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 own law firm—we offer the tools and guidance people need to confidently manage everything from business formation and compliance to intellectual property protection and ongoing business management and legal support. Our ongoing business management services include virtual mail, legal forms, bookkeeping and estate planning services, among others. 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.

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 (“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, 2025. The December 31, 2025 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, 2026 from those disclosed in the audited consolidated financial statements for the year ended December 31, 2025 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, 2026 are not necessarily indicative of the results expected for the full year ending December 31, 2026.

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 security, recoverability of long-lived assets and goodwill, income taxes, commitments and contingencies, valuation of assets and liabilities acquired in business combinations, 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, 2025.

Segment and Geographic Information

Our Chief Executive Officer, as the Chief Operating Decision Maker (the “CODM”), organizes our company, manages resource allocations, and measures performance on the basis of ourone operating segment. Refer to Note 12 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, 2026 and 2025. Long-lived tangible assets located outside the U.S. represented approximately 11.4% of total tangible long-lived assets as of September 30, 2026. Long-lived tangible assets located outside the U.S. were immaterial as of December 31, 2025.

Concentrations of Credit Risk

We maintain accounts in U.S. banks with funds insured by the Federal Deposit Insurance Corporation (the “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, 2026 and 2025. At September 30, 2026, there weretwo partners with outstanding balances of 10% or more of our total accounts receivable balance. At December 31, 2025, there wasone partner with an outstanding balance of 10% or more of our total 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, 2026 and December 31, 2025, the allowance for credit losses was not material.

Investments in Other Equity Securities

We hold an equity investment in LawPath, Pty Ltd (“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 at September 30, 2026 and December 31, 2025.

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. Transaction revenue also includes the transaction price allocated to transaction based services and products bundled in certain arrangements. 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, eSignature services, and software-as-a-service (“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 subscription based services in certain bundled arrangements, including 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.

The timing of revenue recognition, billings and cash collections results in accounts receivable and contract assets. 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. We record amounts recognized as revenue but not yet billed as contract assets within accounts receivable on our unaudited condensed consolidated balance sheets. 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 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 was effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption was permitted as of the beginning of a reporting period if the entity had 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 adopted ASU 2024-04 as of January 1, 2026. The adoption of this accounting standard did not have a material impact 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 receivable and current contract assets by assuming that current conditions as of the balance sheet date will not change for the remaining life of the asset. The accounting standard was effective for interim and annual reporting periods beginning after December 15, 2025 and is to be applied on a prospective basis. We adopted ASU 2025-05 as of January 1, 2026. 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 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, including employee compensation, 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 on 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 may use a prospective, modified retrospective or retrospective transition approach. We are currently evaluating the impact of the adoption on our unaudited condensed consolidated financial statements.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, to make targeted, narrow-scope improvements to the interim reporting guidance in Topic 270 to clarify application and improve consistency in practice. The amendments create a comprehensive list of required interim disclosures and introduce a disclosure principle requiring entities to disclose, in interim periods, any event or change since the previous year-end that has a material effect on the entity. The accounting standard is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027 with early adoption permitted. The adoption of ASU 2025-11 can use a prospective or retrospective transition. We are currently evaluating the impact of the adoption to our unaudited condensed consolidated financial statements.

In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements which includes various amendments that clarify, correct, or make minor improvements to various codifications. The accounting standard is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods within those annual reporting periods, with early adoption permitted. The adoption method of this ASU may vary on an issue-by-issue basis. 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 receivables from partners that are considered uncertain or no longer collectible.

Contract assets

Contract assets as of September 30, 2026 and December 31, 2025 were $5.3 million and $2.7 million, respectively. The increase is associated with a multi-year extension of an existing agreement entered into during the three months ended September 30, 2026 with both fixed and variable consideration.

Prepaid Expenses and Other Current Assets

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

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, 2026 and December 31, 2025 was $220.0 million and $203.9 million, respectively. Revenue recognized in the three months ended September 30, 2026 and 2025 that was included in deferred revenue as of June 30, 2026 and 2025 was $103.8 million and $101.4 million, respectively. Revenue recognized in the nine months ended September 30, 2026 and 2025 that was included in deferred revenue as of December 31, 2025 and 2024 was $193.2 million and $165.2 million, respectively.

