LZ - NASDAQ

Good day, and thank you for standing by. Welcome to Legal

Thank you, operator. Welcome to Legal

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 Legal

Thanks, Jeff, and good afternoon, everyone. Our financial performance in 2024 reflects the shift in our key focus areas and execution priorities. As Jeff noted, over the last two quarters, we have worked hard to lay the groundwork for a return to predictable revenue performance, powered by our emphasis on reaccelerating subscription revenue. As we shift our top line execution to focus on the areas we can best control, bottom line performance in 2024 demonstrates an ongoing commitment to adjusted EBITDA margin expansion. For the full-year 2024, adjusted EBITDA of $148 million grew 25% year-over-year. This improvement highlights the impact of our ongoing efforts to drive automation and generate efficiencies in our operations. As well as our headcount restructuring and reduced hiring plans. This restructuring, which was executed in the third quarter of last year underscored our narrowed focus and resolve to drive growth while delivering a strong margin profile. On that front, full-year adjusted EBITDA margins of 22% grew by 380 basis points year-over-year. This builds on our 2023 margin improvement of almost 800 basis points year-over-year versus 2022. I'll now turn our focus to our fourth quarter financial performance. Unless otherwise stated, all comparisons will be on a year-over-year basis. Total revenue was $162 million for the quarter, up 2%. Looking at our revenue performance in more detail, transaction revenue was $53 million, up 2%. We recorded 241,000 transaction units in the quarter. The 12% increase was primarily due to a rise in non-formation business-related transaction products such as our BOIR offering, offset by our lower volume of formation units. We recorded 96,000 business formations in the fourth quarter, a 15% decline. The decrease was due to a combination of a softer business formations macro with Census EIN applications falling 3% year-over-year and our ongoing focus on attracting high-value customers. Average order value was $220 for the quarter, down 9% due to a higher mix of lower-priced transactions, including an increase in BOIR, annual reports, and corporate dissolutions. Subscription revenue was $109 million, up 2% from stronger compliance-related subscriptions. This growth was partially offset by a decline in revenue from our tax offering due to our decision to pause new customer acquisition. We ended the quarter with approximately 1.8 million subscription units, up 14% from an increase in forms and eSignature and bookkeeping subscriptions due to the bundling of these products into certain business formation packages as well as an increase in compliance subscriptions. ARPU was $263 for the quarter, down 5%. This was primarily driven by pricing changes to our compliance-related subscriptions and a mix-shift within our virtual mail subscriber base. Turning to expenses and margins, where all of the following metrics are on a non-GAAP basis. Fourth quarter gross margin was 71% compared to 68% in Q4 2023. The year-over-year improvement was primarily driven by lower filing fees as a percentage of revenue from lower formation volumes. Margins were also supported by lower headcount expenses associated with our tax offering as well as continued automation and process improvements in our service delivery operations. Sales and marketing costs were $44 million or 27% of revenue, an increase of 1% from the prior year. Customer acquisition marketing costs increased 8%, primarily due to higher brand marketing spends. Non-CAM sales and marketing expense was down $2 million or 24%, primarily due to lower content production expenses and a decline in personnel costs. Technology and development costs were $13 million, down $3 million or 16%. General and administrative expenses were $13 million, a decrease of $2 million or 12%. Both technology and development and G&A cost-savings were primarily driven by the reduction in force that occurred in the third quarter of last year. Our execution drove adjusted EBITDA of $44 million or a 27% margin. This represents a 32% year-over-year increase as compared to adjusted EBITDA of $33 million for the same period last year. As a reminder, our adjusted EBITDA margins are generally higher in the back half of the year due to lower TAM spend levels that align with our business' seasonality. Deferred revenue decreased by $11 million from Q3, which was in-line with expectations and the typical seasonality of our business. Free cash flow was $36 million compared to $14 million for the same period in 2023. Our free cash flow performance exceeded our expectations, primarily due to the increase in adjusted EBITDA as well as an improvement in and the timing of working capital changes. We ended the quarter with cash and the cash equivalents of $142 million. We remain debt free with no outstanding borrowings under our $150 million revolving credit facility. Subsequent to the end of the quarter, in Q1, we used approximately $50 million of cash on hand related to the acquisition of Formation Nation. During the fourth quarter, we repurchased 0.4 million shares of our common stock for approximately $2 million. For the full-year, we returned approximately $165 million to shareholders through share repurchases, repurchasing 19.2 million shares of our common stock at an average price of $8.58 per share, lowering our share count by approximately 10%. As of December 31st, 2024, we had approximately $50 million remaining under our $215 million share repurchase program. Turning to our capital allocation priorities in 2025, we remain committed to executing against our three key focus areas to drive growth. We will utilize our healthy balance sheet and strong cash generation to drive shareholder value. We're very pleased to begin the year with the acquisition of Formation Nation, which accelerates many areas of our growth strategy. In 2025, we will remain focused on making the right organic investments in our business, namely legal and compliance services and technology to improve our customer experiences and drive organic growth. We will also continue to evaluate synergistic M&A opportunities that can accelerate our strategic growth plans and bolster our market leadership. Last, we will also continue to opportunistically deploy capital for share repurchases. Finally, turning to our outlook. I will now provide guidance for the first quarter and full-year 2025, including the impacts from our recent Formation Nation acquisition on February 10th, 2025. For the first quarter, we expect revenue in the range of $175 million to $179 million or 2% year-over-year growth at the midpoint. We expect first quarter revenue performance to reflect a year-over-year decline in transaction revenue in part due to the impact of beneficial ownership filing injunction and a year-over-year increase in subscription revenue driven by the commercialization of our core business subscriptions partially offset by headwind from the discontinuation of new customer acquisition related to our tax offering. For the full-year, we expect year-over-year revenue growth of approximately 5%. This reflects our goal to reaccelerate Subscription revenue growth throughout the year. We expect to exit the final quarter of 2025 with double-digit growth in Subscription revenue. Our guidance includes an assumption of a flat macro for business formations as based on Census reporting of EIN applications. It also reflects our assumption that the beneficial ownership filing requirement will be on a voluntary basis given the rapid changes we have seen to federal rulings. It includes the impact of shifting the commercialization of our L

