Good day and thank you for standing by. Welcome to the LegalZoom's Third Quarter 2021 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference may be recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Danny Vivier, Head of Investor Relations. Please go ahead..

Thank you, operator. Hello and welcome to LegalZoom's Third Quarter 2021 Earnings Conference Call. Joining me today is Dan Wernikoff, our Chief Executive Officer; and Noel Watson, our 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. Results could differ from those contemplated by our forward-looking statements.

We caution you to review the Risk Factors section of our reports and filings with the Securities and Exchange Commission for a discussion of factors that could cause our results to differ materially.

The forward-looking statements we make on this call are based on information available to us as of today's date and we disclaim any obligation to update any forward-looking statements, except as required by law. In addition, we will also discuss certain non-GAAP financial measures.

Our CEO and CFO use these measures to make their decisions regarding our business and we believe these measures provide helpful information to investors. 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.

The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. I'll now turn the call over to Dan..

one, the relationships are bilateral. We acquire new customers for our partners and they acquire for us. Two, the economics are shared in a recurring model, whereby LegalZoom participates in the ongoing value delivery of the partner's service.

And three, LegalZoom customers receive preferential pricing on the partner services by signing up through our platform. As a leader in business formation services, we are uniquely positioned to establish trust with our customers very early in their business life cycle.

We collect a vast amount of data from our customers oftentimes before they even start operating. We know their industry, location, hiring plans, et cetera and can use this information to intelligently connect them with the right service providers for their unique situation.

Our vision is to partner with the most reputable technology-enabled SMB service providers to make it simpler and less costly for small business owners to get the resources and support they need, so they can devote their attention to running and growing their business.

With more and more partner brands joining our curated network, the value of our ecosystem continues to grow. Our third and final growth vector is Attorney Assist, a new hybrid model that leverages our core technology platform while also integrating access to attorneys throughout the user experience.

On October 1, we announced that LegalZoom subsidiary, LZ Legal Services, was approved and licensed by the Arizona Supreme Court to operate an alternative business structure, or ABS, in the state.

This announcement represents a big step forward in the ongoing push in the United States for regulatory reform that permits non-lawyer owned entities to provide legal advice. With the ABS license, LegalZoom essentially now owns a law firm in the state of Arizona, enabling us to directly provide select legal services to our customers.

While we will continue to fulfill the majority of demand through our independent attorney network, the new ABS structure provides a means for us to test new, innovative ways to empower consumers with access to affordable and transparent legal services online.

We will also be testing new business models that will allow LegalZoom to deliver additional legal services beyond the scope initially contemplated and participate in the ongoing economics of that value delivery throughout the life of the customer relationship.

In conclusion, we are committed to making the right strategic investments to capitalize on the large market opportunities that exist within the legal and compliance vertical. We are patient operators and we'll continue to make decisions aligned to our long-term, growth-oriented mindset.

To that end, we will continue to strategically prioritize an accelerating mix of subscription revenues. These revenues performed independently of the broader formations macro and position us to deliver on our long-term growth and profitability targets. With that, I'll now turn the call over to Noel to discuss our financial results..

Thanks, Dan and good afternoon, everyone. I'll start today with a review of our performance in the third quarter and end with our outlook for the remainder of the year. Total GAAP revenue in the period came in at $148 million, up 12% year-over-year.

As Dan mentioned, we lapped a challenging compare from Q3 of last year as the reopening of the economy led to a surge in pent-up business formation volumes. The two-year revenue CAGR of 19% remains healthy and we believe more appropriately reflects underlying growth trends in the business.

Transaction revenue was $67 million in the quarter, representing 45% of total revenue. We completed 106,000 business formations in the third quarter. Business formations include LLC, Inc. and nonprofit formation events which are critical entry points through which we cross-sell our suite of subscription services.

Though down 9% year-over-year, business formations have grown 24% annually over the two-year period, pacing well ahead of our internal market benchmarks. Total transaction units which also include other transactions involving intellectual property and estate planning, were 229,000 units in the quarter, performing in line with business formations.

Average order value which represents the average revenue contribution from each transaction unit, remained strong at $291 in the period. The quarter-over-quarter increase was due to improvements in order fulfillment rates. Subscription revenue was $73 million in the quarter or 50% of total revenue.

We added 49,000 net subscription units in the period, with a growing portion of those driven by the successful integration of LZ Tax within our LLC formation flow. Growing our base of subscription units remains a top priority, given it's impact on LTV.

