Good morning, everyone. Thank you for being here. Thank you for tuning into the webcast. I'm delighted to have Jeff Stibel, CEO and Chairman of LegalZoom, and Noel Watson, CFO of LegalZoom. Thank you so much for being here this morning.
Thank you.
Thanks for having us.
We'll talk about a lot this morning. I want to get into AI partnerships, your partnership channel, attorney and accountant network, Concierge, a lot to get into after in 35 minutes. Maybe AI partnerships is a good place to start because I think investors have a lot of questions. Jeff, you launched the Cloud Connector and the ChatGPT Formations app and called LegalZoom the de facto choice for legal services across AI platforms. Can you give us any early KPIs, whether conversion rates, average order values, attach rates on the customers coming through those integrations versus your traditional web funnel?
Sure, I'll preface this by saying we are still very early. You know, the AI platforms themselves haven't figured out the revenue model for their free consumers. However, what we are seeing is pretty exciting and positive. I mean, when we look at it relative to other sources, we see a higher conversion rate and a higher propensity to upgrade to our subscription offerings, which means ultimately a higher LTV. Early innings, you know, we're seeing strong signs there. Probably more importantly, as you know, as we look internally at the things that we're tracking, is how we're performing from the standpoint of AEO and as being a source of reference for AI. In our category, particularly with respect to formation, we lead the charge there.
You know, we are looking relative to our competitors as the number one reference when it comes to formations generally, and, you know, that's inclusive of ChatGPT and, you know, and the others.
Perfect. Thank you.
You bet.
Maybe this one's for Noel, but when you think about the revenue -share economic structures of these AI partnerships, are we paying for placement, receiving referral fees, or is it a revenue-s hare? How do those unit economics compare whether you compare to when you pay Google for a click today?
Yeah. Currently, we're not paying anything, right? To Jeff's point, it's still very early stage, I think they're still figuring out exactly what the business model is. Obviously, you know, whatever traffic we can get from them, we'd love to have. As that evolves, we'll be there to figure out, you know, the economics. You know, ChatGPT now has ads, for example, I think on their free experience, we're starting to play in that as a first test. To Jeff's point, we're strategically in the right place, we'll look to evolve with them as their sort of model takes better shape.
Great. There's a fear among investors at times that's not unique to LegalZoom, but LLM would eventually handle the full formation workflow end-to-end, filing included, and there's a disintermediation risk. What do you think specifically prevents that? Is it the state-by-state registered agent infrastructure, the liability backdrop or something else?
Yeah. Here, I actually think the markets have things a bit backwards. You know, when you look whether we're talking about SaaS, software, or the legal space, the question, it really isn't whether we're gonna be disintermediated or disrupted. SaaS is gonna get disrupted. Software's gonna get disrupted. The legal space is gonna get disrupted. The real question to be asking is, who's gonna monetize that disruption? From my standpoint, without question, in our category, it's gonna be LegalZoom.
You know, I'll give you three key reasons and, you know, and each one of them is a differentiation, and each one of them is what makes LegalZoom unique. First is positioning. You know, from the standpoint of the legal space online, LegalZoom's brand stands apart from everyone else's. What customers are looking for ultimately is trust. You know, and LegalZoom's brand equates to trust. We offer value within our product. We offer a guarantee, and the guarantee is backed by experts. No one else can do that. To the extent that the AI platforms can do it, they do it with us, not, you know, not in and amongst themselves. They allow us to leverage AI to deliver that.
The second is the regulatory side, which you mentioned. It shouldn't be lost on anyone that unauthorized practice of law is not an easy thing to unpack, and it is getting more and more difficult. We've been doing this for 25 years, not always in the best way in the beginning, but we have figured this out. The other side of that regulatory aspect is privacy and being able to have privilege. Customers demand and require privilege at times, you know, that requires a lawyer. The third, I think this is probably the most important thing, is margin. You know, margin gets sort of conflated with cost savings. Make no mistake, we are leveraging AI on the cost side.
