Good day, and thank you for standing by, and welcome to LegalZoom's First Quarter 2024 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Madeleine Crane, Head of Investor Relations. Please go ahead. .

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.

Such forward-looking statements are based on management's assumptions and expectations and information available to us as of today's date. These forward-looking statements are also subject to risks and uncertainties that could cause actual results to differ materially from such statements.

These risks and uncertainties are referred to in the press release we issued today and in the Risk Factors section of our most recent annual report on Form 10-K filed with the Securities and Exchange Commission.

Except as required by law, we do not plan to publicly update or revise any forward-looking statements whether as a result of any new information, future events or otherwise. In addition, we will also discuss certain non-GAAP financial measures.

We use non-GAAP measures in making decisions regarding our business, and we believe these measures provide helpful information to investors. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

Reconciliations of all non-GAAP measures to the most directly comparable GAAP measures are set forth in the Investor Relations section of our website at investors.legalzoom.com. I will now turn the call over to Dan. .

first, we have built the right premium filing experience; second, there is a clear advantage offering an integrated books to tax solution; and third, there remains a large portion of our customers we're not yet serving when it comes to their early tax needs, which is still a large and unrealized opportunity.

Exiting last year, we made the decision to recommercialize our tax offerings with the goal of driving higher customer consideration and retention. As we narrowed our audience to focus on the most relevant tax customers, we invested heavily in improving the experience, moving to an integrated filing experience all within our platform.

As expected, our subscriber count in tax was down year-over-year, but utilization improved with approximately 20% more filers per active subscription.

The combination of simplified customer intake, matching to a dedicated tax expert, and utilization of MyLZ for document sharing and expert collaboration drove a net promoter score of 59 for the overall tax filing experience and a net promoter score of 87 for interactions with our experts during the season.

While the channel strategy is a headwind to subscription revenue in 2024, we believe the superior experience of this season will drive retention improvements moving forward into next year.

This was our first tax season where a customer could utilize LZ Books, despite only having launched books in the formations flow with 3 months left in fiscal 2023, 17% of our 1040 filers imported data from LZ Books this season. We also saw clear trends in the data, including strong upgrades from customers with over $10,000 in annual profit.

We feel very good about the future upsell opportunities given that 1/3 of the 1040 filers that imported data chose a book solution distributed through LegalZoom, whether LZ Books or QuickBooks. And over 50% of all filers used manual methods, which demonstrates the distribution opportunity for LZ Books post filing.

Despite having high customer satisfaction when it comes to our current tax offering, there is a large population of customers who are not ready to file so soon after forming. For many, the price is prohibitive as we only offer an assisted filing solution.

Approximately 40% have not yet started operations at the time of formation and over 35% generate less than $10,000 in their first year in operations. We continue to believe books is the right gateway to tax services. We're working to expand the potential audience of books customers along with addressing the accessibility of our tax offerings.

Moving on to the legal side of expertise, on our last call, I hinted that our newly designed expert platform could support not only tax experts, but could also be the foundation for attorney offerings as well.

This investment in our platform, combined with our Arizona law firm, has created a unique opportunity for us to expand beyond providing general legal advice. I'm excited to announce that through our law firm, we will be partnering with our network of attorneys to participate directly in legal matters.

The first legal matter we've launched is prenuptial agreements. This matter was selected intentionally, given its quick time to value, low jurisdictional complexity and forms-based engagement.

We're still very early in our journey, but to be clear, our expectation is that we begin to launch additional legal matters on this platform within the consumer and SMB space.

This will be a platform play in a space that currently has no established players and certainly no one with the brand name recognition, technology capabilities and attorney reach. In closing, I'd like to thank the entire LegalZoom organization for their hard work during the quarter.

We remain focused on putting the customer first from formation and compliance to financial and legal needs. And our progress this quarter reflects our dedication towards our customer, and our overall mission to unleash entrepreneurship. With that, I'll turn it over to Noel to go deeper into the financials. .

Thanks, Dan, and good afternoon, everyone. I'll now discuss our first quarter performance in more detail. Please note all comparisons will be on a year-over-year basis unless otherwise stated. Total revenue was $174 million for the quarter, or up 5%. We completed 139,000 business formations in Q1, down 18%.

Our market share of business formations was 9.3%, which represented a 17% year-over-year decline. Looking at these results in more detail, beginning with business formations. In Q1, business formation growth was impacted by a partnership exit, which occurred in Q3 of 2023.

This will continue to remain a headwind in Q2 of this year, however, will be fully lapped by the end of Q3. Looking at our LLC direct channel, our formations were down 12% year-over-year.

We experienced softness due to a combination of testing changes as we worked to fully optimize our lineup and a lower contribution from our sales efforts as we work to rebuild our team. Lastly, the macro underperformed our expectations, declining 2% year-over-year in Q1 versus our expectation of low single-digit growth.

Turning to market share performance. The combination of our partnership exits, commercialization testing and Salesforce transition pressured our market share in the first quarter. However, as Dan noted, we believe Q1 Census data understates our formations market share relative to EIN applications during the quarter.

We expect to exit the year with at least 10% share growth relative to Q1, as we lap some of the factors I just discussed and look to drive higher conversion through the product. Transaction revenue was $66 million, down 3%, driven by a 10% decline in average order value, partially offset by a 9% increase in transaction units.

