การประชุมแถลงผลประกอบการไตรมาส 3 ปี 2026 ของ LegalZoom (LZ): การเติบโตของยอดสมัครสมาชิก, การปรับลดแนวโน้ม EBITDA

ลีกัลซูม (LegalZoom) (NASDAQ: LZ) รายงานรายได้ไตรมาส 3/2026 ที่ระดับ 195 ล้านดอลลาร์ เพิ่มขึ้น 3% เมื่อเทียบรายปี เนื่องจากความเติบโตของรายได้ค่าสมัครสมาชิกช่วยชดเชยรายได้จากการทำธุรกรรมที่อ่อนแอลง ทั้งนี้ กำไรก่อนหักดอกเบี้ย ภาษี ค่าเสื่อมราคา และค่าตัดจำหน่ายที่ปรับปรุงแล้ว (Adjusted EBITDA) เพิ่มขึ้น 8% สู่ระดับ 50 ล้านดอลลาร์ อย่างไรก็ดี ฝ่ายบริหารได้ปรับลดคาดการณ์ผลกำไรตลอดทั้งปีลง เพื่อนำเงินไปลงทุนในการขยายช่องทางการจัดหาลูกค้าใหม่และบริการที่มีมูลค่าสูงขึ้น

ประเด็นสำคัญ

• รายได้ไตรมาส 3 เพิ่มขึ้น 3% เมื่อเทียบรายปี สู่ระดับ 195 ล้านดอลลาร์ โดยรายได้จากค่าสมัครสมาชิกเพิ่มขึ้น 11% สู่ระดับ 140 ล้านดอลลาร์ ขณะที่รายได้จากการทำธุรกรรมลดลง 14% สู่ระดับ 55 ล้านดอลลาร์
• Adjusted EBITDA เติบโต 8% สู่ระดับ 50 ล้านดอลลาร์ โดยมีอัตราส่วน Adjusted EBITDA margin แตะระดับ 26% เพิ่มขึ้นประมาณ 130 basis points
• บริการสมัครสมาชิกแบบผสมผสานผู้เชี่ยวชาญ (Human-in-the-loop) คิดเป็น 49% ของรายได้ทั้งหมด และเติบโตประมาณ 17% เมื่อเทียบรายปี ด้านยอดสมัครสมาชิก Business Manager เพิ่มขึ้นประมาณ 25% จากไตรมาสก่อนหน้า
• ลีกัลซูม ดำเนินการจดทะเบียนจัดตั้งธุรกิจประมาณ 110,000 ราย ลดลง 13% เนื่องจากช่องทางค้นหาแบบดั้งเดิมยังคงเผชิญแรงกดดัน ขณะที่มูลค่าคำสั่งซื้อเฉลี่ยต่อรายการทำธุรกรรม (AOV) ลดลง 12% สู่ระดับ 222 ดอลลาร์
• ฝ่ายบริหารคงค่ากลางของคาดการณ์รายได้ตลอดทั้งปีไว้ที่ 800 ล้านดอลลาร์ แต่ปรับลดคาดการณ์ Adjusted EBITDA ลงสู่ระดับ 180 ล้าน - 185 ล้านดอลลาร์ ซึ่งสะท้อนถึงการลงทุนในช่องทางใหม่ ๆ และผลตอบแทนจากการหาลูกค้าที่ลดลงเป็นหลัก
• บริษัทปิดไตรมาส 3 ด้วยเงินสด 182 ล้านดอลลาร์ โดยไม่มีหนี้สิน และมีกระแสเงินสดเสรีนับตั้งแต่ต้นปีจนถึงปัจจุบัน (YTD) อยู่ที่ 109 ล้านดอลลาร์

ข้อมูลทางการเงินที่สำคัญ

ผลการดำเนินงานด้านธุรกิจและการปฏิบัติการ

บริการแบบผสมผสานผู้เชี่ยวชาญ (Human-in-the-loop) ยังคงเป็นเป้าหมายหลักในการเติบโตของลีกัลซูม บริการเหล่านี้รวมผลิตภัณฑ์ด้านการปฏิบัติตามกฎระเบียบ เช่น ตัวแทนรับจดทะเบียน (Registered Agent) และ Virtual Mail เข้ากับการเข้าถึงผู้จัดการธุรกิจ ทนายความ และผู้เชี่ยวชาญอื่น ๆ ฝ่ายบริหารระบุว่าโมเดลนี้มีวัตถุประสงค์เพื่อสร้างความสัมพันธ์ระยะยาวกับลูกค้า มากกว่าการสร้างรายได้สูงสุดจากการทำธุรกรรมจัดตั้งธุรกิจเพียงครั้งเดียว