You know, if you look at the back half of our year between fulfillment, sales, service, operations, we are seeing massive cost efficiencies, and that is driving our margins up in the back half and throughout 2027. That's half of the story and the least important one. When it comes to margin, AI has become an enabler for us. You know, if you look five years ago, most of the products that we're leaning into to go after higher quality customers, we couldn't have done otherwise. You know, when I got here two years ago, we had, you know, we had expert products like trademarks and copyrights and patents. These business lines were unprofitable. They didn't scale.
With our use and ability to leverage AI, we've been able to make those profitable, scalable, and now introduce other products on the expert side, like Concierge, where we're able to do something that is incredibly unique at scale, with healthy margins.
Perfect. Thank you. We'll talk more about AI and Concierge in a bit, but I want to ask you about partnerships more in particular as well, because I think that's been a big focus area for you in the last two years.
Yes
since you've taken the CEO seat. maybe if there's first anything that you'd like to say about the partnership business and your focus there, and then as a follow-up for Noel Watson, I was hoping you could help us understand the economics of that business, 'cause it's opaque for investors at times.
Did you wanna say something first?
Do you wanna go-
Do you want me?
yeah, partnership.
Yeah. I'm happy to talk about it. I mean, I think the first conversation we had when I joined as CEO, we talked about this a lot and how we had a lack of diversification in terms of our.
How partnerships were critical and key but weren't prioritized. You know, we announced this past quarter that we went from 4% to 10%. You know, from my standpoint, that's not enough. I mean, when you look at best practices, we should be at +25% .
which gives us a lot of room to grow that channel, and accelerate. Working with other partners in the SMB ecosystem, it gives us scale, it gives us new channel, and it gives us customers who have a higher propensity to pay and higher likelihood to be in business over the long run because they've already determined that they're going to do something else with their business other than just form.
We're incredibly excited about the channel. We're incredibly excited about the partners that we've already established, and we're excited to, you know, to announce new ones throughout the year.
Perfect.
Yeah. It's strategically important, it's growing fast, and it's clearly an area of focus. You know, we've announced some partnerships recently and we expect to continue to announce new partnerships as we move forward here. On the economic side, you know, it can vary pretty widely by partner. We try to be bespoke and customized to the situation. You know, with that said, I guess there's a little bit of the maturity cycle of it, right? We'll invest early on, and the good thing about partnerships is we like to be really integrated and embedded and partner closely so that we can optimize those relationships over time and the experience over time. We generally structure them as either a revenue- share or some sort of fixed fee, but it's tied to a conversion.
It's fundamentally different than, you know, a traditional search where you're essentially buying clicks and then it's intent, you're responsible for the conversion. That's one aspect that I like in particular, the certainty of it. You know, we'll focus on other aspects of the relationship in terms of, you know, exclusivity, if we can get exclusivity.
that's something we often, you know, try to strive for. Long-term commitments as well. We have again, it runs the gamut. Some are shorter term.
some can be really long-term in nature. Fundamentally, and Jeff mentioned this as well, they're You know, we're dealing with a customer that is already somewhat established. They're already spending money. They have a, you know, a case of, let's say one of our website partners, they have a domain, they have a website. The propensity for them to be around longer, given that investment and to be a different, stronger profile for us is higher. Overall, the economics, when you look at in aggregate with some earlier stage and later stage, it's kind of at or better than we see through a traditional search.
That's really interesting because in the past year, I think your partnerships went from 4% to 10% of order volume, and I think you said, Jeff.
expecting maybe down the line 25% and that should continue to grow.
Yeah. I mean, to be more emphatic, I hope it's more than 25%.
You know, if I just look at best practices relative to what we have done, we can do better here.
You know, this is an ecosystem. Small businesses benefit when we as businesses work together to provide them the services that they need and they want, so that as they're growing, they don't have to think about this. You know, who is the best web services provider? Who is the best compliance provider? Who is, you know, who is the best on legal services? That isn't something they should have to spend mind share on. We should be able to provide all of that, you know, at LegalZoom.
Perfect. Maybe one more on the partnership channel before we move on to some other topics. You mentioned exclusive relationships. How important are these to you? Typically, maybe how long are the exclusivity windows, and what does LegalZoom commit in return for those partnerships?
