LZ

LegalZoom is a recognizable brand with a sticky subscription mix — management discloses that ~65% of FY2025 revenue came from subscriptions — sitting on a clean balance sheet: $203M cash, zero long-term debt (per the FY2021 disclosure carried forward as $0), and $178M of operating cash flow against just $30M of capex. Free cash flow of roughly $148M against a $1.02B market cap is a ~14% FCF yield, which is the strongest part of the bull case and explains why management spent $80.5M on buybacks in FY2025. Revenue growth re-accelerated to +10.9% in FY2025, a clear step up from the +3.2% posted in FY2024.

The quality of earnings, however, is going the wrong way. Net income fell -48.5% to $15.4M and operating income dropped -29.8% to $25.0M, compressing operating margin to just 3.3% and net margin to 2.0%. On reported earnings the stock trades at 73x P/E, which is not 'cheap' on any GAAP read — the headline cheapness only shows up in P/S (1.3x) and the FCF yield. The MD&A flags 'increased volatility across our key business metrics' as they test new commercialization strategies and push higher-value DIFM offerings, and the Risk Factors explicitly call out a '2024 deceleration in our subscription revenue growth rate' — so the subscription engine that justifies any premium is itself wobbling.