LegalZoom.com, Inc.

Good day and thank you for standing by. Welcome to LegalZoom's fourth quarter 2024 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Madeline Crane, Head of Investor Relations. Please go ahead.

Thank you, Operator. Welcome to LegalZoom's fourth quarter and full year 2024 earnings conference call. Joining me today is Jeff Geibel, our Chairman and Chief Executive Officer, and Noelle Watson, our Chief Operating Officer and Chief Financial Officer. As a reminder, we will be making forward-looking statements on this call. These forward-looking statements can be identified by the use of words such as believe, expect, plan, anticipate, will, intend, and similar expressions, and are not and should not be relied upon as a guarantee of future performance or results. Such forward-looking statements are based on management's assumptions and expectations and information available to us as of today's date. These forward-looking statements are also subject to risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties are referred to in the press release we issued today and in the risk factor section of our most recent quarterly report on Form 10Q filed with the Securities and Exchange Commission. Except as required by law, we do not plan to publicly update or revise any forward-looking statements, whether as a result of any new information, future events, or otherwise. In addition, we will also discuss certain non-GAAP financial measures. We use non-GAAP measures in making decisions regarding our business, and we believe these measures provide helpful information to investors. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations of all non-GAAP measures to the most directly comparable GAAP measures are set forth in the investor relations section of our website at investors.legalzoom.com. I will now turn the call over to Jeff.

