LEGALZOOM.COM, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1. Description of the Business

LegalZoom.com, Inc., was initially formed as a California corporation in 1999 and reincorporated as a Delaware corporation in 2007. LegalZoom.com, Inc., and its wholly owned subsidiaries, are referred to herein as the “Company”, “we,” “us,” or “our”.

LegalZoom.com, Inc. 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 our LegalZoom-owned law firm—we offer the tools and guidance people need to confidently manage everything from business formation and compliance to estate planning and ongoing legal support. With over two decades of experience and millions of customers served, LegalZoom helps individuals and small businesses navigate legal needs with confidence.

Note 2. Summary of Significant Accounting Policies

A summary of the significant accounting policies we follow in the preparation of the accompanying unaudited condensed consolidated financial statements is set forth below.

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial information. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these unaudited, condensed, consolidated financial statements should be read in conjunction with our audited, consolidated financial statements and the related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024. The December 31, 2024 unaudited condensed consolidated balance sheet was derived from our audited consolidated financial statements as of that date. Our unaudited condensed consolidated financial statements include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair statement of the unaudited condensed consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. There have been no significant changes in accounting policies during the nine months ended September 30, 2025 from those disclosed in the audited consolidated financial statements for the year ended December 31, 2024 and the related notes, except as noted below under Recently Adopted Accounting Pronouncements.

The operating results for the three and nine months ended September 30, 2025 are not necessarily indicative of the results expected for the full year ending December 31, 2025.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosures of contingent liabilities in the unaudited condensed consolidated financial statements and accompanying notes. Estimates are used for, however not limited to, revenue recognition, sales allowances and expected credit loss allowances, other equity securities, recoverability of long-lived assets and goodwill, income taxes, commitments and contingencies, valuation of assets and liabilities acquired in business combinations, valuation of assets in asset acquisitions, and fair value of stock-based compensation. Actual results could differ materially from those estimates. On an ongoing basis, we evaluate the estimates compared to historical experience and other factors including the current economic and regulatory environment, which form the basis for our judgments about the carrying value of assets and liabilities.

Significant Accounting Policies

Significant accounting policies are detailed in Note 2. Summary of Significant Accounting Policies of our Annual Report on Form 10-K for the year ended December 31, 2024.

Segment and Geographic Information

Our Chief Executive Officer, as the Chief Operating Decision Maker, or CODM, organizes our company, manages resource allocations, and measures performance on the basis ofone operating segment. Refer to Note 13 to our unaudited condensed consolidated financial statements.

Revenue outside of the U.S., based on the location of the customer, represented less than 1% of our revenue for the three and nine months ended September 30, 2025 and 2024. Our property and equipment located outside of the U.S. were immaterial as of September 30, 2025 and December 31, 2024.

Concentrations of Credit Risk

We maintain accounts in U.S. banks with funds insured by the Federal Deposit Insurance Corporation, or FDIC. Our bank accounts may, at times, exceed the FDIC insured limits. Financial instruments that potentially subject us to credit risk consist principally of cash and cash equivalents. Management believes that we are not exposed to any significant credit risk related to our cash or cash equivalents and have not experienced any losses in such accounts.

Due to a large and diverse customer base, no individual customer represented more than 10% of our total revenue for the three and nine months ended September 30, 2025 and 2024. At September 30, 2025, there were two partners with an outstanding balance of 10% or more of our accounts receivable balance. At December 31, 2024, there were no customers with an outstanding balance of 10% or more of our accounts receivable balance.

Accounts Receivable and Allowance for Credit Losses

Our accounts receivable balances, which are not collateralized and do not bear interest, primarily consist of amounts receivable from our credit and debit card merchant processors, customer receivables, and fees due from third parties for services purchased by our customers from such third parties. We reduce our accounts receivable for sales allowances and a reserve for potentially uncollectible receivables. We determine the amount of the allowances based on various factors, including historical collection experience, the age of our accounts receivable balances, credit quality of our customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect our ability to collect from customers. Account balances are charged off against the allowance when we determine that it is not probable we will collect the receivable. At September 30, 2025 and December 31, 2024 the allowance for credit losses was not material.