บริษัทเริ่มทดสอบชุดบริการจัดตั้งธุรกิจตามระดับความช่วยเหลือที่ลูกค้าต้องการ โดย ณ สิ้นเดือนตุลาคม สัดส่วนลูกค้าที่เลือกบริการระดับท็อปเพิ่มขึ้นมากกว่า 50% ลีกัลซูมกำลังเพิ่มขีดความสามารถด้านการขายและการบริการเพื่อรองรับการเปิดตัวในวงกว้างยิ่งขึ้น

ยอดสมัครสมาชิก Business Manager เติบโตประมาณ 25% จากไตรมาส 2 นอกจากนี้ ลีกัลซูม ยังปรับแต่งบริการให้เหมาะกับอุตสาหกรรมต่าง ๆ รวมถึงอสังหาริมทรัพย์ ซึ่งมีการจัดตั้งธุรกิจที่ยังดำเนินงานอยู่เกือบ 269,000 รายผ่านแพลตฟอร์ม ฝ่ายบริหารระบุว่าการปฏิบัติตามกฎระเบียบแบบต่อเนื่อง การคุ้มครองสินทรัพย์ การควบรวมกิจการ และการขยายพอร์ตการลงทุน เป็นโอกาสการบริการที่เกี่ยวข้องสำหรับลูกค้ากลุ่มนี้

บริการ Virtual Mail ยังคงบันทึกการเติบโตของจำนวนหน่วยผู้สมัครสมาชิกอย่างแข็งแกร่ง โดยลูกค้าสามารถจัดการไปรษณีย์กายภาพผ่านการเชื่อมต่อกับ Claude และ ChatGPT ซึ่งอัตราการใช้งานการเชื่อมต่อ AI เหล่านี้ในบัญชีระดับสูงกว่าคิดเป็นประมาณ 10 เท่าของบัญชีเริ่มต้น

ลีกัลซูม กำลังขยายช่องทางการจัดหาลูกค้าให้หลากหลายยิ่งขึ้นนอกเหนือจากเครื่องมือค้นหาแบบดั้งเดิม โดยยอดขายจากโปรแกรม Chase Offers เพิ่มขึ้นเท่าตัวจากไตรมาสก่อนหน้าในไตรมาส 3 นอกจากนี้ บรรลุข้อตกลงเป็นพันธมิตรร่วมกับ Amex Ads, LivePlan และ TurboTenant

ปริมาณการเข้าชมจากการส่งต่อของแพลตฟอร์ม AI เพิ่มขึ้นเกือบ 50% จากไตรมาสก่อนหน้า แม้ฝ่ายบริหารระบุว่าปริมาณยังคงมีขนาดเล็ก ทั้งนี้ บริษัทกำลังเข้าร่วมโครงการค้นพบข้อมูลร่วมกับกูเกิล (Google), โอเพนเอไอ (OpenAI) และพันธมิตร AI รายอื่น ๆ และได้เริ่มทดสอบการลงโฆษณาแบบชำระเงินในโหมด AI ของ Google แล้ว

เทคโนโลยี AI ยังช่วยสนับสนุนประสิทธิภาพการดำเนินงาน โดยเอเจนต์ AI ของลีกัลซูมสามารถจัดการและแก้ไขปัญหาการสนทนาผ่านแชตได้เสร็จสิ้นเกือบครึ่งหนึ่ง และสายบริการลูกค้าเกือบหนึ่งในสี่ นอกจากนี้ ระบบรับข้อมูลเครื่องหมายการค้าด้วย AI ยังช่วยลดระยะเวลาตั้งแต่สั่งซื้อจนถึงการยื่นคำขอลงประมาณ 20% ในไตรมาส 3 เมื่อเทียบกับไตรมาส 1

แนวทางคาดการณ์ของฝ่ายบริหาร

ลีกัลซูม ได้แคบกรอบคาดการณ์รายได้ปีงบประมาณ 2026 ลงมาอยู่ที่ 797 ล้าน - 803 ล้านดอลลาร์ โดยยังคงค่ากลางไว้ที่ 800 ล้านดอลลาร์ ซึ่งคิดเป็นการเติบโตประมาณ 6% เมื่อเทียบรายปี

สำหรับไตรมาส 4 ฝ่ายบริหารคาดว่ารายได้จะอยู่ที่ 190 ล้าน - 196 ล้านดอลลาร์ โดยมีอัตราการเติบโตอยู่ที่ประมาณ 1% ณ ค่ากลาง คาดว่ารายได้จากการทำธุรกรรมจะลดลงในอัตราระดับสิบกลาง ๆ (mid-teens) เมื่อเทียบรายปี เนื่องจากแรงกดดันอย่างต่อเนื่องในช่องทางค้นหา