It's a great question. I think it's critically important, not just for us as a business, but for our customers, right? We want consistency. We want predictability. We wanna make sure that we're working with the best across that SMB ecosystem. Can't always get exclusivity. In, you know, in other cases, it doesn't even make sense, depending on which side of the equation that you're on. When we find a good fit, we wanna lean in on a long-term basis. We want our partner to lean in on a long-term basis. For the most part, we've, you know, we've had great success over the last couple of years being able to do that.
From an infrastructure standpoint, we can provide a really embedded and integrated experience, which goes a long way. Obviously, we have a really strong brand, so from a branding standpoint, we're dealing with great brands as well so that the it's benefiting both sides of the equation. We just bring, you know, a great experience on the back end for customers, which is super important for any partner that's passing off one of their customers to us. They wanna make sure that that partner is taking great care of them, and we offer a fantastic service.
Perfect. Thank you. Moving into the attorney and accountant network, this is one of my favorite parts about your business, honestly, because I don't think there's another publicly traded company out there with a network of accountants and its own law firm. That's really exciting to me. Maybe first for Noel, for legal plan consultations outside of Arizona where your ABS is based, LegalZoom pays independent law firms a monthly fee, I believe, and recognizes revenue net. Can you walk us through how that fee is structured? Is it per consultation, per subscriber, or flat retainer? If you could say anything about the margin profile, that'd be great.
Yeah, absolutely. As you said, we have our own law firm, ABS in Arizona that services that state, and then our federal matters, and then we have a large independent network across the other 49 states with independent law firms. The structure is on a per subscriber model, and it's the subscribers that are assigned to a particular firm in a particular state. Then we've got, you know, 25 years of experience around the in prediction around the patterns of utilization, so we understand, you know, how to price that. I would say, you know, it's an attractive subscription-oriented margin similar to our other subscription and accretive to our overall margin profile.
Is there any seasonality to that revenue?
There's seasonality in the same way that our overall business has seasonality in terms of the point in time where we attach new subscriptions. It's much more first quarter and first half weighted than back half. Outside of that, in terms of, you know, the utilization patterns, it's, you know, it's more episodic based on the individual business, but averages out from a true calendar year.
Perfect. We'll dive deeper into Concierge in a couple minutes. I believe on one of the recent earnings calls you mentioned the potential of adding accountants to the Concierge product.
How would that network be structured, and would it be the same independent contractor model as attorneys? If you could speak to any regulatory complexity that you might also face with the lawyers.
Sure. You know, we already have a path and pattern, so we're gonna follow that with what we did with our legal network.
You know, if you look at our current partnership with 1-800Accountant, and we've had other partnerships as well, there is a, you know, there is a natural group of experts that we can, you know, that we can work with and bundle in these products and services. We've already actually started testing this with our legal plans and our business plans and, you know, and we see a relatively high take rate and propensity and interest level from our customers. I don't think that the margin profile changes dramatically. I don't think that the pricing shifts dramatically. The nice thing is between legal and accounting, you've got a very similar framework.
You offer far higher value, which means we can either play with the inelasticity curve on price, or work towards creating greater retention because what we're doing is we're adding value.
Mm-hmm. Perfect. Awesome. Maybe now to move on to the Concierge product, which is another new opportunity that I'm very excited about because it's entirely a greenfield opportunity.
You're uniquely served to address it, I believe. The Concierge product, I think you've said that it has a 3x to 4x average ARPU than your existing products widely. The list prices can go up to $1,400 per year. You haven't sized this business yet, but can you give us an overview maybe of what the various Concierge tiers are and how they are priced? I realize it's been about 1 year at this point.
Sure
since it's launched.
Yeah, that's exactly right. It's been about a year. We launched with an MVP, it started quite small. We're just getting through that first renewal curve now, but we're already pleased with what the renewal rates look like and the engagement and the adoption. When you think about Concierge, and look more broadly at, you know, at the SMB space, you generally have this notion of do it yourself and do it for me, and then in the middle you've got these do it with me type of, you know, type of propositions that tend to fail. You don't hear a lot about them because people tend to gravitate into, you know, either I'm very cost sensitive or I'm very time sensitive.