We will continue to leverage our unique position early in the SMB life cycle to connect our customers to the right set of tools and services they need to operate their business. ARPU or the average annual revenue contribution per outstanding subscription unit was $231, up 5% year-over-year.

We continue to expect modest growth in this metric over time as higher ARPU services like LZ Tax account for a growing share of our subscription units. As a reminder, we provide ARPU on a last 12-month basis to account for the fact that the majority of subscriptions are billed upfront on annual terms.

Partnership revenue was approximately $8 million in the quarter, representing 5% of our total revenue.

In the near term, we continue to expect lower sequential performance in our partner revenue as we transition away from legacy partners that do not align with our strategic direction and we evolve our relationships from bounty-based economics to recurring revenue.

However, we are very excited about the opportunity that our newest partnerships represent and remain confident in the long-term opportunity to build an ecosystem of marquee brand partners, complete with high-margin recurring revenue structures. Now, turning to expenses and margins where all of the following metrics are on a non-GAAP basis.

Cost of revenue which includes government filing fees and other fulfillment and care costs, was $45 million in the period, up 8% versus last year. Gross margin came in at approximately 70% of revenue, up 200 basis points from Q3 of last year, due to improvements in order fulfillment.

We expect a typical seasonal decline in gross margin in the fourth quarter and anticipate additional downward pressure driven by our investments in LZ Tax ahead of the spring tax season. Sales and marketing costs were $65 million in the third quarter or 44% of revenue.

Within that, customer acquisition spend of $50 million was up 46% year-over-year as we continue to scale our media budgets to grow transaction and subscription volume and build on our category leadership. As Dan mentioned, we allocated incremental spend in the third quarter to new channel testing.

We leverage results from these tests to inform our media allocation and to drive greater efficiencies over the long term. Inclusive of this in-period testing spend, we believe we are continuing to generate LTV in a highly efficient manner.

Technology and development spend was $12 million in the third quarter or 8% of revenue, up $1.6 million quarter-over-quarter. The sequential increase was expected as we continue to build out a best-in-class product and technology organization and make investments to modernize our infrastructure.

Finally, G&A spend was $11 million in the quarter or 7% of revenue, in line with Q2. The year-over-year increase in G&A was driven by incremental public company costs and headcount investments. We expect G&A to increase sequentially in the fourth quarter, primarily due to additional consulting costs.

Adjusted EBITDA was $15.1 million in the quarter or 10% of revenue. Our base of deferred revenues remained roughly flat in the period as growth in subscription bookings was offset by improving transaction fulfillment times. Free cash flow was $17 million in Q3, down from $29 million in the same period last year.

As of September 30, 2021, we had cash and cash equivalents of $311 million and no debt outstanding. I'll now turn to guidance for the fourth quarter and full year 2021. We expect full year revenue of $575 million to $579 million or year-over-year growth of 23% at the midpoint.

This full year range implies a fourth quarter revenue of $142 million to $146 million, up 18% year-over-year at the midpoint. Our revenue guidance considers discontinuation of a more normalized seasonal pattern of business formations and our proactive decision to drive subscription bookings in favor of in-period transaction revenue.

We expect full year adjusted EBITDA of $45 million to $47 million or 8% of expected revenue at the midpoint. We are continuing to invest in the business to drive durable multiyear growth.

In the fourth quarter, we will deploy incremental spend to support the NBA campaign which we view as a unique opportunity to accelerate our brand repositioning efforts. We are also continuing to ramp investments in LZ Tax, both in people and infrastructure, to keep pace with outsized demand for that service.

Because of these investments and the strength that we're seeing in the subscription side of our business, we remain confident in our ability to deliver on long-term growth and profitability targets. We will not provide explicit 2022 guidance at this time but plan to do so in our Q4 earnings call early next year.

And quickly, before wrapping, we will be participating in several upcoming investor conferences, including Credit Suisse, Barclays and Raymond James. With that, let's open it up for questions..

[Operator Instructions] Our first question comes from Sterling Auty with JPMorgan. Your line is open..

Yes, thanks. Hi, guys. So two questions from my side. One question, one follow-up. So on the business starts and the comment that you made about the transactional portion. I think as you guys came through the IPO process, you mentioned the long-term growth goals. There was a belief that you could drive acceleration north of 25%.

What do you still need even with kind of the modification of the transaction subscription that you mentioned in the call, what do you need as a baseline in terms of business starts to still be able to deliver upon that goal?.

