LegalZoom.com Inc at Barclays Global Technology Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Trevor Young - Barclays Capital Inc - Analyst : So Jeff, you've been in your new role as CEO for several months now. You're, of course, not new to LZ. You spent quite amount of time on the Board, but new to the role. What have been the few positive surprises for you? And on the other hand, what have been some of the areas that are more challenging than you previously anticipated when you came into the seat?

Question: Trevor Young - Barclays Capital Inc - Analyst : Okay. So strengths being the quality of the team, quality of the base of the product, but maybe some more opportunity to innovate on the products. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 10:30PM, LZ.OQ - LegalZoom.com Inc at Barclays Global Technology Conference

Question: Trevor Young - Barclays Capital Inc - Analyst : Okay. Great. On the recent 3Q results, you outlined some of your key goals going forward. There's a clear focus on driving durable, predictable results with an emphasis on shifting to a more subscription-based model. That's not new to the LZ story, but you're also aiming to reaccelerate that subscription revenue growth down the road and drive better profitability. Can you expand upon all that and share some of the initial steps that you're taking to drive that shift towards subscription?

Question: Trevor Young - Barclays Capital Inc - Analyst : Okay. And obviously, transactions is still part of the story here. At present, at least one-third of revs is transaction; two-thirds, subscription. What does that mix look like in your ideal world down the road? And what does the profitability look like from each of those segments? Is transactions going to be just a small sliver of the profit or perhaps even loss leader to drive into that more durable subscription business?

Question: Trevor Young - Barclays Capital Inc - Analyst : Got it. And some of those transactional products, at least historically, could be more subscription in nature, like estate planning type? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 10:30PM, LZ.OQ - LegalZoom.com Inc at Barclays Global Technology Conference

Question: Trevor Young - Barclays Capital Inc - Analyst : Got it.

Question: Trevor Young - Barclays Capital Inc - Analyst : Okay.

Question: Trevor Young - Barclays Capital Inc - Analyst : That's helpful. Just a quick one on partnerships. That was deemphasized earlier in the year. Jeff, how are you thinking about the importance of partnerships going forward, if at all? Are there any opportunities to drive post-formation engagement with LZ in certain services that perhaps you don't need to own in-house at LZ?

Question: Trevor Young - Barclays Capital Inc - Analyst : Okay. So it sounds like maybe going forward, we might see more on the partnership side over the medium term. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 10:30PM, LZ.OQ - LegalZoom.com Inc at Barclays Global Technology Conference

Question: Trevor Young - Barclays Capital Inc - Analyst : That makes a lot of sense. And you both kind of alluded to it in your answer to that question. Your approach going from kind of a one-size-fits-all approach for SMBs to more micro segmentation, I think it was the language you used. Perhaps one of many revelations that you've had as you strive to better understand customers' needs. Explain what you mean by that approach and how it will translate into financial results down the road.

Question: Trevor Young - Barclays Capital Inc - Analyst : Or granular?

Question: Trevor Young - Barclays Capital Inc - Analyst : Right, the right thing for their needs.

Question: Trevor Young - Barclays Capital Inc - Analyst : Yes. That makes a lot of sense. Let's sit on business formation trends a little bit here. For a few quarters now, we've heard you call out the decline in market share of business formations and that's expected, as you were focusing more on quality. Noel, you mentioned focus on LTV is really important. Is that trend of share losses within overall business formations expected to continue? And is that quality focus resulting in better attach, better engagement with the platform?

Question: Trevor Young - Barclays Capital Inc - Analyst : And they clearly see that value in services.

Question: Trevor Young - Barclays Capital Inc - Analyst : Okay. Jeff, I heard you mention it a few times here already, kind of the market leadership position that you have, and that's a bit of a realization for you being in the seat. You want to lead by -- through being that trusted resource to advise among SMBs, but also leading on price, I think, is part of the approach here. Can you talk about each of those, market leadership, as well as your focus on pricing and the higher value products and how you can actually drive better financial outcomes for LZ such as those higher intent customers? I think you've addressed that pretty well, but also like lower churn and so forth.

Question: Trevor Young - Barclays Capital Inc - Analyst : Yes. And as part of your leadership in educating some of your customers, one area that's come up this year is the beneficial owner information reports. And probably a good point to hit on now, particularly as recently, a Texas court has put in place a temporary injunction on some of that overarching legislation. Any preliminary thoughts on what that means going forward? Because obviously, the BOIR has been pretty impactful this year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 10:30PM, LZ.OQ - LegalZoom.com Inc at Barclays Global Technology Conference You're trying to help customers navigate, do I need to file this, do I not? When do I need to file it? When do I need to update it? Just any thoughts on how that's evolving?