Investments in Other Equity Securities

We hold an equity investment in LawPath, Pty Ltd, or LawPath, an Australian proprietary limited company that provides an online legal platform to individuals and small and medium sized businesses. The carrying amount of our investment in LawPath was $4.7 million and $4.4 million at September 30, 2025 and December 31, 2024, respectively. The change in the carrying amount was due to an observable price change in an orderly transaction.

Revenue Recognition

We derive our revenue from the following sources:

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. We also earn fees from third-party providers in connection with lead generation activities, where referred customers purchased 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-signature services, and software-as-a-service, or SaaS, 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.

For transaction and subscription revenue, we generally collect payments and fees at the time orders are placed and prior to services being rendered. We record amounts collected for services that have not been performed as deferred revenue on our unaudited condensed consolidated balance sheet. The transaction price that we record is generally based on the contractual amounts and is reduced for estimated sales allowances for price concessions, charge-backs, sales credits and refunds, which are accounted for as variable consideration when estimating the amount of revenue to recognize.

Our transaction and subscription revenue is as follows (in thousands):

Recently Adopted Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We adopted ASU 2023-07 as of December 31, 2024. Refer to Note 13 to our unaudited condensed consolidated financial statements.

In March 2024, the FASB issued ASU 2024-01, Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards, which clarifies how an entity determines whether a profits interest or similar award is a share-based payment arrangement that is within the scope of ASC 718, Compensation - Stock Compensation. This accounting standard is effective for fiscal years beginning after December 15, 2024, including interim periods within those years, and early adoption is permitted. ASU 2024-01 can be applied retrospectively to all prior periods presented in the financial statements or prospectively to profits interest and similar awards granted or modified on or after the date at which the entity first applies this accounting standard. We early adopted ASU 2024-01 effective January 1, 2024 and will apply the amendments prospectively to profits interest and similar awards granted or modified on or after January 1, 2024. The adoption of this accounting standard did not have a material impact to our unaudited condensed consolidated financial statements.

In March 2024, the FASB issued ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements, to amend a variety of topics in the accounting codification by removing references to various FASB concepts statements. This accounting standard is effective for fiscal years beginning after December 15, 2024, and early adoption is permitted. ASU 2024-02 can be applied retrospectively to the beginning of the earliest comparative period presented in which the amendments were first applied or prospectively to all new transactions recognized on or after the date that the entity first applies the amendments. We early adopted ASU 2024-02 effective January 1, 2024 and will apply the amendments prospectively to all new transactions recognized on or after January 1, 2024. The adoption of this accounting standard did not have a material impact to our unaudited condensed consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires entities to disclose more detailed information in the reconciliation of their statutory tax rate to their effective tax rate as well as disclosures of income taxes paid disaggregated by jurisdiction. This accounting standard is effective for the fiscal year ending December 31, 2025, and will be applied prospectively with an option for retroactive application to each period in the financial statements. We are currently evaluating the impact of the adoption to our unaudited condensed consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires public business entities to disaggregate certain expense captions into specific categories in disclosures within the notes to the financial statements. As further clarified by ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), issued by FASB in January 2025, this accounting standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The amendments in ASU 2024-03 should be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements, and early adoption is permitted. We are currently evaluating the impact of the adoption to our unaudited condensed consolidated financial statements.

In November 2024, FASB issued ASU 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments, which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. ASU 2024-04 is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of a reporting period if the entity has also adopted ASU 2020-06 for that period. Entities may apply the new guidance prospectively to settlements of convertible debt instruments that take place during annual reporting periods (and interim reporting periods within those annual reporting periods) beginning after the effective date of ASU 2024-04. Retrospective application may be elected as of the beginning of the first comparative reporting period in which the entity has also applied ASU 2020-06. We are currently evaluating the impact of the adoption to our unaudited condensed consolidated financial statements.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient for calculating current expected credit losses for current accounts receivables and current contract assets by assuming that the current conditions as of the balance sheet date will not change for the remaining life of the asset. The accounting standard is effective for interim and annual reporting periods beginning after December 15, 2025 and is to be on a prospective basis. We are currently evaluating the impact of the adoption to our unaudited condensed consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, to remove all references to software development stages and to require capitalizing software costs when management has authorized and committed to funding a software project and it is probable that the project will be completed and that the software will be used to perform the function intended. The accounting standard is effective for annual reporting periods beginning after December 15, 2027 and interim reporting periods within those annual reporting periods with early adoption permitted at the beginning of an annual reporting period. Adoption of ASU 2025-06 can use a prospective, modified retrospective or retrospective transition. We are currently evaluating the impact of the adoption to our unaudited condensed consolidated financial statements.