Yes. Well, thanks for the question, Sterling. And I think when we talked about this on the road show, there's really three dimensions to growth. One is the macro itself and we still feel really good about the macro tailwind.

If you look at the current new business starts, relative to where they were in 2019 and we're still seeing solid growth and obviously, there was a little bit of a step down in Q3. But long term, we feel good about that. The second piece is really around share gains. We know that we have a superior offer to the offline alternatives.

And so we continue to be aggressive in marketing to go after share. And then, the third piece is we don't think of our business as a transactional business. We think of ourselves as a formation service.

And so the more that we continue to add subscription services that people need right when they're forming a business, the more successful we'll be not only in terms of solving for in-period results but really accelerating long-term growth with higher visibility.

So those are really the three dimensions of how we think we exceed, hopefully, the long-term targets that we put out there..

Got it. And then the follow-up is, you talked about choosing subscription versus transaction.

How much control do you have to drive the business in that subscription side? And what are the leading subscriptions that investors should look for you to drive to make that happen?.

Yes, that's a great question.

And actually, one of the things that we think about a lot and that we also test for a lot, because when people come into our solution, they're doing a combination of buying a transaction, the registration of their business and even some other ancillary transactions like an operating agreement or an EIN but they're also adding subscription services that help them stay compliant as a business.

And even further now, we're getting into more back-office operations with something like the acquisition of ECM [ph]. And so what we do is we often test different forms of commercialization.

And what we typically see is there can be both a combination of increase in the overall value of a shopping cart but also really a transition in the mix of the cart to be heavier into the subscription side.

Now, one of the interesting things is we knowingly will lean into some of the subscription bookings even if we know it has a short-term impact on revenue and actually bringing revenue down, because it's reducing the transactional revenue that's recognized in period.

Because we know it's the right decision to make for long-term growth and we're building up this larger subscription base over time. So a lot of this is testing. And as all of you know, we run a lot of different tests to try and understand the consumer behavior in the cart.

And the more services that we can add during formation, the more things we have to test and learn on. The biggest one and I'll just add it, is LZ Tax. LZ Tax, as an example, is a service that's a much higher-priced ARPU. And also, the revenue is further deferred because it's not recognized in current period.

It's actually mainly recognized in the tax season itself. So today, we're building up a lot of infrastructure. We're building up capabilities. We're building up headcount to support a future tax season. And so you can see that even in the Q4 guide in EBITDA and we're really investing for the future..

That makes sense. Thank you, guys..

Thank you..

Thank you. Our next question comes from Mario Lu with Barclays. Your line is open..

Great, thanks for taking the questions. Just wanted to hone in on this quarter as the drivers came in a little bit different than what we expected, with ARPU being a little bit higher, volumes being a little bit lower.

So just wanted to see if we could double-click, especially on the transaction side, like how sustainable are these levels of ARPU going forward. And then conversely, on the volume side, when should we expect that to kind of tick up sequentially? Is it seasonally, you guys talked about 1Q being stronger.

Is that what we should expect going forward?.

Yes. Thanks for the question, Mario. I think you were saying should we expect AOV on the transactional side to continue to go up, because that did increase slightly this quarter. ARPU was relatively flat, just slightly better than what it was in the prior quarter. And so I'll answer that and then you can correct me if that's not the question.

On the AOV side, we actually did benefit a little bit from increased fulfillment rates. One of the things that is really a key focus area for us is the customer experience. And then one of the top drivers of both promotion in terms of Net Promoter and the traction is turnaround times.

And so we've done a pretty significant investment on the fulfillment side. We continue to automate. And some of that did pull in orders that essentially would increase the AOV in period. That's along with the historical increases in AOV that have been really commercialization driven, a better job of marketing the product.

We don't expect AOV to continue to climb, even just aligned with the question I just answered. In some ways, we'd be comfortable if AOV goes down and really that we see a higher mix of ARPU and subscription services going forward. And so you'll -- you can almost think of AOV as a trade-off between CAM spend in a way.

In some cases, we might test lower prices in order to reduce our CAM spend reliance. And so it might even be the opposite but that's all things that we test into and try to understand from watching consumer behavior..

Mario, this is Noel. Just to add in, AOV was up 30% quarter-over-quarter. Year-over-year in Q2, it was up 16% this year. I think as we mentioned on the prior call, we expected the growth rate in AOV to decelerate sequentially in each quarter in the back half of the year.