Thank you, Noel. I want to reiterate the strong confidence we have in our ability to meet our 2025 outlook. Achievement will reflect the success of our three key focus areas and the prioritization of positioning Legal

Thank you. At this time, we will conduct the question-and-answer session. [Operator Instructions] Our first question comes from the line of Ella Smith with JPMC. Your line is now open.

Good evening. Thank you so much for taking my question. So Jeff, maybe first for you, you mentioned raising the registered agent price. I think it was from $1.99 to $2.49. I was wondering if you can update us on how that's going and maybe how Legal

Sure. So first off, philosophically, we think that many of our products are much stronger than our competitors in-part because of the historical context, having been doing this for the entirety of 24 years and then RA's case for almost that long. The registered agent product is something that needs to work when you need it. And having Legal

That makes a lot of sense. Thank you so much, Jeff.

You bet.

And Noel, maybe for you. Your 4Q24 free cash flow was exceptionally strong. I think it exceeded the top-end of your guidance by $15 million or so. Do you have any comments about maybe what happened in the quarter and any thoughts about maybe free cash flow to EBITDA conversion moving forward?

Yes. Thanks for the question, Ella, and thank you for pointing that out. We're happy with the performance that we saw in Q4. We're happy with our free cash flow performance for the year. We think our adjusted EBITDA is converting really well into free cash flow. Q4 in particular, I think there's a number of factors or a few factors. One, our adjusted EBITDA was at the top end of our expectations. So that sort of exceeded our expectations a bit. We also saw a deferred revenue outcome exceeded our expectation somewhat as well. And then just with working capital changes, some structural improvements that benefited us in the quarter and will benefit us moving forward. And then there -- a bit of it was just the natural timing of working capital. So you see that ebb and flow from quarter to quarter a little bit better in Q4. That will create a little bit of a headwind in Q1. But overall, I think it speaks well to how we're converting free cash flow. As it relates to how we think about it looking forward for 2025, I would expect that we'll continue to see strong conversion from adjusted EBITDA into free cash flow. Probably, I would say at the same level or slightly better than what we were able to deliver in 2024.

Great. Thank you both so much.

Thank you.

Thank you.

Thank you. Our next question comes from the line of Trevor Young with Barclays. Your line is now open.

Great. Thank you. First on the Formation Nation acquisition, can you quantify specifically how much revenue and EBITDA is baked in for fiscal '25 before any of the synergies? And then how should we think about layering that in from a modeling perspective across transaction and subscription revenues? That's my first question.