Note 3. Other Financial Statement Information

Accounts Receivable

Changes in the allowances consisted of the following (in thousands):

The allowance recognized as a reduction of revenue primarily relates to our installment plan receivables for which we expect we will not be entitled to a portion of the transaction price based on our historical experience with similar transactions. The allowance recognized against general and administrative expense represents an allowance relating to receivables from partners that are no longer considered collectible.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

Goodwill

The following table presents the changes in the carrying amount of goodwill (in thousands):

(1) Amounts relate to the acquisition of Formation Nation, Inc., or Formation Nation. Refer to Note 5. Acquisition to our unaudited condensed consolidated financial statements.

(2) Amounts relate to the $0.3 million payment for net working capital adjustments and measurement period adjustments related to deferred taxes of $1.9 million associated with the acquisition of Formation Nation. Refer to Note 5. Acquisition to our unaudited condensed consolidated financial statements.

(3) Amounts relate to accruals for sales tax remediation associated with the acquisition of Formation Nation. Refer to Note 5. Acquisition to our unaudited condensed consolidated financial statements.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

Deferred revenue

Deferred revenue as of September 30, 2025 and December 31, 2024 was $214.1 million and $175.0 million, respectively. Revenue recognized in the three months ended September 30, 2025 and 2024 that was included in deferred revenue as of June 30, 2025 and 2024 was $101.4 million and $90.4 million, respectively. Revenue recognized in the nine months ended September 30, 2025 and 2024 that was included in deferred revenue as of December 31, 2024 and 2023 was $165.2 million and $159.1 million, respectively.

We have omitted disclosure on the transaction price allocated to remaining performance obligations and the estimated timing of revenue recognition, as our contracts with customers that have a duration of more than one year are immaterial.

Depreciation and Amortization

Depreciation and amortization expense of our property and equipment, including capitalized internal-use software, and intangible assets consisted of the following (in thousands):

Note 4. Sale of Assets Held for Sale

In September 2022, following an evaluation of our office space and business requirements, we determined that our operational headquarters property at 9900 Spectrum Drive in Austin, Texas was no longer aligned with operational needs due to an increased shift to remote work. As a result, we initiated plans to sell the property consisting of land, a building and building improvements, and classified these assets as held for sale.

On September 24, 2024, we entered into a binding purchase and sale agreement for this property with Round Rock Independent School District. The sale was completed on March 31, 2025, and we received net cash proceeds of approximately $37.1 million after deducting selling costs such as brokerage commissions, title fees, and asset disposal costs.

Prior to completion of the sale, the property had a carrying value of $22.7 million. As a result of the sale, we recognized a gain of $14.3 million. This gain is recorded in gain on sale of assets held for sale on the unaudited condensed consolidated statement of operations.

As of March 31, 2025, the property was fully derecognized from our unaudited condensed consolidated balance sheet andno amounts remain to be classified as held for sale as of September 30, 2025.

Note 5. Acquisition

Formation Nation, Inc.

On February 10, 2025, we acquired all of the outstanding equity interests of Formation Nation, Inc. in exchange for a total consideration of $83.0 million consisting of cash, net working capital adjustments and equity consideration comprising 2,205,445 restricted shares of our common stock. The shares are subject to a lock-up and voting agreement, and a portion of the cash consideration is subject to a one-year holdback and customary adjustments. Upon closing of the transaction, Formation Nation and its subsidiaries – including Inc Authority, LLC and Nevada Corporate Headquarters, Inc. – became wholly owned subsidiaries of LegalZoom.