What we did with Concierge was we created a effectively downsell mechanism for people who wanted expertise but didn't think they needed a lawyer or an accountant specifically, and an upsell mechanism for customers who said, "I can do some of this myself, but in the end, I don't trust myself.
I don't trust technology." You know, that comes back to some of that defensibility around AI, where it's not good enough to have an okay solution or a good solution. These are binary situations. You have to be right. We introduced this Concierge model about a year ago to say, "We've got a group of experts who see thousands of formations, thousands of wills. They do, you know, tens of thousands of reinstatements a year. They dissolve companies when needed.
We can give you some of their time and all of their technology to make sure that it is done right, and then LegalZoom will back whatever is being done with a guarantee to make sure that if it isn't done right, we'll do it again for free." That has resonated tremendously with customers and has become kind of the, you know, the benchmark for what we think our services should become. You know, I'm as excited maybe even a little bit more so than you are, Ella, because we've seen, you know, we've seen more demand than we had supply for in the beginning with the MVP. And ironically, the supply issue wasn't a function of expertise, it was technology.
We, we didn't have the technology built, the automation and the AI, when we launched, because the trick here is we wanted to give that technology to our experts to make them more efficient so that they didn't have 10 customers or 100 or 1,000, but they could have 10,000. Every customer engagement felt one-on-one, it felt personal, and it felt like they had all the time in the world for people. We've gotten to that point now, and that's why we've been able to launch more and more of these products at higher and higher prices.
Perfect. How should we think about those various tiers? Does the service differ meaningfully? I believe the sticker prices might go from $1,000 a year to $1,400.
What would be the service difference for that?
It's largely results driven or value driven. On the results side, it's when someone has a real issue. We, you know, we think that there's upwards of a third of all small businesses that fall out of compliance from time to time. That's when a real small business realizes their time is more valuable than spending $500, $800, $1,200 for, you know, for a product that makes sure that it is done, it's guaranteed. All of the other things that you might have been doing, you can offload onto us as well. That's the first. The second is from the standpoint of value when they are looking at using a law firm.
Nonprofit, you know, is a good example. We've got a nonprofit, Concierge, that is our highest price point. They're comparing what we do to something that's gonna cost them, you know, tens of thousands of dollars. There we wanna make sure that we are value priced, not cheap, but value priced. We have to be very careful with how we price that so that people don't say it's too good to be true. Because in many respects, relative to going to a law firm, it is too good to be true because we are that good. We continue to make sure that we've got that pricing right. That's how we get to the variability of pricing with those Concierge suite products.
Yeah, some of it is product driven for a specific need. If somebody is doing you know, an entity conversion, then that's a particular product. If somebody is dissolving an entity, then we have a Concierge dissolution. If somebody has fallen out of compliance and needs to get reinstated, that's its own product as well. Then, you know, a lot of times what we're seeing, especially with our base where, you know, we're up to date on their level of standing with a particular state. If they're out of good standing, we can let them know and say, "Hey, do you want us to help you reinstate your entity?" A lot of times they just don't know. They're not paying close enough attention. Yes, I'd like you to do that.
Oh, by the way, can you please handle all of my Concierge needs moving forward? Because clearly, you know, it's either gotten too complex or I haven't had the time to do it myself. The good news about that as well is it's proving out a use case for a general, the broader SMB population where some percentage of them are gonna have enhanced compliance needs or may even not be in good standing themselves. It gives us the opportunity through some of the partnerships that we've talked about and just through that channel to approach bases in a way where we've learned a lot through rolling these products out to our customer base.
Mm-hmm. Perfect. Maybe that's a great segue into how you slice and dice the Concierge market, because there's a lot of different ways you could look at it. You could look at it as LegalZoom's existing customer base, which might be half a million businesses you form in a given year, or the $5 million roughly that's being formed right now in the United States, or the +$30 million that are in existence. What do you view to be currently the prime market for the Concierge product, and how do you anticipate that could change?
The primary market is some percentage of that $30 million.