And so we -- I would reiterate that here, that we'll see -- because AOV was increasing sequentially each quarter last year, that the year-over-year growth would be closer. They absolutely will be closer and the year-over-year growth would decelerate even in Q4..

Got it. Thank you, Dan..

Thanks, Mario..

Our next question comes from Elizabeth Elliott with Morgan Stanley. Your line is open..

Great, thank you so much for the question. I just wanted to dig in on kind of the share gains as an element for one of the key drivers of your growth.

Can you let us know what you're seeing in terms of LegalZoom's share within overall business formations? How should we should think about the balance between maybe some weaker macro year-over-year versus the accelerating digital penetration to help offset?.

Yes. Thanks for the question, Elizabeth. This is one of those things that depends on how -- what you're looking at as the macro. And we know that the published macro data that everybody is viewing is the census data. Q3 data on the census was sequentially down 19% and it was also down year-over-year, 17%.

Now it's also worth noting that the two-year CAGR is up 22% but it definitely was a step down. And one of the things that I'd say is unique as we have our own internal data source which really links directly to the majority of the Secretary of State's data sources directly.

And so what we actually saw was a little bit different in September than I think what Census printed. And actually, I would say it was lower than what they actually had on their numbers which, again, we've always said that the EIN data is not perfect.

It's a superset of what we essentially see in terms of business formations, because some people have an existing business and then they go get an EIN because they hired an employee or they're opening a bank account. And so we often see it have variation.

What I would say is, given the fact that September was lower in our own view and you can see the data as it relates to our share relative to the Census macro, we did gain share in the quarter. I mean it's pretty clear. But we will not be sharing our own internal data.

It's a pretty unique data source and it gives us more visibility than we think any of our competitors have. And it also helps us from a forecasting perspective and from a marketing spend perspective, so we consider it pretty proprietary..

Got it. And then just a follow-up on some of the retention. I think the retention rates are on kind of a 13-month basis. And kind of you really started to see the tailwind for demand in July and August last year.

So now that we lost that 13-month period, any color how retention rates have trended, especially for some of those cohorts that might have come on quickly?.

Yes. That's a really good question. And actually, we had a sense of this that this would happen. Some of those businesses were pretty ephemeral. And so we did see a reduction in the cohort that was acquired in July and August on the 13-month retention. What's interesting is we actually saw strengthening in all of our other cohorts.

So the overall churn rates improved. And what I'd also say is it was very specific to that July and August cohort and we've already seen it start to climb back up on the 13-month retention side as well..

Great. Thank you so much..

Thank you..

And we have a question from Andrew Boone with JMP Securities. Your line is open..

Hi guys, thanks for taking my questions. I've got two, please. So the first, can you talk about any learnings on LZ Tax? And just your level of confidence as you build supply ahead of the 2022 tax season? And then a macro question, just going back to formations. Admittedly, I'm asking for an opinion here.

But just given the strong job market, do you feel like that is more of the headwind for business formation and so we should be looking at job numbers as well? Or is the hiring market less correlated with business formations?.

Yes. Let me take that last one first. It's a really interesting question in that there are a significant amount of job openings out there but there still is a pretty significant amount of unemployment.

And it feels like there's a nice behavior change that seems to be happening, people both being willing to go out on their own or even also have a potential-side business.

And so, when you start to look at the data itself, I actually feel like that unemployment data is a little bit of a misnomer, in that the great resignation in many ways is actually like the great entrepreneurial bloom in some ways. So we're really bullish on this.

Like we look at this macro and we see a very stable floor at this point which we're forecasting off of. We're not assuming any improvements. And by the way, we reforecast off of our own internal macro data on a monthly basis. And so we start to build off of that.

I wouldn't be surprised if there's a little bit more of a recovery, just given the fact that it's never been easier to start a business than it is today. I mean you have all of the enterprise-level tools. You have the ability to get started quickly. You can test something and try it. You can run it as a side business.

You can do it when you're working from home as well. So we feel pretty good about that.

Anything you'd add there, Noel, before I jump into the LZ Tax question?.

That's okay..

Yes. LZ Tax, we're learning a lot. This is one of those services where I think I've said in the last call, one of the things that was a massive surprise for me when I joined was that we would get as many tax questions when someone forms the business as we get legal questions. And it's playing out that way.

We're seeing attach rates that are very similar to what we see in our legal subscription service. Now along the way, we're growing so fast that we're making sure that at the same time, we're providing a great experience. So we've deployed practice management.