Formation Nation is a Nevada-based small business services company with a range of legal and business solutions, from highly personalized offerings, to lower-cost value options. The acquisition of Formation Nation, along with its subsidiaries, was completed in order to accelerate our strategy of attracting higher value customers by leveraging Formation Nation’s best-in-class customer service teams, expand our portfolio of offerings, and enable us to reach a broader customer base.

The acquisition meets the criteria to be accounted for as a business combination which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date and that the difference between the fair value of the consideration paid for the acquired entity and the fair value of net assets acquired be recorded as goodwill, which is not amortized but is tested at least annually for impairment.

The preliminary fair value of consideration transferred is as follows (in thousands):

(1) Deferred cash consideration includes preliminary adjustments related to sales tax remediation related to Formation Nation’s pre-acquisition revenues.

The fair value of equity issued to the selling shareholder was determined based on the closing price of the Company’s common stock immediately prior to acquisition.

Approximately $12.3 million of the consideration was deferred to satisfy any necessary adjustments, including without limitation, indemnification claims related to general representations and warranties, any net working capital adjustments and deferred change in control bonuses. This deferred consideration is expected to be settled in cash after a 12-month holdback period, net of any amounts necessary to satisfy all unsatisfied or disputed claims for indemnification and net working capital adjustments. An additional $0.2 million in consideration is payable intwo installments on the one- and two-year anniversary of the acquisition date. The current portion of deferred consideration was included in accrued expenses and other current liabilities and the non-current portion was included in other liabilities on our unaudited condensed consolidated balance sheet based on their respective due dates.

The identifiable assets acquired and liabilities assumed were recorded at their preliminary fair values as of the acquisition date and consolidated with those of the Company based on management's estimates and assumptions. Assigning fair market values to the assets acquired and liabilities assumed at the date of an acquisition requires the use of significant judgments regarding estimates and assumptions that may change during the measurement period, which will not exceed one year from the acquisition date. The estimated fair values of the customer relationships were calculated using income and cost approaches, including the multi-period excess earnings method. The estimated fair values of developed technology and in-process research & development were calculated using cost approaches, and the estimated fair value of trade names was calculated using the relief from royalty method.

Goodwill represents the excess of the purchase price over the identifiable net assets acquired arising from the business combination. The goodwill related to the acquisition was attributable largely to the assembled workforce and synergies expected from combining our operations, and is not deductible for tax purposes.

The following table summarizes the preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed (in thousands):

(1) The deferred tax assets above include measurement period adjustments for the release of the valuation allowance related to Formation Nation’s net operating losses.

(2) The accrued expenses and other current liabilities above include preliminary measurement period adjustments for sales tax remediation related to Formation Nation’s pre-acquisition revenues.

The following table summarizes the preliminary valuation of acquired intangible assets and estimated useful lives as of the acquisition date (in thousands, except years):

Acquisition costs related to this transaction of approximately $1.5 million were expensed as incurred and are included in general and administrative expenses on the unaudited condensed consolidated statements of operations.

Results of Formation Nation, inclusive of any synergy effects, cross-selling, or cross-marketing benefits, have been included within the unaudited condensed consolidated financial statements since February 10, 2025, the date of the acquisition. Revenue and net loss attributable to Formation Nation included within the unaudited condensed consolidated statements of operations since the acquisition date were approximately $14.7 million and $1.4 million, respectively, for the three months ended September 30, 2025 and $35.9 million and $4.0 million, respectively, for the nine months ended September 30, 2025.

Pro forma revenues and results of operations for this acquisition have not been presented as the impact on our unaudited condensed consolidated financial statements would be immaterial.

Note 6. Long-term Debt

On July 2, 2021, we entered into an amended and restated credit and guaranty agreement, or the Revolving Facility, providing for revolving borrowings of up to $150.0 million with an availability period offive years. Under the Revolving Facility, we can use up to $20.0 million in letters of credit and up to $10.0 million in borrowings on same-day notice, referred to as swingline loans. In addition, on May 5, 2023, we entered into an amendment to the Revolving Facility to replace the LIBOR interest rate benchmark with the Secured Overnight Financing Rate, or SOFR, benchmark, with a 0.10% credit spread adjustment to the SOFR benchmark, or Adjusted Term SOFR, for all available interest periods, provided that if the Adjusted Term SOFR is less than zero, the Adjusted Term SOFR shall be deemed to be zero. Other than the foregoing, the remaining terms of the Revolving Facility remained unchanged.