Good afternoon, everyone. I'm excited to speak with you today about the progress we've made in our three key focus areas, optimizing our subscription business, reorienting our go-to-market strategy, and leveraging AI to deliver expertise. We are narrowing our focus back to LegalZoom's heritage as a trusted partner of legal and compliance solutions. In line with our efforts, We are entering 2025 with a new mission rooted in our history to transform how businesses and individuals navigate the legal system. Over the last 24 years, LegalZoom has delivered over 9 million legal solutions to businesses and individuals. We are a leading online platform for legal services at scale, with over 25 in-house attorneys through our own ABS law firm, a nationwide independent attorney network of over 1,000 attorneys, and approximately 1.8 million active subscriptions of our legal compliance and small business management solutions. We believe our strong technology platform supported by technology augmented legal services represents an even larger opportunity for LegalZoom in the long term. Our vision is for LegalZoom to serve as the guardian of people's aspirations, lives, and legacies. Over the last eight months, We've set an executable strategy and are positioning LegalZoom to drive sustainable results. Our focus is to build the best core products we can, partner with others who offer best-of-breed ancillary products, and provide service that empowers and delights our customers. This year, we will continue to focus on the areas of our business we can control. We'll improve predictability by re-accelerating subscription revenue growth and drive the business toward increasing profitability. Let's jump in. We achieved fourth quarter revenue of 162 million at the high end of our guidance. Subscription revenue grew 2% year over year from strength in our compliance related subscriptions. Q4 marked a critical turning point for us. After four sequential quarters of deceleration, we expect to re-accelerate subscription revenue growth in 2025. As we continue shifting our business toward higher value customers, LegalZoom formations declined faster than overall U.S. business formations in the quarter. We expect our deliberate focus on quality share will support our goal of driving consistent and sustainable growth. We know that high intent customers, i.e., customers who spend more with us during their initial purchase, build more durable businesses. In Q4, without removing our free formation offering, we shifted over 10% more customers to our pro and premium packages year over year. These packages include a mix of compliance solutions, business management subscriptions, one-on-one legal advice, and trials for certain subscription offerings. Our execution in 2025 will focus on building sustainable revenue performance. We aim to achieve this by focusing on quality share and concentrating on our core competencies of legal and compliance services with an emphasis towards subscriptions. Our actions will include driving greater brand awareness, providing best-in-class service, weaving expertise through our products, and pricing for the value we provide. We are confident these measures will enable us to achieve our 2025 outlook of 5% year-over-year revenue growth. On the bottom line, we delivered fourth quarter adjusted EBITDA of $44 million, representing another quarter of strong margin performance. Adjusted EBITDA margins of 27% benefited from ongoing cost efficiencies and a shift to higher margin formations. As Noel will discuss, our full year adjusted EBITDA margin outlook reflects double digit growth in dollars year over year and confirms our commitment to drive durable margin expansion in 2025. Let's now turn to an update on our key focus areas, beginning with optimizing our subscription business. Staying current with legal and compliance requirements is an ongoing obligation. reorienting our products towards subscriptions is key to growing our customers lifetime value. It's also what our customers need from us to succeed. As I mentioned earlier, we're continuing to see positive results from changes in our business formation lineup to attract higher intent customers. We are also focused on aligning our pricing with the value our services provide with a goal to attract and retain high value customers who will grow with LegalZoom over the long term. To that end, We've begun to reprice certain products. In September, we returned the entry point pricing of our registered agent product from $199 to $249. We continue to see relatively stable attach rates. Looking forward, we'll continue to test pricing changes across our portfolio, from top of funnel to renewals, to accurately price for the value we provide, whether this be a price increase or decrease. with an emphasis on shifting our customers towards recurring subscription offerings. Last quarter, I also addressed our efforts to reorient our customers from filing a standalone Beneficial Ownership Information Report, or BOR, to a subscription offering. This reorientation helped shift customers to our total compliance subscription and gave us a roadmap out of the circular roundabout many of our competitors are driving through. with the recent challenges to the beneficial ownership filing requirement in the court system. Since December, the filing deadline has been volatile and subject to continued judicial review. As a result, our outlook does not assume the beneficial ownership filing will be a federal requirement in 2025. This is a perfect example of the challenges and complexities of remaining compliant as a business owner. It reinforces our commitment to reorient our legal compliance offerings towards subscriptions. It also reflects a conservative approach to our 2025 guidance. Let me turn to our second key focus area, reorienting our go-to-market strategy. This year, we will diversify our marketing spend to emphasize our overall LegalZoom brand and lean into our positioning as a premium online legal and compliance services provider. We're looking forward to launching a new marketing campaign later this spring to introduce our new mission and vision. Our marketing plan includes more than two times the investment and brand spend we made in 2024 without increasing our overall marketing budget. We expect our premium messaging to drive strong returns as we improve overall brand awareness and attract high value customers. Separately, we made the decision to stop investing resources into building non-core products and instead invest in our partner ecosystem. In December, we partnered with 1-800-Accountant to provide full service tax and bookkeeping solutions. This allows us to continue serving the tax and accounting needs of our customers under a partnership model that retains economics for LegalZoom and allows us to reallocate our time and resources to our core legal and compliance offerings. So far, early results are encouraging. the majority of our formation customers are opting in to receive information about 1-800 services. You should expect more updates from us as we continue to build out our partnership channel to provide our customers with access to a curated portfolio of offerings through our LegalZoom platform. Turning to our third strategic priority, becoming an export platform by leveraging AI and our 20 plus years of proprietary data, research and legal expertise to augment human expertise. Generative AI alone cannot replace attorney advice. For both business and personal legal decisions, affordable and accessible attorney advice will remain essential to ensure the best legal protection for customers. LegalZoom stands apart from our competitors as a technology platform with an established network of independent attorneys and the power of AI to unlock high value for our customers. We believe we can deliver powerful AI solutions to our customers, attorney network and in-house teams to drive growth and efficiencies in our business and provide greater value to our customers. We intend to launch more AI-powered tools to help our customers during clear friction points and promote the value and services of our attorney network. Following the launch of an AI-powered business name generator, we recently began testing an estate plan AI assistant. We're excited to offer certain customers 24 seven access to an AI assistant who can help them navigate this very personal journey while still early preliminary behavior of customers who have engaged with the AI assistant includes purchasing an estate plan and an attorney services plan. This aligns with our goal of using AI to promote our attorney network. Finally, Let's now turn to our acquisition of Formation Nation. Formation Nation has established itself in the industry as a best-in-class formations and small business service provider under two distinct brands. Nevada Corporate Headquarters, or NCH, is unique in the online formation space as a full-service, do-it-for-me, white-glove business formation provider. Inc. Authority provides value-priced do-it-yourself formation and small business services and was the first company in our industry to offer free formations. The Formation Nation acquisition is expected to positively contribute to adjusted EBITDA in the first year, inclusive of synergies, due to our complementary ecosystems. Our integration efforts are already well underway, and we expect this to drive immediate value. We expect Formation Nation to significantly strengthen our customer service profile, expand our portfolio of offerings, and enable us to reach a broader customer base. At the same time, We believe Formation Nation will benefit from our strong technology platform, AI products that augment expertise, scaled marketing and fulfillment, and tenured experience shifting businesses from transaction to subscription. Finally, we expect both our brands to benefit from cross-selling and upselling each other's complimentary portfolio of products. We are thrilled to welcome Formation Nation's senior leadership team, including CEO Court Christie and CFO Dean Walker, Inc. Authority President Trevor Rowley, and NCH President Raymond Morin, along with their experienced team to the LegalZoom family. Let me summarize by saying how grateful I am for the hard work of our teams over the last two quarters, and how excited we are for 2025 and beyond. Before I turn the call over to Noel to discuss our fourth quarter results, and in particular our 2025 outlook, I want to again express my strong conviction and our ability to execute and meet our financial goals for 2025. Noel?