We've been hiring experts ahead of the tax demand and we're also augmenting that with other service providers. And so we have a combination of many different ways that we're trying to solve for the season's tax business. And to be totally clear, we're throttling the volume as well. Like we are not reaching our full potential.

We just ramped it up on LLC, we're not including it in our other workflows, like INK [ph] and non-profit. And we're not really marketing actively to our existing base at this point, because the goal here is providing the best experience possible in our first tax season..

Great, thank you..

Thank you..

Our next question comes from Matt Pfau with William Blair. Your line is open..

Hey guys, thanks for taking my questions; nice results.

On the EBITDA guidance implied for the fourth quarter, I think it would be helpful if you can just give us some more details on the magnitude of the LZ Tax and NBA partnership and investments and where these expenses sit on the income statement? And then are these going to be more onetime? Or should we think about them as ongoing when we put together our models?.

Matt, this is Noel. I'll take this one and Dan can jump in if he has anything to add.

So certainly, in Q4, we're continuing to be aggressive in terms of how we're investing in the business and that starts with our investment in people or aggressively hiring to increase capacity and capability in the business and continue to focus on the technology function.

On the marketing side, we talked about the investment we made this quarter into testing new channels. We're going to continue to do that aggressively in the quarter.

And then two items, as you pointed out, in terms of the NBA partnership, we're certainly investing a fair amount in terms of from a brand standpoint to just help launch that campaign in the proper way. And so it will be a little heavier in Q4 but it's a longer-term partnership.

So there will be continue -- we'll continue to allocate to that investment moving forward. And then, LZ Tax; we're -- the brand cost of the MBA, they sit in the -- obviously, in our CAM spend. And then for LZ Tax, we're investing wholly to scale operations in support of the growth there and in particular, as we ramp up for tax season.

The tax experts, where we're really focused on hiring and are most critical for that support, they sit in our cost of sales. So you'll notice in our prepared remarks, we talked about the sequential step-down in gross margin and that's in part related to the tax investment that we're making there.

And as Dan mentioned earlier, again, as we grow the subscribers on the tax side, all that recent growth in subscriptions related to LZ Tax, a lot of that revenue or the majority of that revenue will be recognized in 2022. So this is a bit of an investment in advance of that revenue..

Yes. And the only thing I'll add and it's maybe a gratuitous ad because it's not the question you're asking. I think on the brand side, we've talked about this before that we have a very high-aided brand awareness. You talk about 74%. But one of the big challenges we have is more on the brand familiarity and product knowledge side.

So a lot of people who know who we are but they're not exactly sure what we do and they still probably have a legacy view of us being focused on estate planning. And so just to put that into context, only 40% of our potential consumers are aware that we have a business formations product.

So that is a big limiter to growth and growth in share and that is why we're making such a significant investment on the brand side. So if you think about that NBA partnership, I mean it is called Fast Break for Small Business. Or if you think about what type of partner we are, we're not the legal partner. We're the online business formation partner.

And this is very explicitly done because we're reintroducing our brand primarily as a small business brand. And the analogy I would use is it's almost like if everybody knows what Coca-Cola is and there's 90% awareness. But imagine 60% of the people thought you eat it with a fork.

I mean that's essentially the challenge we're trying to get through right now. It's a big opportunity. In many ways, this is unrealized potential and it's why we think this brand spend is so important..

Got it. That's helpful detail, guys. I appreciate it. Just one follow-up on the LZ Tax revenue recognition.

Does -- so first, does that flow through the subscription line? And then second of all, is that more seasonal in the way it gets recognized? And maybe it's too immaterial now but do you expect that to create some seasonality with respect to your revenue on maybe the first and second quarters of the year?.

Yes. Matt, this is Noel. Great question. So LZ Tax is recognized in our subscription revenue line. It's largely monthly subscriptions. And so there is -- there are components of it that we separate in terms of our revenue recognition. Some of it is recognized ratably over the term.

And then there are pieces that are tied to kind of the various entitlements like tax preparation that will be more seasonal in nature. And so you will see, especially as it becomes more material, a bit of a seasonal impact from it..

Yes, just to punctuate that, too. The -- we originally deployed this as with different choices. We had a choice of a SKU that was tax advice and bookkeeping and then a different loan which was tax prep. And what we realized is everybody want a tax prep. And so we've shifted.

And the way we're commercializing it is two flavors of tax prep which then again has the exact impact that Noel just talked about which is more of that revenue is deferred into tax season..