On July 14, 2025, we entered into a second amendment to the Revolving Facility, or, as amended, the Amended Revolving Facility, which reduced the revolving loan commitment from $150.0 million to $100.0 million and extended the maturity date from July 2, 2026 to July 14, 2030. The terms of available letters of credit and swingline loans remained unchanged. In addition, the Amended Revolving Facility added additional reductions to the existing interest rate margins and the commitment fee upon achieving a total net lien leverage ratio of 1.00 to 1.00 and also removes the 0.10% credit spread adjustment to the SOFR benchmark for all available interest periods. As a result of the Amended Revolving Facility, we incurred $0.8 million of incremental deferred issuance costs. Those costs were capitalized in other assets in the unaudited condensed consolidated balance sheets and are amortized straight-line over the term of Amended Revolving Facility. In connection with the Amended Revolving Facility, we performed an extinguishment versus modification assessment on a lender-by-lender basis resulting in the write-off of an insignificant amount of unamortized debt issuance costs under Revolving Facility, included in other (expense) income, net in the unaudited condensed consolidated statement of operations.

Borrowings under the Amended Revolving Facility bear interest at a rate per annum equal to either (a) the SOFR plus a margin ranging from 2.00% to 1.25% or (b) a margin ranging from 1.00% to 0.25% plus the highest of (i) the administrative agent’s prime rate, (ii) the Federal Funds rate plus 0.50% or (iii) one-month Term SOFR plus 1%. The interest rate margins under the Amended Revolving Facility are subject to a reduction of 0.25% upon achieving total net first lien leverage ratios of 3.50 to 1.00 and further reductions of 0.25% upon achieving total net first lien leverage ratios of 2.50 to 1.00 and 1.00 to 1.00, respectively. We are required to pay a commitment fee in respect of unutilized commitments under the Amended 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 0.05% upon achieving a total first lien leverage ratio of 1.00 to 1.00. We are also required to pay customary letter of credit fees and agency fees. We have the option to voluntarily repay outstanding loans under the Amended Revolving Facility at any time without premium or penalty, other than customary “breakage” costs with respect to SOFR loans. There is no scheduled amortization under the Amended Revolving Facility. Any principal amount outstanding is due and payable in full at maturity, five years from the closing date of the Amended Revolving Facility. Obligations under the Amended Revolving Facility are guaranteed by our existing and future direct and indirect material wholly-owned domestic subsidiaries, subject to certain exceptions. The Amended Revolving Facility is secured by a first-priority security interest in substantially all of our assets, subject to certain exceptions.

The Amended Revolving Facility contains a number of covenants that, among other things, subject to certain exceptions, restrict our ability and the ability of our restricted subsidiaries to incur additional indebtedness and guarantee indebtedness; create or incur liens; pay dividends and distributions or repurchase capital stock; merge, liquidate and make asset sales; change lines of business; change our fiscal year; incur restrictions on our subsidiaries’ ability to make distributions and create liens; modify our organizational documents; make investments, loans and advances; and enter into certain transactions with affiliates.

The Amended Revolving Facility requires compliance with a total net first lien leverage ratio not to exceed 4.50 to 1.00, or the Financial Covenant. The Financial Covenant will be tested at quarter-end only if the total principal amount of all revolving loans, swingline loans and drawn letters of credit that have not been reimbursed exceeds 35% of the total commitments under the Amended Revolving Facility on the last day of such fiscal quarter.

At September 30, 2025 and December 31, 2024, we hadno amounts outstanding under our Amended Revolving Facility or Revolving Facility, respectively, or any outstanding letters of credit and we were in compliance with all financial covenants.

Note 7. Commitments and Contingencies

Legal Proceedings

From time to time, we may become subject to legal proceedings, claims and litigation arising in the ordinary course of business. We are not currently a party to any material legal proceedings, nor are we aware of any pending or threatened litigation that could have a material adverse effect on our results of operations, cash flows, and financial condition, should such litigation be resolved unfavorably.