This is, you know, this is a TAM expander for us. Those businesses need a product like this. Even the businesses that are using a law firm, the law firms would prefer to have us do this at that price than deal with a, you know, really expensive bill that doesn't have a lot of value attached to it. What we are focused on right now is proving this out within our base. We wanna make sure that there is excess demand, that we're serving our customers well, that these products are renewing at a high rate. From there, we'll go to the partner channel, which is why we are leaning in and expanding that partner channel.
By the way, both ways, it's why we want to and it's why partners are now coming to us because they're saying, "Wow, you have a product for us now for the customers that we have that have already formed." Ultimately we'll go direct to market as well.
Perfect. Something I think that's also exciting about AI in your business is that you've said that AI has driven 55% reduction in trademark search time, 30% faster patent drafting, 40% of chat volume handled end to end by AI, and you're uniquely providing this human in the loop option. How do you prevent malpractice issues, especially as it relates to your accountants and lawyers?
It's an important question, and it's something that, you know, our teams do and look at each and every day. Luckily, we've been working with and dealing with this for 25+ years, and have never had a significant issue. The trick is to have layers of protection and layers of security, one on top of another so that we've got redundancy. You know, and that's why using AI alone or using, for that matter, technology alone really doesn't work at scale. You know, what we do is we use technology for that first layer. We use human and artificial intelligence for the next layer, we have redundancy built in on top before we send something out. We do and a mistake happens because mistakes inevitably happen.
We are quick to acknowledge it and then fix it with a guarantee.
Perfect. Noel, are you excited about Concierge like Jeff and I?
Yeah. I'm more excited than both of you combined.
He's jumping out of his seat.
Yeah.
Yeah.
Great. I'm gonna ask another question about AI and then get into some more modeling growth questions. Maybe one more on AI. Jeff, the stock has traded at times, and again, not unique to LegalZoom, like an AI loser. In maybe 60 seconds or so, can you please make the case why is LegalZoom an AI winner.
Sure. I'm going to go back to my earlier statement. The question to ask is who is going to win when you see this dislocation? A foundation model isn't going to do this. A startup isn't going to have the strength, breadth, or power to compete with us. They never have, they never will. A small business owner isn't going to want to build a dozen agents and then maintain them over time. What do we have? We've got the positioning, we've got the regulatory moat that we've built and expanded, we've got the margin profile that allows us to do this at scale for customers.
Perfect. Thank you.
You bet.
Awesome. Maybe Noel's time to shine as well, getting into organic growth and financial framework questions. Noel, I think there's a lot of puts and takes with the 2026 revenue guide. In the first quarter, revenue grew 13%. Guidance applies 8% for the full year. There's a lot of puts and takes between the Formation Nation acquisition and I think some one-off benefits to the first quarter. Could you maybe sum that up for us and let us know of those puts and takes?
Yeah, absolutely. First and foremost, talk about shining. We're very excited about our first quarter results, where we exceeded our expectations. I think coming off of a year in 2025 where our organic growth was around 3%, and you noted guided to 8% for this year. In the first quarter, that 13% growth was partially benefited by the Formation Nation acquisition, where we're just getting to that final stage of lapping. With Q2, we will have fully lapped the Formation Nation inorganic benefit, and there was about a half quarter's worth in the first quarter.
We saw really strong annual report filings in the quarter tied to some of the automation that we've done around delivering that service, which is a really nice customer experience value add that we know is gonna provide really nice medium and long-term retention benefit, and we're starting to see that in our earlier cohorts now. That was a big driver in Q1 as well, and it's heavily concentrated from a seasonality standpoint in Q1, just given regulatory timelines. That, you know, that benefit will moderate as we move through the rest of the year. If you take the combination of those two factors as drivers and adjust our growth for the quarter, it looks much more like our Q2 growth.
you know, that implies some modest acceleration in the back half of the year.
Perfect. Makes a lot of sense. It's clear that the annual report filing outperformance is flowing through. Is there any other structural improvement in the subscription business that gives you more confidence through the end of the year or anything surrounding subscription AOV or ARPU?
