LegalZoom.com (LZ) 6 Nov 24 2024 Q3 Earnings call transcript

In LegalZoom's third quarter earnings call, the company highlighted its strategic shift towards subscription-based services, customer education, and a focus on quality over market share. This approach is intended to drive sustainable growth, increase predictability, and improve profitability.

Financial Performance and Outlook

LegalZoom reported a revenue of $169 million, meeting the high end of its guidance and achieving a 28% adjusted EBITDA margin. The company's subscription revenue grew by 5%, driven by strength in compliance-related subscriptions. However, transaction revenue declined by 7%, reflecting softer business formations and the company's strategic efforts to attract high-value customers.

For the fourth quarter, LegalZoom expects revenue to be in the range of $158 million to $162 million, representing a 1% year-over-year growth. The company also raised its adjusted EBITDA expectation for the full year to be in the range of $144 million to $148 million.

Strategic Initiatives and Future Focus

LegalZoom's strategic initiatives include reimagining transactional products into subscription services, revamping customer education and pricing, and focusing on attracting high-value customers. These efforts are aimed at improving the predictability of the business and driving durable results.

The company has begun updating its customer education and pricing to better reflect the value it provides. This includes revising its formation lineup to attract higher-intent customers and expanding offerings in its Pro and premium SKUs. LegalZoom is also retesting pricing on certain compliance solutions and reorienting transactional products towards subscriptions.

Customer-Centric Approach

LegalZoom's approach is centered on understanding its customers' needs and providing them with best-in-class expertise. The company recognizes the importance of education in building trust and engagement, and it plans to weave this into its technology and service offerings.

Challenges and Future Opportunities

LegalZoom faces challenges, including market share versus quality share, evolving macro trends, and competition from Zen Business and other players. However, the company believes its unique value proposition, including its legal expertise and network of attorneys, sets it apart from competitors. LegalZoom is also exploring opportunities in the consumer channel, recognizing the potential for monetization and long-term customer relationships.

Conclusion

LegalZoom's Q3 earnings call underscores its strategic focus on subscriptions, customer education, and quality share. These initiatives aim to drive sustainable growth, increase predictability, and improve profitability. As the company navigates the evolving business landscape and competition, its commitment to understanding and addressing customer needs will be key to its success.