Indemnifications

Indemnification provisions in our third party service provider agreements provide that we will indemnify, hold harmless, and reimburse the indemnified parties on a case-by-case basis for losses suffered or incurred by the indemnified parties in connection with any claim by any third party as a result of our website, advertising, marketing, payment processing, collection or customer service activities. The maximum potential amount of future payments we could be required to make under these indemnification provisions is indeterminable.

No amounts have been accrued or have been paid during any period presented as we believe the fair value of these indemnification obligations is immaterial.

Note 8. Stockholders’ Equity

Stock Repurchase Program

In October 2023, our board of directors approved a stock repurchase program authorizing repurchases of our common stock with no fixed expiration. In May 2025, our board of directors approved a $100.0 million increase in our stock repurchase program, bringing the aggregate amount authorized to $315.0 million. Under this program, we are authorized to repurchase our common stock through any manner, including open market transactions, accelerated stock repurchase agreements, or privately negotiated transactions with third parties, and in such amounts as management deems appropriate. Open market repurchases may be structured to occur in accordance with applicable federal securities laws, including within the pricing and volume requirements of Rule 10b-18 under the Securities Exchange Act of 1934, as amended. We may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of our shares of common stock under this authorization. This program does not obligate us to repurchase any particular amount of common stock and may be modified, suspended or terminated at any time at the discretion of our board of directors. Shares repurchased under our stock repurchase program are purchased for immediate retirement.

During the three months ended September 30, 2025, using Rule 10b5-1 plans, we repurchased a total of 1.8 million shares of our common stock through open market purchases at an average per share price of $9.91 for a total repurchase of $17.6 million including broker commissions. During the nine months ended September 30, 2025, we repurchased a total of 4.0 million shares of our common stock through open market purchases at an average per share price of $9.59 for a total repurchase of $38.0 million including broker commissions. The repurchases were recorded as a reduction to stockholders’ equity in the unaudited condensed consolidated balance sheets. Approximately $112.0 million remained available for future repurchases of our common stock under the stock repurchase program as of September 30, 2025.

The Inflation Reduction Act of 2022, enacted in August 2022, imposed a 1% non-deductible excise tax on net repurchases of shares by domestic corporations whose stock is traded on an established securities market. Consequently, this excise tax is applicable to shares of stock repurchased pursuant to our stock repurchase program beginning in 2023 and represents a cost of the repurchases of our common stock. We havenot recognized an excise tax liability as of September 30, 2025 because the fair market value of the stock issuances exceeded the fair market value of the stock repurchases during the nine months ended September 30, 2025.

Note 9. Stock-based Compensation

Stock-based Compensation Expense

We recorded stock-based compensation expense in the following categories in the accompanying unaudited condensed consolidated statements of operations and balance sheets (in thousands):

Restricted Stock Units and Performance Stock Units

During the nine months ended September 30, 2025, we granted 6.2 million restricted stock units, or RSUs, with a total grant date fair value of $61.2 million to various employees. RSUs are measured based on the fair market value of the underlying stock on the date of grant and recognized as expense over the requisite service period.

During the nine months ended September 30, 2024, we granted 2.5 million RSUs with a performance condition, or PSUs. Vesting of the PSUs is contingent upon the recipient’s continuous employment over the requisite service period and was subject to fulfillment by the Company of a predefined profitability target during the performance period. The number of PSUs subject to vesting was determined at the end of the performance period and could equal zero percent (0%) to two hundred percent (200%) of the target award. If the performance criteria were achieved, one third of the PSUs would vest on the date the compensation committee of the board of directors certified achievement of the performance criteria, and the remaining awards would vest quarterly thereafter through February 2027. These PSU awards also included a modifier to the total number of shares earned based on the Company’s total shareholder return, or TSR, compared to the TSR of the Nasdaq Composite Index during the performance period. The total number of shares issued pursuant to the PSU award could be increased, decreased, or remain unchanged based on the TSR modifier. The TSR modifier applicable to the PSUs was considered a market condition and therefore is reflected in the respective grant-date fair values of the awards. A Monte Carlo simulation was used to account for this market condition in the grant-date fair value of the awards. Expense related to the PSUs is recognized over the employee’s requisite service period using graded vesting attribution method to the extent it is probable that the performance conditions will be achieved. During the nine months ended September 30, 2025, our compensation committee certified achievement of the predefined profitability target during the performance period. In addition, no additional awards were granted as a result of the TSR modifier. We recognized $1.2 million and $2.9 million during the three months ended September 30, 2025 and 2024, respectively, and $5.1 million and $6.4 million during the nine months ended September 30, 2025 and 2024, respectively, in stock-based compensation expense related to these awards.