Hey, Trevor, this is Noel. Thank you for the question. I think first, just want to reiterate our excitement about the acquisition. We're happy to welcome the team. It's a seasoned and accomplished executive team. It's a highly dedicated and capable employee base. So we're happy to have them as part of the Legal

Expanding on that point, which -- it's a good question to be asking, Trevor, and we've sort of struggled with this ourselves because as we start to look at integrating this business, we can either keep it somewhat separate and segmented or we can do what we think is the right approach, which is really lean-in on integrating this business quickly. So we can take advantage of a number of key things. Noel already brought up one of them, which is an aggressive approach to pivoting from a transactional business, which they largely are as we were at one point as well to subscription. Leveraging our technology, number two, really deeply integrating a cross-sell and up-sell approach where we're not thinking about how to separate things, but how to unite them and combine so that we can sell some of their products into our base. They can sell ours into theirs, but more importantly, they can call into our base and vice-versa. And then finally, on marketing, brand, and positioning, we've effectively acquired a low-oriented value brand as well as a very-high -- high-touch do-it-for-me product, something that is white glove. We don't have either of those. We've been right in the middle. And anytime we had to compete either down-market or upmarket, we had to leverage the exact same brand. We now have the opportunity to go after a -- the lower end of the market as examples such as free formations, but not dilute our brand. We can only do that by full tight deep integration and doing that aggressively. And the opposite is true as well as we think about some of these higher-end products and services that we've been testing with success in market that are priced orders of magnitude higher than what we offer. Being able to do that by leveraging their experts service force is going to benefit us significantly. So we've taken the approach of looking at these companies on a combined basis on a go forward basis.

That's really helpful detail. Thanks both on that. Jeff, just back to your comments on pricing, some potential increases, but maybe also some decreases as you push towards more of that subscription mix. How do we bridge that with the overall full-year guide? How much is baked in in terms of pricing lift in that 5% revenue growth for the full-year?

So the way that we've approached this guide is to make sure that we as a team have confidence in the numbers. And you saw a number of elements that Noel brought up that we layered in where there could be potential upside, but we're taking an approach on focusing on the things that we can control. And when it comes to price, the same is true there as well. While we believe in the pricing model and we think that there is real anelasticity both with new customers and our existing base, what we're focused on first and foremost, is driving towards that double-digit subscription growth. That's what's going to deliver us into the future in a predictable and consistent way. And it is something that we had lost previously. And we have now -- we have now earned the right to have that back and we're not going to lose sight of that. So first and foremost, we're actually focused more on long term than the immediate term, which expresses some conservatism in the early periods, which gives us confidence over the long run. So I think that there is a lot of opportunity. We have priced into our guide, what we think is reasonable to do on pricing. But we don't think that we're being aggressive on pricing either. So it gives us levers and leverage in the business to the extent that we need it.

Great. Thank you.

Thank you.

Thank you. Our next question comes from the line of Andrew Boone with Citizens. Your line is now open.

Thanks so much for taking my questions. One tactical and one more strategic. Can you talk about the very strong subscription net unit adds that we've seen kind of in the back half of 2024? The attach rate, if I think about that compared to kind of business formations has just been much higher than we've seen historically. Can you talk about the drivers of that? And then how do we think about the drivers of that for '25? And then a little bit more strategically, Jeff, can you just touch on the partnership strategy? Where does that go over the next kind of two to three years? What does that help you guys unlock both internally in terms of more resources as well as then touching new partners and bringing new services onto the platform? Thanks so much.

You bet.

Thanks, Andrew. This is Noel. I'll take the first one and I'll pass it to you, Jeff. The first one on the net sub-adds. I think it's a combination of things. First, we started bundling certain subscriptions into our Pro and Premium SKUs as we continue to look to differentiate the higher end SKUs and seek out a higher-quality, higher value customer. And so, we included our Forms and eSignature subscription and then subsequently, we also started including our bookkeeping subscription in those SKUs. And so, as folks are buying into those packages, they're automatically getting those subscriptions and that's creating the ads. We're really focused with those additions on creating activation, creating engagement, so we can ensure that we're driving some meaningful level of retention and renewal of those subscriptions. The other thing I'll point out is our compliance subscriptions, we've done a better job. We talked a lot last year about BOIR and the impact that had from a transaction unit standpoint, but also in the back half of the year, we really started leveraging BOIR into our compliance subscriptions to ensure that the customers, as they learn that the environment is getting more complex, that we have an offering that can help keep them compliant across the Board rather than just addressing the single point related to BOIR. So I think those are the factors. We'll obviously start to lap the inclusion of these additional subscriptions in those packages. We just started lapping this quarter, the Forms and eSignature, and then in the end of Q -- by the end of Q3, we'll start lapping the bookkeeping inclusion.

