Favorable risk/reward under the prior report’s 8.0x adjusted-EBITDA method: $9.95 base fair value, 57.9% above the verified $6.30 close. Subscription growth and cash generation support the case, while weak search discovery and material stock compensation make adjusted EBITDA an optimistic measure of earnings quality.
$192.5m FY2026 guided adjusted EBITDA × 8.0x = $1,540m EV; plus $167.227m June cash and no financial borrowing = $1,707.227m equity value. / 171.641m diluted proxy shares = $9.9465, rounded to $9.95. The $8.972/sh. operating component plus $0.974/sh. cash component reconciles to $9.946/sh. before rounding. Implied EV/issuer adjusted EBITDA is 8.0x. A ±2x change in this multiple moves the base by ±$2.24/share; 10% more shares would reduce it by 9.1%. The adjusted measure excludes $44.910m H1 stock compensation, plus H1 restructuring and transaction costs. A separate economic FCF sensitivity uses illustrative $150m FY2026 reported FCF less $89.82m annualized H1 stock compensation, capitalized at an 8% yield plus June cash: $5.36/share, 46.1% below this base. This is a model sensitivity, not issuer FCF guidance. The valuation therefore hinges on whether adjusted EBITDA translates into shareholder returns after equity awards and buyback spending. June cash is included in full, although $221.2m deferred revenue and $318.1m current liabilities mean it is not a distributable-cash floor. ⚠️ Not investment advice.
| Component | Assumption | USD/share |
|---|---|---|
| Operating enterprise value | 8.0x × $192.5m FY2026 adjusted EBITDA midpoint = $1,540m EV / 171.641m shares | +8.972 |
| June cash | $167.227m at June 30, 2026 / 171.641m shares | +0.974 |
| Financial debt | $0 financial debt at June 30 / 171.641m shares | −0.000 |
| Unexecuted buyback | $80.4m remaining authorization; $0 assumed future net accretion because cash spent must also be deducted | +0.000 |
| AI platform option | $0 base incremental NPV without a disclosed, separable cash-flow estimate; potential upside is in Bull | +0.000 |
| Litigation reserve | $0 quantifiable expected liability from the earlier 2024 investigation; legal risk remains in scenarios | −0.000 |
| Base case fair value | +$8.972 + $0.974 − $0.000 + $0.000 + $0.000 − $0.000 = $9.946/sh., rounded | $9.95 |
Bar is scaled to a 20% float-short reference. The $2.95m CFO sale followed the August 5 guidance cut; its motive cannot be inferred from the filing. The 2025 $113.7m stock-compensation expense shows why net share count matters more than gross repurchases.
| Item (USD m) | FY2023 | FY2024 | FY2025 | H1 2025 | H1 2026 | FY2026 guidance |
|---|---|---|---|---|---|---|
| Revenue | 660.7 | 681.9 | 756.0 | 375.6 | 412.1 | 795–805 |
| Subscription revenue | 412.9 | 436.2 | 492.5 | 236.2 | 263.6 | Not guided |
| Gross profit | 421.5 | 441.8 | 498.1 | 241.7 | 272.2 | Not guided |
| GAAP net income | 14.0 | 30.0 | 15.4 | 4.9 | 6.3 | Not guided |
| Adjusted EBITDA | 118.7 | 148.1 | 172.2 | 76.0 | 82.4 | 190–195 |
| Operating cash flow | 124.3 | 135.6 | 178.2 | 89.8 | 86.8 | Not guided |
| Free cash flow | 92.7 | 99.9 | 147.9 | 72.9 | 74.7 | Not guided |
| Stock-based compensation | 66.0 | 71.5 | 113.7 | 60.4 | 44.9 | Not guided |
FY2025 adjusted EBITDA was $172.2m versus GAAP net income of $15.4m; stock compensation was $113.7m and is excluded from adjusted EBITDA. H1 2026 FCF of $74.7m includes stock compensation added back in operating cash flow. Revenue guide was cut from $810–830m to $795–805m after Q2; adjusted EBITDA guide from $190–200m to $190–195m. FY2023 FCF is operating cash flow less property/equipment purchases from the 2025 Form 10-K; FY2023 adjusted EBITDA is from the issuer's 2024 results/proxy. The issuer did not provide FY2026 FCF guidance in the cited release.
| Item (USD m) | Q2 2025 | Q3 2025 | Q4 2025 | Q1 2026 | Q2 2026 |
|---|---|---|---|---|---|
| Revenue | 192.5 | 190.2 | 190.3 | 206.8 | 205.3 |
| Subscription revenue | 119.9 | 125.4 | 130.9 | 130.2 | 133.4 |
| Gross margin | 65% | 67% | 68% | 64% | 68% |
| GAAP net income/(loss) | (0.3) | 4.5 | 6.1 | 1.1 | 5.2 |
| Adjusted EBITDA | 39.0 | 46.3 | 49.9 | 36.5 | 45.9 |
| Cash at quarter end | 217.0 | 237.2 | 203.1 | 183.2 | 167.2 |
Business model — online legal and business services
Subscription services $263.6m H1 2026 · 64% of sales Compliance, registered agent and assisted services. Revenue grew 12% year on year in H1; Q2 units fell 3% while ARPU rose 5% to $270. Transactions $148.5m H1 2026 · 36% of sales Business formation, filings, IP and estate-planning transactions. Q2 revenue slipped 1% as traditional search discovery weakened. Partner and assisted channels Included in the two revenue types Distribution and human support layered onto core products. The issuer does not disclose a separate revenue segment for this activity; no third revenue line is invented.
Legal, regulatory and risk analysis
SWOT analysis
- +65% Q2 subscription revenue mix
- +$147.9m FY2025 reported FCF
- +$167.2m June cash and no financial debt
- +Recognized online legal-services brand
- −Q2 transaction revenue declined 1%
- −Subscription units fell 3% year on year
- −FY2025 $113.7m stock-compensation expense
- −Marketing funnel still relies on search discovery
- →AI and partner referrals may replace search traffic
- →Higher-value assisted services can lift ARPU
- →Remaining $80.4m buyback authorization
- →Small-business compliance and estate-planning demand
- !Search-channel transition can extend revenue slowdown
- !Intense digital legal and DIY competition
- !New regulation or privacy costs
- !Buybacks may not offset future equity awards
Summary by assessment area
- $9.95 base FV versus $6.30 verified close (+57.9%)
- 8x FY2026 adjusted EBITDA; ±2x moves FV by ~$2.24/share
- FY2026 sales guide lowered to $795–805m
- Q2 transaction sales down 1%; subscriptions up 11%
- $167.2m June cash, no financial borrowing
- $89.0m H1 repurchases versus $44.9m H1 SBC
Sources: Q2 2026 results / guidance · Q2 2026 Form 10-Q · Q1 2026 results · FY2025 results · FY2025 Form 10-K Q2 2025 shares / results · FY2024 results / FY2023 adjusted EBITDA · Q3 2025 results · CFO Form 4 filing · Oct 19 LZ close · LZ valuation / short interest · HRB peer ratios · GDDY peer ratios · DOCS peer ratios · Analyst target median . Financial amounts are USD unless otherwise stated. Market data retrieved October 20, 2026; the valuation price is the completed October 19 session. Scenarios are analyst estimates, not issuer guidance. This document is for informational purposes only and does not constitute financial or investment advice.