คาดว่า Adjusted EBITDA ตลอดทั้งปีจะอยู่ที่ 180 ล้าน - 185 ล้านดอลลาร์ ซึ่งคิดเป็นอัตราส่วนกำไรประมาณ 23% ณ ค่ากลาง ส่วน Adjusted EBITDA ไตรมาส 4 คาดไว้ที่ 48 ล้าน - 53 ล้านดอลลาร์ โดยมีอัตราส่วนกำไรประมาณ 26% ณ ค่ากลาง

ฝ่ายบริหารระบุว่ามากกว่าครึ่งหนึ่งของการลดลง 10 ล้านดอลลาร์ในค่ากลาง Adjusted EBITDA เกิดจากการลงทุนในพันธมิตร เครือข่ายการตลาด และการลงโฆษณาใน AI แบบชำระเงิน อีกประมาณหนึ่งในสี่สะท้อนถึงผลตอบแทนจากการหาลูกค้าที่ลดลง ส่วนที่เหลือถูกนำไปสนับสนุน Business Manager และชุดบริการจัดตั้งธุรกิจใหม่

คาดการณ์ดังกล่าวตั้งอยู่บนสมมติฐานว่าสภาพแวดล้อมการค้นหาในปัจจุบันจะดำเนินต่อไปจนถึงสิ้นปี และยังไม่ได้รวมสมมติฐานการฟื้นตัวของปริมาณการเข้าชมจาก Google

ความเสี่ยงและประเด็นที่ต้องจับตา

• แรงกดดันจากช่องทางค้นหาแบบดั้งเดิมกำลังส่งผลให้ต้นทุนการจัดหาลูกค้าสูงขึ้น และลดปริมาณการจัดตั้งธุรกิจ
• ช่องทางจัดหาลูกค้าใหม่ ๆ อาจให้ผลตอบแทนต่ำกว่าในช่วงแรก ในระหว่างที่ลีกัลซูมทดสอบและปรับปรุงประสิทธิภาพ
• รายได้ค่าสมัครสมาชิกอาจได้รับผลกระทบตามมาหลังจากปริมาณธุรกรรมที่อ่อนแอ เนื่องจากยอดสมัครสมาชิกมักจะเกิดตามหลังกิจกรรมการจัดตั้งธุรกิจ
• สัดส่วนธุรกรรมเปลี่ยนไปยื่นรายงานประจำปีที่มีมูลค่าต่ำกว่า ส่งผลให้มูลค่าคำสั่งซื้อเฉลี่ยลดลง
• การลงทุนในขีดความสามารถด้านการขายและการบริการจะเพิ่มต้นทุนในระยะสั้น ขณะที่ผลประโยชน์ด้านการมีส่วนร่วมและการรักษาฐานลูกค้าที่คาดไว้นั้นต้องใช้เวลาในการสร้างผลลัพธ์

ไฮไลต์การถาม-ตอบกับนักวิเคราะห์

ฝ่ายบริหารระบุว่าบริการแบบผสมผสานผู้เชี่ยวชาญ (Human-in-the-loop) เป็นโอกาสการเติบโตระยะยาวที่ยั่งยืนที่สุดของลีกัลซูม โดยคาดว่าการสนับสนุนจากผู้เชี่ยวชาญ, Business Manager และบริการระดับพรีเมียมจะช่วยชดเชยแรงกดดันในส่วนการดึงดูดลูกค้าระยะแรก (top-of-funnel) ได้เมื่อเวลาผ่านไป

เกี่ยวกับการใช้จ่ายในการจัดหาลูกค้า ฝ่ายบริหารกล่าวว่าลีกัลซูมจะให้เวลาแก่ช่องทางใหม่ ๆ ในการเติบโต แต่จะยังคงใช้เกณฑ์ผลตอบแทนและมูลค่าตลอดช่วงชีวิตของลูกค้า (Customer Lifetime Value) ต่อไป ทั้งนี้ การใช้จ่ายจะปรับเปลี่ยนไปยังช่องทางที่มีความคุ้มค่าสูงสุดเมื่อมีข้อมูลผลการดำเนินงานมากขึ้น

ฝ่ายบริหารระบุว่าความร่วมมือกับพันธมิตรสามารถขยายตัวได้อย่างมีนัยสำคัญ เนื่องจากลูกค้าที่ได้รับการส่งต่อมามักจะมีความพร้อมในการพัฒนาธุรกิจมากกว่า มีแนวโน้มการซื้อสูงกว่า และอาจสร้างมูลค่าตลอดช่วงชีวิตได้สูงกว่า ทั้งนี้ การเติบโตในอนาคตจะขึ้นอยู่กับการเพิ่มพันธมิตรและการพัฒนาข้อเสนอการบริการที่มีความแตกต่าง