And the only thing I'll add there, Andrew, is this is a test-and-learn strategy in terms of how we drive first subscription units, which increases our funnel and then the ability to upsell and cross-sell and increase price and value to those products and services. In the spirit of better to be lucky than right sometimes with BOIR, we made a conscious effort of pushing people from BOIR to our total compliance package before all of the lawsuits came up with BOIR. So we ended up creating some amount of friction in BOIR before the deadlines started to unwind. So we didn't see quite the yo-yo that I suspect some of our other competitors have and some of these government agencies have had because what we have done is we've used some of these transactions as engagement tools to help educate customers on why they need a full-service, full-suite product that endures over time. I'm not going to tell you that we feel as if our compliance product is where it needs to be. I think we can get much better on the product side there, but it just shows that we can move people into these higher offering subscriptions and over time add value that helps retain and ultimately increase price. Switching over to your partnership question which happens to be, I think, a good one and very, very strategically important. So I'm glad you put it in the strategy camp. It is -- it -- my answer is less about partnership specifically. It's more about go-to-market and making sure that we're insulating ourselves from the risks of the concentration that we had before. We were focused exclusively at the top of funnel on bringing people in through formations and then cross-selling and upselling. And the goal was bring people into that funnel very cost-effectively, so lower marketing costs by offering formations for free and then upselling them other SMB products. We have shifted that strategy now just to look at the larger addressable market in the legal services space, going after that by doing what we do best and then being able to bring people in across different channels, whether that's affiliates, our core top of funnel, partners, even M&A as we saw with Formation Nation in this case, where it makes sense opportunistically. And in order to do that well, we need to have the best products in category. And we believe we do and those will continue to get better. And then we partner on the ancillary side and that will provide us that insulation. So you saw that with 1-800. You saw that earlier with Wix and you will continue to see partnership channel as an ecosystem becoming more and more core to what we do because that will be the thing that a customer wants from us next. We -- in the business side, we incorporate a customer. We make sure that they're compliant. We get them a registered agent. The next question is going to be things like where do I get a bank account? Where do I get credit? How do I build my business credit versus my personal credit, something I know really well from my early career? How do I form a website and get a web presence, our partnership with Wix and then ultimately, how do I pay taxes in the most advantageous way with my business vis-a-vis my -- what I'm doing personally? And it is that where this partnership ecosystem can be really, really valuable on to driving higher-value opportunities to our customer base without us having to tax our technology and product teams. And then secondly, which I think is going to be equally important, if not more, leaning on partners to drive customers to us into our core business. And that is something that we haven't done in a significant manner historically, but it's something we're going to lean in on this year and beyond because we think that there is a world of opportunity where we can lean on partners to start bringing customers into our SMB ecosystem and consumer ecosystem. But great question, Andrew.

Thank you. One moment for our next question. Our next question is from Patrick McIlwee with William Blair. Your line is now open.

Hi, team. Thanks for taking my questions. So your implied market share stepped down by another point this quarter, and I know you're focused more so on customer quality versus market share at this point, but I just wanted to ask how we should think about your share going forward. And if there's a certain level or critical mass of formations you hope to maintain? And further how material Formation Nation is in terms of volumes?

Sure. So I'll take this at a high level and Noel, feel free to jump in on details. This distinction between quality share and market share is a really, really important one in our space. Because the way we define market share or at least the way to measure market share is with formations or the proxy for formations, EINs. What you end up is with a bunch of noise in that system, whether that's fraud, whether that's bulk, whether that's high-volume, there are a large number of incorporations that really aren't valuable to us. And we have been focused too much on that market share number. And I think we've said over the last couple of quarters that we are going to reorient to focus on quality share, even if it means at the cost of perceived market share versus real market share. I don't think we're significantly impacting our market share because I think what we're doing is we're driving higher value customers into our flow. And I think this quarter, we -- to some extent proved that by being able to pivot over 10% of the customers that were coming in and looking to form companies from going from our free formation to one of our higher-end Premium and Pro formations and that was done organically through education. Don't get me wrong, plenty of others fell out of the funnel. But the ones who fell out of the funnel, I don't think they were high intent customers or had high propensity for up-sell, cross-sell or to buy something down the line. So, we're pleased for now with the work that we're doing on market share versus quality share because again, we don't think it is impacting our actual market share as much as it might be impacting perceived market share. That said, this will stabilize over time. This is going to take a couple of quarters for us to get right and then we'll probably tick and tack back to the -- to those EIN numbers.

