9 million increase in customer acquisition marketing spend. Customer acquisition marketing spend was $55.1$52.6 million and $44.2$46.7 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, primarilyreflecting increased spending due to lowerdiversification performanceof marketinginvestments spendin duringbrand theand three months ended March 31, 2025.partnerships. Additionally, there was a $4.5$1.1 million increase in payroll and related benefits largely due to an increase in sales and marketing headcount, and a $1.5$0.8 million increase in depreciation and amortization.

Technology and development expenses for the three months ended MarchJune 31,30, 2026 decreased by $1.7$1.6 million primarily due to a $3.3$3.5 million decrease in payroll and related benefits driven by a reduction in technology and development headcount,headcount. These decreases were partially offset by a $1.1$1.8 million increasedecrease in externalcapitalized consultingsoftware development costs.

General and administrative expenses for the three months ended MarchJune 31,30, 2026 decreased by $8.0$6.6 million compared to the three months ended MarchJune 31,30, 2025. The decrease was primarily due to a $7.5$5.4 million decrease in stock-based compensation expense driven by lower expense from PSUs, including awards with market conditions granted in prior periods, as well as a reduction in expense from time-based RSUs.

The change in interest income was primarily due to interestlower incomeaverage generatedinterest-earning fromcash our money market investmentsbalances during the three months ended MarchJune 31,30, 2026.