เกี่ยวกับการโฆษณาผ่าน AI ลีกัลซูมกำลังทดสอบการลงโฆษณาในโหมด AI ของ Google และโฆษณาในรูปแบบแชต โดยฝ่ายบริหารกล่าวว่าการลงทุนจะยังคงขึ้นอยู่กับข้อกำหนดด้านผลกำไรและผลตอบแทน

นอกจากนี้ บริษัทยังระบุว่าการปรับโครงสร้างองค์กรส่วนใหญ่เชื่อมโยงกับประสิทธิภาพที่เพิ่มขึ้นจากระบบอัตโนมัติ AI ฝ่ายบริหารรายงานว่าไม่มีการชะลอตัวถาวรในการพัฒนาผลิตภัณฑ์ และอธิบายว่าการตัดสินใจทำได้เร็วขึ้นและมีการกระจายอำนาจมากขึ้นหลังจากการเปลี่ยนผ่านดังกล่าว

บันทึกการแถลงผลประกอบการฉบับเต็ม

บทถอดเสียงฉบับเต็มของการประชุมทางโทรศัพท์ผลประกอบการ

คำชี้แจงจากฝ่ายบริหาร

Operator

[Operator Instructions]

Please be advised that today's conference is being recorded. I would now like to turn the call over to your first speaker today, Madeleine Crane, Head of Investor Relations. Please go ahead.

Madeleine Crane

Thank you, operator. Welcome to LegalZoom's third quarter 2026 earnings conference call. Joining me today is Jeff Stibel, our Chairman and Chief Executive Officer, and Noel Watson, our Chief Operating Officer and Chief Financial Officer. As a reminder, we will be making forward-looking statements on this call. These forward-looking statements can be identified by the use of words such as believe, expect, plan, anticipate, will, intend, and similar expressions, and are not and should not be relied upon as a guarantee of future performance or results. Such forward-looking statements are based on management's assumptions and expectations and information available to us as of today's date. These forward-looking statements are also subject to risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties are referred to in the press release we issued today and in the Risk Factors section of our most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission.

Except as required by law, we do not plan to publicly update or revise any forward-looking statements, whether as a result of any new information, future events, or otherwise. In addition, we will also discuss certain non-GAAP financial measures. We use non-GAAP measures in making decisions regarding our business, and we believe these measures provide helpful information to investors. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations of all non-GAAP measures to the most directly comparable GAAP measures are set forth in our investor presentation and can be found on the Investor Relations section of our website at investors.legalzoom.com.

I will now turn the call over to Jeff.

Jeffrey Stibel

Thank you, Madeleine, and thank you all for joining us. Third quarter revenue was $195 million, up 3% year over year. Adjusted EBITDA was $50 million, representing a 26% margin. For the full year, we are reiterating the $800 million midpoint of our revenue outlook, or 6% year-over-year growth, while narrowing the range to $797 million to $803 million. We are lowering our adjusted EBITDA outlook to $180 million to $185 million, or a margin of approximately 23%, reflecting both a more challenging acquisition environment and targeted investment. Customer acquisition remains under pressure, and we are making strategic investments to protect our position over the long term.

We are spending more into partners and affiliates, which diversify how we acquire customers, and investing in our Business Manager product and service line, which helps to increase the value of each customer we win. We are also encouraged by what Google has most recently done to expand its ads in AI Mode. We've begun spending into those opportunities. Noel will walk through the details. Of note this quarter, we are approaching an important milestone in our transformation toward higher-value recurring customer relationships. Company-wide human-in-the-loop subscription services now represent 49% of our total revenue. Revenue from these services increased approximately 17% year over year.

Our goal is to help owners start, run, and grow their businesses with AI, experts, and partners all working together. Our objective is not to maximize the value of a single formation, but to build a long-term relationship, which is why we are bringing human-in-the-loop services in from the first day. In late Q3, we began testing a new formation lineup organized around how much help an owner wants: getting started on their own, receiving ongoing business support, or working with credentialed experts. The response has been encouraging, with a larger share of customers choosing our top tier, which includes our highest level of expert support. Our goal is to roll this out more broadly, and we are currently adding talent and service capabilities to support this opportunity. It adds to our Q4 costs, but with benefits we expect to build over time that will increase sales, deeper engagement, and stronger retention. Let me discuss what we are seeing in human-in-the-loop in more detail.

As a reminder, the portfolio has two layers: a service layer, products like Registered Agent and Virtual Mail to keep businesses compliant and connected, and an expert layer, attorneys and business managers that help them grow by putting accountable people behind the decisions that matter. This portfolio is built on 25 years of brand trust, a nationwide attorney network, and a compliance infrastructure and customer experience that are increasingly powered by AI. That is what customers value, and it is where we are growing. Business Manager subscriptions grew approximately 25% sequentially in Q3. We believe that growth underscores customers' demand for ongoing support beyond a single transaction, which reinforces our decision to make lasting service and expertise a core part of the customer journey from day one. That is the idea behind the new formation lineup I mentioned earlier, which makes the level of human support the central choice at the first purchase. The tiers of service range from a business advisor who assists with LLC startup and compliance to full-service support from a business manager, attorney, and accountant.