Yes. I think you hit the point that I was going to bring up on the stabilization at some point. So as Jeff said, sort of we're working through it. The work is not fully done. But as we get closer to identifying exactly where we want to be in terms of the customer profile that we're attracting, we will see market share stabilize. And obviously, Formation Nation will be additive to our business formation count and market share. But to the extent at which is unclear at this point. And so we're looking at it again in totality.

I'm getting good at stealing Noel's thunder. The one thing I'll add with Formation Nation is Inc Authority originated to my understanding, the free formation model. And frankly, we copied from them. And I can say that now that we own them. We were behind the ball on it and in our urgency to try to catch up, I think we may have done some damage to our brand. So the other side of the equation with this Formation Nation acquisition is we can now leverage Inc Authority as this free-to-pay brand. And I think that, that will help us in two ways. Number one, it will shore up the lower end of the market that are still quality customers. And number two, it will do so in a manner that won't devalue the Legal

Right. Okay. That's all very helpful. Thank you both. And then...

Great. Thank you, Pat.

Just one more, if I may. Jeff, in recent quarters, you've talked a little bit more about your strategy with AI, leveraging your library of documents to power the capabilities on your platform. And you've launched a couple of new products recently, but I just wanted to ask if you could quickly touch on your longer-term vision for what other products or capabilities could look like with that technology.

Yes, great, great question. And what I would say is long term, the strategy and goal is to leverage AI to augment expertise. And again, Formation Nation is a critical component here because they have that 100 plus, 140 plus service experts that we can leverage. When you look at our two competitive sets, on the one hand, you have mom-and-pop lawyers who are very adept, have great expertise, but can't scale because they lack the technology prowess. On the other, you've got the online largely formation companies and the peer services. They have great technology and that technology is designed to replace expertise. We are unique in the sense that we have deep expertise in the form of lawyers, paralegals, legal network, and now these service experts. And we're the leader in this space on the technology side. So the idea here is to take artificial intelligence and particularly generative artificial intelligence and make things easier and simpler for our customers, for our agents, for our experts, and for our lawyers to help customers at scale. And for us, I think that that is a key differentiator and that will pull more and more customers off of main street to our online platform.

And I think just to build on that, there's an operational efficiency side of that equation as well. We talk about augmenting our attorneys and our sales teams and our developers, but also on our fulfillment -- on the fulfillment side of our business, we have a really broad and long-tail product set and many of which still require manual steps in the process and we think there's still a meaningful opportunity to leverage AI to help us make that much more efficient.

Very helpful. Thank you both for the thoughts.

Yes, thank you.

Thank you. Our next question comes from the line of Elizabeth Porter with Morgan Stanley. Your line is now open.

Great. Thank you so much. I wanted to ask about the marketing piece a little bit more and was hoping you could just unpack the strategy around building out more of the education and increasing brand spend. I think you said 2 times both out increasing the marketing budget. So first, just where are some of the offsets? And secondly, what are you doing differently in terms of the messaging or the channels now compared to when you were last leaning in on marketing after the IPO? Thank you.

You bet. Good question. I'll take it at a high level if you want to jump in Noel on some of the numbers. Our go-to-market strategy historically has been pretty uniform and it has been leveraging search probably to a point that is too extreme. And unfortunately, when you're leveraging search and then your brand is the high end brand in the market, but is offering a free product, you effectively race to the bottom and the only ones who win are the people you're buying marketing from because you're competing against like substitutes. So as you think about how we move forward, the first thing and I've talked about this earlier is we will have a multi-brand strategy that will allow us to take our value oriented products that are priced lower and offer that using a different brand, in this case, Inc Authority. Our premium brand services, meaning being Legal

Yes. I guess I'll probably reiterate a little bit what you said, but just, and to say it again, the brand message now encompasses a broader suite of services and better encapsulates our full offering while not reducing the relevancy to SMB. So allows us to capture a broader audience with our brand message and do it more efficiently. And therefore, we can replace some of the lowest efficiency portions of our performance spend. And that's how we get to kind of holding spend relatively flat on a year-over-year basis.