The transaction price allocated to our fixed remaining performance obligation was $29.2 million to be recognized over the next 4.3 years, with $6.9 million to be recognized in the next twelve months. We have omitted performance based variable consideration allocated entirely to unsatisfied performance obligations within a series of other distinct performance obligations. Additionally, we elected to omit disclosure on the transaction price allocated to remaining performance obligations for contracts with an original expected term of one year or less.

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. Acquisition

Formation Nation, Inc.

On February 10, 2025, we acquired all of the outstanding equity interests of Formation Nation, Inc., a Nevada-based small business services company with a range of legal and business solutions, in exchange for a total consideration of $83.2 million consisting of cash, net working capital adjustments and equity consideration comprising 2,205,445 restricted shares of our common stock. Approximately $12.5 million of the consideration was initially 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. We paid $13.1 million for the deferred consideration in cash, inclusive of $0.6 million of accrued interest, during the nine months ended September 30, 2026 upon the expiration of the 12-month holdback period, net of any amounts withheld to satisfy all unsatisfied or disputed claims for indemnification and net working capital adjustments.

Note 5. Long-term Debt

On July 2, 2021, we entered into an amended and restated credit and guaranty agreement (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. 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 (“SOFR”) benchmark, with a 0.10% credit spread adjustment to the SOFR benchmark (“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 (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.

Borrowings under the Amended Revolving Facility bear interest at a rate per annum equal to either (a) the 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 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% each 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% reduction 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 on July 14, 2030. 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 (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.

As of September 30, 2026 and December 31, 2025, we hadno amounts outstanding under our Amended Revolving Facility.

Note 6. 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 7. 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 February 2026, our board of directors approved a $100.0 million increase in our stock repurchase program, bringing the aggregate amount authorized to $415.0 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, 2026, we repurchased a total of 2.5 million shares of our common stock through open market purchases and Rule 10b5-1 plans at an average per share price of $5.90 for a total repurchase of $14.6 million, including broker commissions. During the nine months ended September 30, 2026, we repurchased a total of 15.1 million shares of our common stock through open market purchases and Rule 10b5-1 plans at an average per share price of $6.87 for a total repurchase of $103.6 million, including broker commissions. The repurchases were recorded as a reduction to stockholders’ equity in the unaudited condensed consolidated balance sheets. Approximately $65.8 million remained available for future repurchases of our common stock under the stock repurchase program as of September 30, 2026.

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 have recognized an excise tax liability of $0.8 million as of September 30, 2026 because the fair market value of the stock repurchases exceeded the fair market value of the stock issuances during the nine months ended September 30, 2026.

Note 8. 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

During the three and nine months ended September 30, 2026, we granted 0.7 million and 11.4 million restricted stock units (“RSUs”), respectively, with a total grant date fair value of $3.9 million and $74.9 million, respectively, 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.

Performance Stock Units

During the three months ended March 31, 2026, we granted 3.6 million performance stock units (“2026 PSUs”) to members of the senior leadership team. During the three months ended June 30, 2026, we granted 1.7 million 2026 PSUs to a member of the senior leadership team. The 2026 PSUs granted during the nine months ended September 30, 2026 consist oftwo performance components: revenue and total shareholder return (“TSR”). The number of shares ultimately issuable under each component of the 2026 PSUs is based on the Company’s achievement relative to certain performance targets, continuous employment over the requisite service period as well as certification of results by the compensation committee of the board of directors following each applicable performance period.

The revenue component of the 2026 PSUs represents 60% of the target award and achievement is measured based on the Company’s year-over-year revenue growth relative to pre-determined targets forthree one-year performance periods ending on each of December 31, 2026, December 31, 2027, and December 31, 2028. Each annual performance period represents one-third of the awards that may be earned under the revenue component. The number of 2026 PSUs earned for each annual period may range from 0% to 300% of the number of awards allocated to each annual performance period. The grant-date fair value of the revenue component is based on the closing price of the Company’s common stock on the date of grant. Compensation expense for the revenue component is recognized over the requisite service period when achievement of the applicable performance condition is considered probable. The grant date fair value of the revenue component for grants issued during the three months ended March 31, 2026 and June 30, 2026 amounted to approximately $14.6 million and $6.0 million, respectively, both assuming achievement at 100% of target.