In the initial rollout, the share of customers selecting our top-tier formation offering increased over 50% as of the end of October. We are also tailoring Business Manager to specific industries, starting with almost 269,000 active real estate businesses that formed with LegalZoom. Many real estate investors manage multiple LLCs with recurring filings and compliance requirements across their portfolios. They subscribe to Business Manager today, giving us a specific opportunity to deepen relationships with businesses we already serve. We'll build on our compliance services with support, including asset protection, acquisition, and portfolio expansion. That means a more relevant, valuable offering for customers and a repeatable model we can take into other industries. Virtual Mail is another human-in-the-loop product with strong subscription unit growth.

And AI is changing how our customers use the service. In addition to our app experience, customers can now manage their physical mail through LegalZoom Virtual Mail integrations in Claude and ChatGPT, asking what has arrived, finding tax and financial documents, and identifying deadlines and legal notices. Adoption of our AI integrations among higher-tier Virtual Mail accounts is roughly 10x that among starter accounts. Put AI and expert service together, and we believe the opportunity is significant. Many small business owners have access to AI tools, but aren't sure how to put them to work. We can help. During the quarter, we launched a pilot with Perplexity, in which Business Managers get customers started with AI, and early usage is encouraging. We can bring that help alongside our services and partner services, beginning the moment an owner forms a business with LegalZoom.

AI, expert support, and the services owners need, all in one place. This brings me to the top-of-funnel, where we are broadening the ways customers find us. Over the past year, we've been intentional about making our go-to-market more resilient through partners, brand, and AI channels. These channels will not replace traditional search overnight, but together they're helping to offset its impact. As a result, we will continue to invest foremost in diversification away from search. Partnerships remain the clearest example. A recent partnership with Chase Bank shows how we can access new channels with stronger engagement and higher purchase propensity. Chase serves over 7 million small business customers.

After launching with Chase Offers in March, sales from the program doubled from Q2 to Q3. When forming an LLC, Chase customers have turned to us for Registered Agent service, annual reports, and state compliance filings, the services that keep a business in good standing. That tells us we are reaching owners with real intent, at formation, and as they grow and run their business. In Q3, we signed new partnerships with Amex Ads and LivePlan, extending our reach across trusted brands that serve small businesses. In line with our real estate focus, we also added TurboTenant, a property management software provider. Turning next to AI, where the authority of our brand helps us get discovered. AI referral traffic is still small, but growing. Traffic from AI platforms grew almost 50% quarter over quarter.

Visitors from organic AI traffic continue to arrive with high intent and convert at meaningfully higher rates than traditional organic search traffic. We are currently participating in beta discovery environments with Google, OpenAI, and other AI partners with some success. For example, earlier cohorts from ChatGPT are generating higher lifetime value compared with our traditional paid channels. Volumes are small, but we expect ad opportunities in these AI experiences to grow materially over time, alongside improvements in tooling to support enhanced targeting and campaign optimization.

In closing, one stat is worth repeating. Our human-in-the-loop subscription services now generate 49% of revenue and grew 17% year over year in Q3. Our direction is to help owners start, run, and grow through our platforms, our experts, and our partner services. We're now bringing that model to customers from the very first purchase, expanding the channels that reach them, and using AI to improve service delivery. Discovery remains challenging, but we have concrete results to build on and a clear focus for our investment. I'm confident in the path ahead. I want to thank our team for their tireless work testing, learning, and executing through a demanding period. And with that, I'll turn the call over to Noel to walk through our financial results and outlook. Noel?

Noel Watson

Thank you, Jeff, and good afternoon, everyone. Unless otherwise stated, all comparisons in my remarks today will be on a year-over-year basis. We ended the quarter with a strong balance sheet. We have $182 million in cash, no debt, and strong free cash flow, all of which give us the needed flexibility to help navigate this changing environment. Those advantages shape how we make decisions, and they are the lens I'll use as I walk through our third quarter results and our outlook for the rest of the year. Third quarter revenue was $195 million, representing 3% growth. Subscription revenue increased 11% to $140 million, exceeding our expectations.