Great. Thanks, guys. Appreciate it..

Yes, thank you..

We have a question from Brett Thill with Jefferies. Your line is open..

Hi, great. Thank you. This is John [ph] for Brent Thill. Another question into the LZ Tax. Just trying to get a better understanding how much you're ramping into there.

I mean is it more tax experts as opposed to the infrastructure and technology underneath it? And then when you ramp this up, I mean in terms of the mix, I mean, will it be primarily tax prep as opposed to bookkeeping? And how much will it impact in terms of headcount overall? I mean does that mean the headcount is going to ramp to much higher percentage versus what it is today? And then I have a follow-up on the AOV..

Yes. Well, I mean, I would think of this as we're creating a very large-scale tax practice. And so essentially, all of those are being built in parallel. I mean we started with the foundation of a very small acquisition. So we had some of the capabilities already.

But as I mentioned in the opening remarks, practice management is an investment, bringing in CPAs and enrolled agents is an investment. Marketing is an investment. There's a sales component because we also have lots of customers coming into our general floor and we're able to introduce it through the sales team.

And so it's a pretty across-the-board investment that, just to the last question, will predate the actual recognition of the revenue which primarily happens in tax season. I think, again, the value here is very much overweighted on tax prep relative to bookkeeping.

But we also feel like the two things have such a strong relationship that we really want the small businesses to be successful and keep the right books and get the right ongoing advice from accountants, so we offer those in combination..

Great, that's very helpful. And then on AOV, you mentioned the fulfillment -- improved fulfillment.

Is that -- I guess just to clarify, does that mean that you were able to green goes in faster, so you're able to recognize the revenue a little bit faster than it might have been in the past?.

Yes, that's right. This is Noel. So you got to remember from a year-over-year standpoint, last year was really unique. There was significant impacts from COVID, both on our fulfillment operations as well as the Secretary of State in it's processing time. So a lot of those impacts have been largely eased. And so our fulfillment productivity has improved.

We've also made investments in our fulfillment process, well, both in our customer experience as well as in the infrastructure that supports our fulfillment. And so we're realizing a durable efficiency improvements in our fulfillment productivity and are just able to get customer orders out the door faster.

And our fulfillment of orders is tied to our -- the timing of our revenue recognition..

And we view it as like a durable benefit, like this is something that even over time, we expect to be faster, we expect to continue to automate. So this is something that's a really critical focus. And I mentioned before, it's really driven by what customers want.

I mean, customers oftentimes are forming a business because they have an immediate need, like they need a bank account or they're working with a trading partner who requires them to be incorporated to be an LLC for liability reasons. And so they need it as fast as possible which is really the underlying reason for that investment..

Great. Thank you very much..

And our next question comes from Stephen Ju with Credit Suisse. Your line is open..

Hi, this is Francois [ph] on for Stephen. Thanks for taking the question. So, I think one of the key strategies you outlined is to improve the service levels for the consumer with the Attorney Assist.

Could you update us on sort of the type of level of uptake you're seeing for those solutions in the verticals and products you have rolled it out to? And sort of any incremental update on the split between DIY versus Attorney Assist?.

Yes. It's still very early in the journey on Attorney Assist. The main place where we've deployed it is on our trademark product.

And we've seen the mix of customers who are choosing to get assistance from an attorney continue to rise and essentially be pretty close to half of the customers who are looking for trademark health which is a great indicator. What we haven't done yet is deploy this into our formation product lineup which is the much bigger opportunity.

And this is an area where we have a couple of things going in parallel. One is we're working to innovate on being able to provide the service ourself and test and learn which is part of getting what's called the alternative business structure. And the second is commercialization testing as well.

And so you'll continue to see stuff that we're doing to try and learn how customers want this product delivered. And that's something that we'll start to see next year..

Thank you..

Thank you..

Thank you. And there's no further questions in the queue. I'd like to turn the call back to Dan Wernikoff for closing remarks..

Great. Well, thanks, everyone, for dialing into the call and thanks for your questions. Really appreciate everything that you guys are asking. To the LegalZoom, I want to thank you guys for the quarter, not only for the amazing execution but also the incredible passion and energy you bring to work each and every day.

I also want to thank our newest team members from Earth Class Mail. Welcome aboard. We're thrilled to have you and can't wait to get to work. We'll talk to all of you soon. Thanks again for your time..

This concludes today's conference call. Thank you for participating. You may now disconnect..