In July 2024, we granted 2.7 million RSUs with a market vesting condition. Vesting of this award is contingent upon the recipient’s continuous employment over the requisite service period and is subject to achievement of predetermined stock price targets during afive-year performance period. Achievement of the predetermined stock price targets is measured based on a 45-trading day volume weighted-average closing price of our common stock, subject to a 44-day extension in certain circumstances. The number of RSUs subject to vesting during the performance period may equal zero percent (0%) to two hundred percent (200%) of the target award. Upon the achievement of a stock price target during the performance period, one-half of the eligible RSUs will vest on the date the compensation committee of the board of directors certifies achievement of the stock price target and the other half will vestone year from such date, subject to the recipient’s continued employment through the vesting date. We recognized $2.4 million during the three months ended September 30, 2025 and 2024, respectively and $7.4 million and $2.4 million, respectively, during the nine months ended September 30, 2025 and 2024, respectively, in stock-based compensation expense related to these awards.

In November 2024, we also granted 2.4 million RSUs with a market vesting condition to members of our senior leadership team. The grant date fair value of these RSUs at 100% of the target was $12.6 million. The weighted-average grant-date fair value per share of the RSUs granted was $5.30. The fair value of the RSUs was estimated using the Monte Carlo simulation model on the date of the grant. Vesting of this award is contingent upon the recipient’s continuous employment over the requisite service period and is subject to achievement of predetermined stock price targets during athree-year performance period, subject to certification by the compensation committee of the board of directors. Achievement of the predetermined stock price targets is measured based on the trailing 30-trading day volume weighted average closing stock price of our common stock subject to a 29-day extension in certain circumstances. The number of RSUs subject to vesting during the performance period may equal zero percent (0%) to four hundred percent (400%) of the target award. If the compensation committee of the board of directors certifies achievement of a stock price target prior to November 15, 2025, the eligible shares will vest in full and become non-forfeitable on November 15, 2025. If the compensation committee of the board of directors certifies achievement of a stock price target on or subsequent to November 15, 2025,100% of the eligible shares will vest and become non-forfeitable immediately on the date of certification by the compensation committee of the board of directors. We recognized $11.0 million during the three months ended September 30, 2025, and $32.6 million during the nine months ended September 30, 2025, in stock-based compensation expense related to these awards.

Note 10. Income Taxes

We recorded a provision for income taxes of $3.9 million and $9.1 million for the three and nine months ended September 30, 2025, respectively. We recorded a provision for income taxes of $8.2 million and $13.5 million for the three and nine months ended September 30, 2024, respectively. The effective tax rate for the three months ended September 30, 2025 and 2024 was 46% and 43%, respectively. The effective tax rate for the nine months ended September 30, 2025 and 2024 was 49% and 44%, respectively. The difference from the federal statutory rate of 21% is primarily due to the recognition of significant non-deductible stock-based compensation and other discrete adjustments.

Gross unrecognized tax benefits were $16.4 million and $13.4 million as of September 30, 2025 and December 31, 2024, respectively. The gross unrecognized tax benefits, if recognized by us, will result in a reduction of approximately $15.8 million, excluding interest and penalties, to the provision for income taxes, thereby favorably impacting our effective tax rate. Our policy is to recognize interest and penalties related to income tax matters in income tax expense. For the periods presented, interest and penalties related to income tax positions were not material to our unaudited condensed consolidated financial statements.