Growth came from legal advisory plans, the result of increased adoption through bundling within select formation offerings, price increases in our compliance offering, and continued growth in our Virtual Mail subscription offering. ARPU rose 9%, benefiting primarily from higher pricing in our Registered Agent and compliance subscriptions, as well as an increase in our higher-value service offerings. In the third quarter, total subscription units were approximately 1.9 million, down 5%, driven by a decline in lower-value forms, e-signature, and bookkeeping subscriptions bundled with certain formation packages. Excluding those, our subscription base grew slightly. Our 12-month small business retention rate held steady at 57%, in line with both the prior quarter and the prior year.

While retention has been steady, we are focused on customer experience enhancements that aim to drive engagement and improve retention. For example, we are introducing a redesigned LegalZoom account and mobile app, bringing a business's status, deadlines, and documents into one place with a personalized action plan that flags compliance gaps and an AI assistant built around each customer's business. Early engagement is encouraging. Customers opening or downloading their documents rose 28% versus the prior experience. And mobile app users were nearly twice as active as similar customers who hadn't engaged. Transaction revenue was $55 million, down 14%, below the high-single to low-double-digit decline built into our outlook as formations and related small business transactions fell more than expected with traditional search under pressure. We processed approximately 110,000 business formations during the quarter, a decline of 13%.

Importantly, formations from strategic partnerships continued to partially offset the pressure from search. As a result, transaction units declined 4% to approximately 249,000. Transaction AOV of $222 declined 12%, resulting from a decline in higher-value business formations and an increase in lower-value annual report filings. Finally, deferred revenue declined $1 million sequentially. Turning to profitability, where all metrics are on a non-GAAP basis, gross margin was 73%, up 2 percentage points year over year. In customer care, our AI agent now fully resolves almost half of chat conversations, up from roughly 1/3 earlier this year. Based on this success, we have expanded the surface of AI agent support to voice, with almost 1/4 of customer care calls now fully resolved by AI.

At our LegalZoom law firm, AI-powered trademark intake reduced purchase-to-filing time by approximately 20% in Q3 versus Q1 and contributed to higher product gross margins. These capabilities lower our cost to serve, improve the customer experience, and allow people to focus on more complex customer needs. Sales and marketing expenses increased 15%, driven by a 15% increase in customer acquisition marketing as we expand and invest in channel diversification across partnerships, brand, and AI-driven acquisition. Non-CAM sales and marketing expenses increased 14%, largely from targeted investments in our sales organization.

Technology and development expenses declined 27% as a result of our reorganization, while G&A declined 3%, improving overall operating leverage. As a result, adjusted EBITDA of $50 million grew 8%, with adjusted EBITDA margin of 26%, expanding approximately 130 basis points. During the quarter, we generated $34 million of free cash flow, reflecting the continued profitability and cash-generating nature of our business. We remain debt-free with $109 million of free cash flow year to date and our $100 million revolving credit facility undrawn. In Q3, we repurchased approximately $15 million of LegalZoom shares at an average price of $5.90. As of September 30, 2026, we had approximately $66 million remaining under our authorization. Share repurchases have reduced our weighted average diluted share count by approximately 10% versus the third quarter of 2025. We also continue to evaluate M&A opportunities that would add durable growth, differentiated distribution, or meaningful cross-sell potential.

Now turning to our outlook. Our guidance assumes the current search environment remains in place through year-end, and it does not assume a recovery in Google traffic. For the full year, we are reiterating the midpoint of our revenue guidance of $800 million, or approximately 6% growth, and narrowing the range to $797 million to $803 million. For the fourth quarter, this implies revenue of $190 million to $196 million or growth of 1% year over year at the midpoint. Consistent with the third quarter, we expect transaction revenue to decline at a mid-teens rate year-over-year, reflecting continued search headwinds. For adjusted EBITDA, we now expect $180 million to $185 million for the full year, an approximately 23% margin at the midpoint. For the fourth quarter, we expect adjusted EBITDA of $48 million to $53 million, or an approximately 26% margin at the midpoint.

Let me bridge the $10 million reduction to our adjusted EBITDA midpoint. More than half is investment in channels that reduce our reliance on search, including partnerships, affiliates, and paid AI placements. In some cases, we are deliberately accepting lower near-term marketing efficiency as these newer channels typically start at lower returns and improve as we optimize them. We are willing to carry that cost while they scale. We continue to hold every channel to return and lifetime value thresholds with a focus on high-quality customers, and as these channels mature, we will shift spend towards those with the most attractive economics. Approximately 1/4 reflects weaker acquisition economics as we manage through this environment.

With search under pressure, it costs more to win each customer, and we are absorbing that cost to protect our position rather than pulling back. The remainder is deliberate investment in sales and service capacity behind our Business Manager offering and the new formation lineup. The sales portion is temporary, tied to seasonality ahead of peak season. The service capacity is a lasting capability with benefits we expect to build over time through deeper engagement and stronger retention. Our cash generation allows us to fund these priorities while continuing to evaluate spending against customer quality and returns.