The TSR component represents 40% of the target award and achievement is measured based on the Company’s TSR percentile against a pre-determined peer set overtwo performance periods, each beginning January 1, 2026 and ending December 31, 2027 and December 31, 2028. Each performance period represents 50% of the awards that may be earned pursuant to the TSR component. The number of 2026 PSUs earned for each performance period may range from 0% to 400% of the number of awards allocated to each performance period. The grant-date fair value of the TSR component is estimated using a Monte Carlo simulation model as vesting depends on a market condition. Compensation expense for the TSR component is recognized over the longer of the requisite or derived service period regardless of whether the market condition is ultimately achieved. The Company estimated the weighted-average fair value of the TSR component for grants issued during the three months ended March 31, 2026 and June 30, 2026 to be approximately $17.9 million and

$5.8 million, respectively. The assumptions to the Monte Carlo simulation used to calculate the grant date fair value of the TSR component are as follows:

We recognized $4.4 million and $8.5 million in stock-based compensation expense during the three and nine months ended September 30, 2026, respectively, related to the 2026 PSUs. In addition, we recognized $1.8 million and $13.3 million in stock-based compensation expense during the three months ended September 30, 2026 and 2025, respectively, and $11.1 million and $40.0 million in stock-based compensation expense during the nine months ended September 30, 2026 and 2025, respectively, related to performance stock units (“PSUs”) with a market-based condition that were granted during the year ended December 31, 2024.

Note 9. Income Taxes

We recorded a provision for income taxes of $6.8 million and $16.5 million for the three and nine months ended September 30, 2026, respectively. We recorded a provision for income taxes of $3.9 million and a provision of $9.1 million for the three and nine months ended September 30, 2025, respectively. The effective tax rate was 46% for each of the three months ended September 30, 2026 and 2025. The effective tax rate for the nine months ended September 30, 2026 and 2025 was 53% and 49%, 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 $17.9 million and $16.8 million as of September 30, 2026 and December 31, 2025, respectively. The gross unrecognized tax benefits, if recognized by us, will result in a reduction of approximately $17.3 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 2022 and forward and state income tax returns for the tax years 2008 and forward remain open to examination. We are under examination for federal tax year 2023 and one state which are not expected to have an impact on our results of operations, cash flows and financial condition.

Note 10. 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, 2026, anti-dilutive PSUs include the 2026 PSUs reflected at 100% of target, as well as PSUs granted in July 2024 and November 2024 reflected at 200% and 275% of target, respectively. For the three and nine months ended September 30, 2025, anti-dilutive PSUs include PSUs granted in July 2024 and November 2024 reflected at 200% and 275% of target, respectively; PSUs granted in April 2025 previously reflected at 400% of target were forfeited during the three months ended September 30, 2025.

Note 11. 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.

As of September 30, 2026 and December 31, 2025, our financial assets recorded at fair value on a recurring basis consist of cash equivalents. 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.

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 12. 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 three and nine months ended September 30, 2026 and 2025. Long-lived tangible assets located outside the U.S. represented approximately 11.4% of total long-lived tangible assets as of September 30, 2026. Long-lived tangible assets located outside the U.S. were immaterial as of December 31, 2025.

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

(1)For 2026 and 2025, restructuring costs related to the reduction of our global 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 (expense) income, net on the unaudited condensed consolidated statements of operations.

Note 13. Restructuring

From time to time, we initiate cost reduction activities to integrate acquired businesses, to align our workforce with strategic business activities, or to improve efficiencies in our operations. Restructuring expenses include severance for the impacted employees and are included in general and administrative expenses in the accompanying unaudited condensed consolidated financial statements.

In August 2026, we committed to a restructuring plan to reduce the size of our workforce by approximately 13%. This restructuring plan was initiated as part of our ongoing organizational evolution toward becoming a more agile, AI-native company with a simpler operating structure. During the three months ended September 30, 2026, we recognized $6.0 million of restructuring charges and related costs associated with the aforementioned plan, consisting primarily of severance and termination benefits for impacted employees, in general and administrative expenses on the unaudited condensed consolidated statements of operations. Substantially all charges associated with the restructuring plan were incurred during the third quarter of 2026. As of September 30, 2026, approximately $1.4 million of restructuring charges associated with the aforementioned plan were accrued in accrued expenses on the unaudited condensed consolidated balance sheets. We expect substantially all of the remaining amounts to be paid in the fourth quarter of 2026.