And I'll give you a specific case study, so we're tangible here. When we launched our tax product a number of years ago, we effectively changed our brand name from Legal

Great. No, that's super helpful context. And then just as a follow-up, I wanted to dig in on the subscription revenue guidance. I know there's a lot of moving pieces, but could you help us just understand the bridge better from 2Q -- for 2% in Q4 of 2024 to double-digits exiting 2025? How much is just driven by the fact that year-over-year comps are materially easing, kind of the contribution from Formation Nation, 100 -- 1-800Accountant, you have price in there, also just demand changes in the core. So I know there's a couple of moving pieces, but any sort of like factors or ranking would be super helpful for us.

Yes. I mean, I think there's a number of factors and you've obviously called out a handful of them all sort of contributing to our view on the reacceleration. I think a couple of central ones. One is the job that we've done in terms of shifting the value across our SKUs and starting to attract higher-quality customers that then are attaching more products and will retain longer, thus driving higher LTV. So we started that a couple of quarters ago and we'll start to see the benefit of that this year. Also, Jeff talked earlier about some of the pricing changes, pricing changes on the front-end as folks come in through the funnel as well as some pricing changes on renewals on Subscriptions as well. And that -- as your price changing renewals, that cohort builds throughout the year and thus provides some momentum in terms of the growth reacceleration.

Yes. And the thing I'll add, and you can see this in our numbers, we were watching deferred revenue decline. And that is now going to change. That's a key forward-looking metric and it speaks to subscription growth or lack thereof. So it's something that we have been focused on intently for the last six months and something we're going to continue to focus on because ultimately, that's what drives stability and allows you to go into future periods with the wind at your back instead of headwind.

Great. Thank you so much.

You bet.

Thank you. [Operator Instructions] Our next question comes from the line of Josh Beck with Raymond James. Your line is now open.

Yes, thanks for taking the question. Maybe just a bigger picture for you, Jeff. I think it will be going on a year this summer since you've been in the CEO seat. Do you feel like by that point, the strategic update will have largely been in place? And then, to this discussion really around the formation number itself, it seems like it's much more about the cohort value of the customers that you're bringing on. So just over-time, does the actual market share and business formation number that you print maybe mean less? Just would love to hear your thoughts there.

Yes, it's a good question. And I mean, I've got relatively high confidence that -- almost directly onto your point. As we head into the summer, we're going to have a really good handle on this business. It's going to look more like a recurring revenue business. And it's going to tack to that recurring revenue number such that we've got more flexibility and freedom within how we operate. So that we're not running the risk of a change because the government decides not to do BOIR next week as an example or the macro shifts massively, or we see small business starts on turn in a wrong way, or EINs get turned-off for two weeks, like we've seen recently. All of these things are and should be manageable. And once you have that, you have a business that's not necessarily good or bad, but it's predictable. And that's a business that can be managed. So for me, a lot of what we're doing strategically is first and foremost designed to build predictability in the business and we do that by focusing on the things in our control and minimizing what is out of our control. And finally, and ultimately, once we do that, we're going to build and lay that path towards success and we're going to start carving through it.

Super helpful. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Stephen Ju with UBS. Your line is now open.

Hi, this is Vanessa on for Stephen. So your customer acquisition spend has remained fairly steady over the last two quarters, but now you've got Formation Nation through the door. Presumably that helps with the top of funnel. So should we be expecting any meaningful changes to your marketing spend through 2025? Thank you.

No, as I mentioned earlier, we expect our marketing spend to be relatively flat year-over-year. So that's inclusive of Formation Nation.

Yes. And remember, we're going to get some benefits for sure from Formation Nation to your point, but they were also spending on marketing as well. So I think when you look at that on a combined basis being flat is pretty meaningful, it is pretty meaningful improvement.

Yes. The one other thing I'll mention around that is just our assumption in our plan and our guide is for a flat macro next year. And so our marketing spend is dynamic and reacts to-market changes very quickly. So if we see a really healthy and strong macro, we would expect to be spending more and vice-versa if we see some softness.

Thank you.

Thank you.

Thank you, Vanessa.