In closing, we remain focused on what we can control: growing human-in-the-loop subscriptions, investing into diversified acquisition channels, and using AI to improve operating efficiency. We are confident these are the right priorities for the business at this time and we will report our progress against each. Before we open the call for questions, I want to thank the LegalZoom team for their consistent hard work and commitment to our customers. With that, I'll turn the call back to the operator for questions. Thank you.

Operator

[Operator Instructions]

Your first question comes from the line of Eleanor Smith with JPMorgan.

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Eleanor Smith

Maybe for you first, Jeff. You've introduced quite a few new avenues for growth as CEO, from more partnerships, new premium products, and advertisements with the major LLM partners. What are you most optimistic about contributing to growth? And do you think we would still primarily see this show up as growth on the subscription ARPU side?

Jeffrey Stibel

Sure, thanks, Ella. For me, what I'm most excited about is the success we've had in human-in-the-loop. And when you look at the strength we've seen in the core new offerings such as Business Manager, which had 25% quarter-over-quarter growth, as well as what we're doing with this new service lineup that we've been testing in-quarter and are beginning to accelerate, where we're really leaning in on service offerings and expert offerings, I think that this is the truly defensible position that we can take as more and more of those DIY solutions become adaptable in this new environment. And from my standpoint, that's the real durable growth opportunity we have. And now that that's approaching 50%, you can start to see where that will overcome some of the shortfall that we see on top-of-funnel. Of course, all the other things that we've done with respect to diversification is good and strong, and we need to do more of it, but I think long term, it's that human-in-the-loop offering that's going to define us in the future.

Eleanor Smith

Very clear. Thank you. And maybe for Noel, I was hoping to hear more about your philosophy surrounding ramping up or down customer acquisition marketing. What would you need to see in the next few months or quarters to lead you to spend more or less on CAM?

Noel Watson

Yes, thanks for the question, Ella. Certainly, we talked and outlined some of the investments that we're making this quarter. It's in reaction to some of the challenges that we've seen in traditional search with Google with rising costs and pressure on efficiencies. And so from our perspective, it's more important than ever that we diversify from a channel standpoint and reduce our reliance on traditional search. And so we've been leaning into spend around brand, partnerships, affiliates, etc., just to broaden that aperture. These investments for us, they have important strategic benefit because they benefit our brand, they can help with AOV. A lot of times these relationships are bilateral and we can more easily optimize them over time.

So for us, there's a halo effect to this as well. At the same time, we are a return-oriented performance marketing group. And so there are certain return profiles that we will set for these channels. We want to give them time because some of these take time to mature and to optimize, but we'll set the various return hurdles for them and monitor those and make adjustments, as we outlined in our remarks, over time to where we see the most economic benefit.

Eleanor Smith

Very clear. Thanks so much.

Noel Watson

Thank you.

Operator

Your next question comes from the line of John Byun with Jefferies.

Sang-Jin Byun

Great, thank you. This is John Byun on behalf of Brent Thill. I have two questions. One, if you could talk a little bit more about the developments around AI mode and ads there and how you're approaching that and what's interesting in that new avenue. Second, wondering if you can talk about the plans for the upcoming tax season and the partnership that you plan to work with or anything organic. Thank you.

Jeffrey Stibel

Sure, I'll take the first one, John. On AI mode, specifically with respect to Google, which is what I assume you're speaking towards, we talked about the acquisition pressure that we're seeing last quarter. We have been working very hard to do two things. First, diversify away from what Google is trying to do, not necessarily because we're averse to working with Google, but because we knew it was going to take time for them to work through what they needed to do to actually leverage advertising in their partner channel. And the good news is, as I think we've all seen and heard with Google's announcement, they are starting to lean in more on advertising within AI mode. And we are early adopters; we are testing into that. It is one of the reasons why we're increasing our spend into that channel.

That said, we're not going to do it inefficiently. So we will stop it if it is not profitable, but we're in the process of testing into it. We're encouraged, we're excited by the conversations that we're having with Google. But on top of that, we're also diversified.

Noel Watson

Yes, and on the partnership side, as it relates to tax, this is one of the areas where this partnership is maturing. We've made a number of experience changes, both through our sales team and our care team, as well as in our site experience, that's optimized how we bring customers to the opportunity that we provide around bookkeeping and taxes. And so we're scheduling more leads, we're seeing really strong conversion rates, and this is heading into an all-important tax season. So we really feel like this one is teed up and the partnership is strong and the groups are working very closely together to make sure we're ready to go.

Jeffrey Stibel

And the things that you'll see with this new service lineup that we're so excited about, as I brought up with Ella's question, our expert layer will now include accounting advice as well, which is a natural cross-sell and upsell into full accounting.

Sang-Jin Byun

Great, thank you.