Question: Trevor Young - Barclays Capital Inc - Analyst : So part of bundling it in of that broader compliance product. It doesn't really matter if it goes away or not over the medium term, because you're still going to be covering those overarching needs.

Question: Trevor Young - Barclays Capital Inc - Analyst : Yes. The appeal process has to work its way through --

Question: Trevor Young - Barclays Capital Inc - Analyst : So Noel, this is one maybe for you. Just any early thoughts on how to tie together the building blocks of revenue in terms of customer growth versus ARPUs over the next few years? Any sort of quantification you share at this point or perhaps waiting for those components in a P times Q framework, is it more customer growth? Is it more getting those more larger subscription products rolled out?

Question: Trevor Young - Barclays Capital Inc - Analyst : Okay. You alluded to some of the uncertainty specific to the BOIR question. With the election now settled, maybe macro marginally less volatile. Any updated views on the environment for business formation specifically as we look into '25? And relatedly, any early views on whether -- or how the new administration might reshape the regulatory environment for businesses?

Question: Trevor Young - Barclays Capital Inc - Analyst : Okay. And do you think you can still put up solid results even if the business formation environment doesn't improve from current trends? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 10:30PM, LZ.OQ - LegalZoom.com Inc at Barclays Global Technology Conference

Question: Trevor Young - Barclays Capital Inc - Analyst : Okay.

Question: Trevor Young - Barclays Capital Inc - Analyst : Got it. So kind of plan for the worst and then if you get some macro improvement...

Question: Trevor Young - Barclays Capital Inc - Analyst : Got it. Jeff, since taking the helm, has there been any sort of attitude shift at the company? Is momentum building internally, that there's kind of this clear path ahead for the company? Employees know what they need to do to execute against the plan, clear benchmarks to measure success and so forth? Or is it still kind of too early in your role to iron all that out and that's more of a '25 story?

Question: Trevor Young - Barclays Capital Inc - Analyst : Okay. And since you mentioned the prior restructuring and you also, early in our conversation, you mentioned the strength of the talent at LegalZoom, how do you feel about the current resourcing within the organization? Are staffing levels appropriate and specifically in the right areas? Or is there more work to do in terms of getting some hiring in certain pockets, maybe that's managing attrition elsewhere? How do you think about staffing levels from here?

Question: Trevor Young - Barclays Capital Inc - Analyst : Okay. Got it. One area where we've historically heard some debate from investors is on the strategy of utilizing outside sales. At present, do you think that, that still is the right strategy for LegalZoom? And if so, why?

Question: Trevor Young - Barclays Capital Inc - Analyst : To be that trusted resource, yes. Got it. Okay. So tying all those thoughts together on staffing levels and outside sales and so forth and also in the context of the ongoing shift towards greater subscription mix, which you mentioned potentially comes with higher margins, how should we think about the EBITDA or free cash flow margin path, both near term and longer term? I know you're not giving '25 guide yet, but just directionally, how should we think about it?

Question: Trevor Young - Barclays Capital Inc - Analyst : That's an easy one.

Question: Trevor Young - Barclays Capital Inc - Analyst : Okay. So no margin reset as part of how you're rethinking --

Question: Trevor Young - Barclays Capital Inc - Analyst : Okay. Super helpful. Last one before we open it up to any questions from the audience. Just any updated thoughts on capital allocation from here? I know you've been very active in the buyback earlier in the year.

Question: Trevor Young - Barclays Capital Inc - Analyst : Okay. I know I said that was my last question, but you mentioned M&A. What's the approach there? Is it to fill certain product gaps? Is it to get certain talent? How should we think about the approach there? And I would imagine tuck-ins more likely than transformative, but correct me if I'm wrong on that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 10:30PM, LZ.OQ - LegalZoom.com Inc at Barclays Global Technology Conference

Question: Trevor Young - Barclays Capital Inc - Analyst : Okay.

Question: Trevor Young - Barclays Capital Inc - Analyst : More opportunity there right now.

Question: Trevor Young - Barclays Capital Inc - Analyst : Got it. Okay. Makes a lot of sense. In our last minute or so here, I do want to open it up if we have any questions from the audience. Looks like actually we covered everything, so thank you both for the time. Really appreciate it.

Question: Trevor Young - Barclays Capital Inc - Analyst : There is, okay. Unidentified Participant Jeff, in your many months so far, or a few months so far in your new job, I mean, it seems like such a kind of a pivot and transformation in terms of your overall strategy. What's really surprised you to the upside? And do you do all these tinkerings with the sales force and product placement? What are you most excited about in terms of what can really change in 2025? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 10:30PM, LZ.OQ - LegalZoom.com Inc at Barclays Global Technology Conference

Question: Trevor Young - Barclays Capital Inc - Analyst : Great. Well, I think we're up on time. Thank you both. Really do appreciate you participating.