Yeah, I mean, you saw AOV improve nicely in the first quarter. I think really what it's coming down to from a ARPU standpoint is customer mix. We talked about, you know, Concierge being a driver. We talked about some of our partner channels starting to drive, you know, really strong, more established businesses through the funnel. Jeff mentioned the delivery of these services helping margins as well. Alongside of some of the commercialization that we've done in our lineup, where we continue to add more value in our upper end SKUs, particularly our pro and premium SKU, by bringing stronger value add subscriptions there. We've expanded legal services in terms of the placements in that SKU, that's helping to drive ARPU as well.
We see ARPU as a meaningful driver of the business in the back half of the year, and we're always looking at pricing opportunities as well. The combination of those things has ARPU as an important driver. We think long term, it'll be more of a balance between subscription units and ARPU. Really, you know, and we've said this a lot over the years, like with the testing that we do, we're kind of agnostic as to whether it's subscription unit growth or ARPU growth. We're looking to drive LTV and from that equation, if there's a bunch of really, you know, low price subscriptions that make sense for the customer and ultimately that's what they're buying, we're more than happy with that.
If it's fewer higher priced ones, we're happy with that as well, as long as it's driving overall performance in the business. That's helping us to unlock, you know, you know, margins as we think about the back half of the year as well. There's a couple of things from that standpoint. One is the annual report volume that I described in Q1. That's a sort of neutral to gross profit, neutral to EBITDA, filing fees as a percentage of revenue is smaller in the back half of the year. Our CAM spend is lower in the back half of the year as well 'cause peak seasonality is in the first half. You know, we're expecting to continue to expand on some of the AI efficiencies that Jeff talked about earlier.
That's, you know, baked into our expectation for the year as well. The combination of those things is really lifting margins in the back half of the year.
Perfect. Thank you. Oh, sorry, were you gonna say anything?
Nope.
Okay. Thank you. What we've seen happen in the public markets in the past few years is there was a time where software investors would focus more on EV sales, EV EBITDA, but times are changing. They're looking at GAAP more. Stock-based compensation is increasingly a big focus for investors, and you have made great progress there. I believe that in the first quarter, SBC was at $21 million, down from $30 million a year ago. How do you think about modeling full year 2026 stock-based comp, and how should we think about stock-based comps in years out?
Yeah, it's certainly a focus for us as well as it is for everybody. It's an important tool, let's be clear, for, you know, recruiting and retention. With that said, you know, we're trying to optimize for our overall the overall profitability as well. We've been focused on it, and you did see it come down meaningfully here sequentially the last few quarters. I think this is a sort of a new baseline right now, so I would kinda model off of that for the full year as, you know, a good sorta quarterly number to be around. With some puts and takes, depending on, you know, it's somewhat hard to predict because there's forfeitures and there's, you know, maybe some unplanned new hires that happen and that can move the needle a bit.
We're generally in that right baseline, and it's something that we'll continue to try to optimize as we move forward.
Perfect. Maybe anything on M&A, how interesting is the pipeline right now? If you were to pursue it, what do you think would be attractive in your existing portfolio?
Yeah, I think, we have a team that's always having great conversations and keeping the pulse of what's happening in the market. We, you know, are very intentional about making sure that our balance sheet is healthy so we have the flexibility to be opportunistic if something happens. Our framework has, you know, stayed pretty much the same. We're looking at anything that is a really strong adjacency to some of the service offerings that we have today that, you know, that might help a small business owner either get compliant, stay compliant, or run their business. That continues to be how we think about it.
At the same time, are open to, you know, if there's something in our space where we think that we can drive some meaningful synergies in the relationship, we'll look at that as well. You know, it's not something that we have to do, it's something that we can be opportunistic around.
Yeah. I would argue M&A is another leg of that stool, like our partner channel. You know, when it makes sense, where it fits, it's a great use of capital. We haven't seen it since Formation Nation. That was a tremendous acquisition. I think we've proven as a team that we can buy right, integrate, and, you know, and leverage it to be a, you know, a series of pieces in our puzzle. Right now we're predominantly focused on, you know, on the partner side and growing that. In fact, we're literally gonna leave here and go to our first ever.