Jeffrey Stibel

Thank you.

Operator

Your next question comes from the line of Matt Condon with Citizens JMP.

Matthew Condon

Hey guys, this is Carter Parlette on for Matt Condon. First one here on partnerships. Partnerships have grown pretty substantially to over 10% of the business. How much further do you think that channel can scale, and what are the biggest factors determining growth from here?

Jeffrey Stibel

So short answer, significantly. I think we've had some great success this year, but not enough and certainly not fast enough, especially as that acquisition channel moves. What we've seen with working with partners, we get customers who are later in their stage, so they're less likely to go out of business, they have a higher propensity to buy, and tend to be better customers of ours. So what do we need to do? We need to establish more partnerships, we need to build richer products, we need to make sure that those products are differentiated in such a way that our service and expert layer, that human-in-the-loop, adds real value to the partner in a less tangible way than just paying a rev share or bounty because we're driving better customer experience. So that's what we're primarily focused on.

Noel Watson

Yes, and one add there is we continue to add new partners and really marquee brand name partners, Chase Bank being one that we just mentioned on this call. And what that means for us is we are the brand within our industry, within our space, that these providers, that leaders in each of their own industries and spaces want to work with. So, again, there's a halo effect in terms of brand equity, but also reinforcing of our positioning in our space.

Matthew Condon

Understood. That's very helpful. Moving to subscription revenue, it continues to grow at a double-digit rate, even as subscription units have declined. Can you help us better understand how that growth is being driven? Is it more on the pricing side, or is it more of consumers shifting towards the higher-value products? Thank you.

Noel Watson

Yes, there's a combination of drivers there. I think most importantly, we're seeing strong performance out of our human-in-the-loop services, particularly Business Manager, where we continue to invest in terms of the size of that team and also the service offerings that we provide. There's also some pricing in there. We've shown that we've had pricing power, and so we've looked at different products and where we can take pricing. And then subscription tends to lag behind transactions, so some of the headwinds we've seen on the transaction side take a little bit longer to show up in subscription. And so we'll see some drag here on the subscription line as we look forward, and you see that implied in our Q4 guidance.

Operator

Thank you. Your last question comes from the line of Pat Walravens with William Blair.

Patrick McIlwee

Hi, Jeff, Noel. First on the transactional side. So despite some pretty healthy macro-level trends in business formations, your formations obviously took a decent step down sequentially, and you're now expecting mid-teens declines for the year. So I just wanted to double-click on that and ask how much of that you feel reflects the challenges around search versus weaker conversion or weaker customer demand at large. And also any color on if trends have stabilized at all through October would be helpful.

Jeffrey Stibel

You bet. I'll take at least the first part of that. This largely is an impact from the change that we've seen with search and Google. And we saw a material shift when that happened. The reality is we've been positioning the company for quality share for quite some time, and I think we've been pretty successful in that respect. What that means is we're looking for higher propensity customers. So if you look at that macro, the EIN macro, it's split between high and low propensity. And on the high propensity side, we feel like we were actually driving good, strong success relative to the macro. We were shedding off some of the low propensity customers that we had in prior years and some of the growth that was coming there that wasn't really driving the core underlying business or yielding long-term good customers for us from an LTV standpoint.

Noel Watson

Yes, and as Jeff mentioned earlier, and we also mentioned in our remarks, a factor in all of this is the transition that's happening between traditional search and AI mode. And we're encouraged by the expansion of ad opportunities that we're seeing in AI mode that have started to take shape, and our expectation is that it's going to further expand and we'll lean into that. We're leaning into chat ads as well and excited about some of the tooling that is to come that will allow us to do better targeting and campaign optimization as those grow as channels for us.

Patrick McIlwee

Okay, great. And if I could sneak one more in. On the RIF, can you just help us distinguish how much of that reduction reflected AI-driven productivity improvements versus recalibration of your cost structure in response to some of the volatility around customer acquisition this year? And with that, just any update on if you've experienced any disruption in the product development function from some of those changes or if you still feel like you're falling behind?

Noel Watson

Full steam ahead there. Yes, I would say it was largely to almost entirely tied to efficiencies that we've gained through AI automation. It's something we've been focused on for a while. You see it in our service line and our gross margins and now through kind of our functional OpEx. As with any significant reorganization like that, there's always a transition period, and I think we've gone through some of that, but really the team has reacted very positively and it feels like we are operating at an increased and faster pace with decisioning more decentralized and people able to move very quickly. So it feels like it's been a really healthy decision for the organization overall.

Patrick McIlwee

Okay. Thank you both for the thoughts.

Noel Watson

Thank you.

Operator

Thank you. I'm showing no further questions at this time. Thank you for participating in today's conference. This concludes the program, and you may now disconnect.

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