We are subject to taxation and file income tax returns in the U.S. federal, state, and foreign jurisdictions. The federal income tax returns for the years 2021 and forward and state income tax returns for the tax years 2008 and forward remain open to examination. We are under examination in two states which are not expected to have an impact on our results of operations, cash flows and financial condition.

On July 4, 2025, H.R. 1, the One Big Beautiful Bill Act, or OBBBA, was enacted. The OBBBA includes provisions related to bonus depreciation, provisions related to domestic research and development expenses as well as modifications to the business interest expense limitation calculation. Beginning in 2025, the OBBBA provides an elective deduction for domestic research and development expenses. As a result of incorporating these updated provisions into our income tax provision for the three and nine months ended September 30, 2025 we recorded a decrease to our deferred tax assets with no material changes to our effective tax rate. We are currently assessing the impact of OBBBA to our consolidated financial statements for the year ending December 31, 2025.

Note 11. Net Income Per Share

The following table shows the computation of basic and diluted net income per share (in thousands, except per share amounts):

The following table presents the number of stock options, RSUs, and PSUs, excluded from the calculation of diluted net income per share because they are anti-dilutive (in thousands):

(1) For the three and nine months ended September 30, 2025, anti-dilutive RSUs include RSU awards with a market vesting condition granted in July 2024 and reflected at 200% of target and RSU awards with a market vesting condition granted in November 2024 and reflected at 275% of target. RSU awards with a market vesting condition granted in April 2025 that were previously reflected as anti-dilutive at 400% of target were forfeited during the three months ended September 30, 2025.

Note 12. Fair Value Measurements

Fair value is defined as the price that would be received from selling an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. The standard establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:

Level 1 — Quoted prices in active markets for identical assets and liabilities.

Level 2 — Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

At September 30, 2025, our financial assets recorded at fair value on a recurring basis consist of cash equivalents. At December 31, 2024, our financial assets recorded at fair value on a recurring basis consist of cash equivalents and available-for-sale debt security. The cash equivalents consist of money market funds valued using quoted prices in active markets, which represents Level 1 inputs in the fair value hierarchy.

During the three months ended June 30, 2025, we received proceeds related to the sale of our available-for-sale debt security, our investment in LegalVision Pty Ltd, or LegalVision, of $1.5 million. We acquired our interest in LegalVision through a convertible promissory note for approximately $0.7 million during the year ended December 31, 2019. As a result of the sale, we recorded a net gain of $0.6 million in other income, net in the unaudited condensed consolidated statements of operations.

The carrying amounts of accounts receivable, accounts payable and accrued expenses and other current liabilities approximate fair values because of the short-term nature of these items.

The following tables summarize our assets and liabilities that are measured at fair value on a recurring basis, by level, within the fair value hierarchy (in thousands):

Note 13. Segment Information

Our Chief Executive Officer, as the CODM, organizes our company, manages resource allocations, and measures performance on the basis ofone operating segment on a consolidated basis. The accounting policies of our operating segment are the same as those described in Note 2, Summary of Significant Accounting Policies. The CODM assesses performance for the segment and decides how to allocate resources based on net income that also is reported on the accompanying unaudited condensed consolidated statements of operations as consolidated net income. The measure of segment assets is reported on the unaudited condensed consolidated balance sheets as total assets.

The CODM uses net income to evaluate income generated from segment assets in making key operating and segment resource allocation decisions, such as investments in new product development. Net income is also used to monitor budget versus actual results.

Ourone reportable segment provides an online platform for business formation in the U.S. and, as described in Note 2, Summary of Significant Accounting Policies, generates revenue from customized legal document services and subscriptions offered to our customers. Revenue outside of the U.S., based on the location of the customer, represented less than 1% of our revenue for the nine months ended September 30, 2025 and 2024. Our property and equipment located outside of the U.S. were immaterial as of September 30, 2025 and 2024.

The following table summarizes financial information by reportable segment regularly provided to the CODM (in thousands):

(1)For 2025 and 2024, restructuring costs related to the reduction of our U.S. headcount.

(2) Other segment items included in segment net income primarily consist of foreign currency gains or losses related to our intercompany loans which were denominated in British Pound Sterling and included in other income, net on the unaudited condensed consolidated statements of operations.