We recorded 336,000 transaction units in the quarter. This 9% increase was primarily due to an increase in non-formation business-related transaction products such as annual reports, as well as the introduction of our BOIR offering.

Average order value was $198 for the quarter, down 10% due to the aforementioned mix shift toward non-formation transactions, which are generally lower priced as well as a decline in partner revenue.

We expect AOV to be relatively flat year-over-year in Q2 and continue to expect a mid single-digit decline in AOV for the full year, compared to the full year 2023. Subscription revenue was $108 million, up 10% due to increases in both subscription units and ARPU.

We remain dedicated to continuing to shift our revenue towards subscriptions over the long-term.

We ended the quarter with over 1.6 million subscription units, up 7% year-over-year as we experienced strength in forms and e-signature subscriptions, due to the bundling of these products into certain business formation offerings and growth in virtual mail subscriptions.

This growth was partially offset by the impact from the exit of legacy partner relationships. ARPU came in at $272 for the quarter, up 5%, driven by a mix shift toward our high value subscription offerings.

ARPU was also impacted by the exit of certain channel partner relationships and the introduction of forms and e-signature subscription offerings, which carry lower price points. Turning to expenses and margins, where all of the following metrics are on a non-GAAP basis, first quarter gross margin was 64% compared to 66% in Q1, 2023.

The year-over-year decrease was driven by higher filing fees as a percentage of revenue. As California reinstated filing fees in the third quarter of last year, following a 12-month pause. As a reminder, we generally experience lower gross margins in the first half of the year due to the seasonality associated with tax season and business formation.

Sales and marketing costs were $51 million, or 29% of revenue and decreased 10% from last year. Customer acquisition marketing costs were up sequentially due to seasonality, but remained flat year-over-year.

In Q2, we expect CAM expenses to increase approximately $5 million compared to the first quarter of 2024 due to higher brand spend, some of which was deferred from Q1 in order to better time our investments with a few changes to our lineup, continued build out of our sales team, and the alignment of our NBA sponsorship with the peak season.

Our investments in CAM in 2024 will largely be offset by the savings we are experiencing from our sales reorganization. Non-CAM sales and marketing expense was down $6 million, or 35% due to the impact from the sales reorganization as well as ongoing efficiencies in our marketing strategy.

Technology and development costs were $17 million, up $2 million or 16% as we remain invested in driving product-led growth. General and administrative expenses were $16 million or up 3%. Our performance drove adjusted EBITDA of $28 million or 16% margin.

Adjusted EBITDA increased 28% year-over-year compared to adjusted EBITDA of $22 million and a margin of 13% to same time last year. Deferred revenue increased by $20 million in the quarter. Free cash flow was $25 million compared to $22 million for the same period in 2023.

Our free cash flow in the first quarter reflects cash tax payments of approximately $4 million, following the full utilization of our existing tax credits. We expect Q2 free cash flow to be slightly down sequentially due to higher estimated tax payments and full year free cash flow to be in the range of $85 million to $95 million.

We ended the quarter with cash and equivalents of $228 million. We remain debt free with no outstanding borrowings under our $150 million revolving credit facility. During the first quarter, we repurchased 1.2 million shares of our common stock at an average price of $10.91 for a total of $13 million.

We plan to continue to opportunistically repurchase shares of our common stock as part of our balanced approach to capital allocation. In terms of capital allocation, we continue to prioritize organic investments in the business, followed by strategic acquisitions; and lastly, stockholder returns via repurchases of our common stock.

We maintain the ability to execute against all 3 priorities simultaneously, given our strong cash position. Turning to our outlook. For the full year, we continue to expect revenue of $700 million to $720 million or 7% year-over-year growth at the midpoint, and adjusted EBITDA of $135 million to $145 million or 20% margin at the midpoint.

We are reiterating our full year outlook based on 2 key factors. Our expectations reflect a higher full year contribution from BOIR, based on our first quarter performance, largely offset by a softer macro expectation.

Based on the trends we are seeing today, we now expect a mid-single-digit decline in the formations macro for the full year 2024 versus our original expectations of flat to low single-digit growth. As a reminder, the macro showed a strong acceleration in the back half of 2023, creating a more challenging comparison.

Based on this, for the second quarter of 2024, we expect total revenue of $172 million to $176 million or 3% year-over-year growth at the midpoint, and we expect second quarter adjusted EBITDA from $25 million to $27 million or 15% margin at the midpoint. And with that, let's please open the call for questions. .

[Operator Instructions] And one moment for our first question. And our first question comes from Ron Josey from Citi. .

This is Jake on for Ron. First question, on the formation share.

Could you double-click on the assumptions and moving pieces that give you confidence in that 10% share expectation for '24? And maybe specifically on the simplified flow, anything specific you could share about what you're doing there to increase conversion rates? And then second, just on Integrating Experts, really great to hear about the prenup initiative.

Anything you could share in terms of; one, where you can -- you're leveraging existing investments? And then second, any key product investments that still need to be made there to increase your chances of success?.

All right. Thanks for the question, it's Jake. Maybe first on the confidence in reaccelerating share.

It's almost worth just stepping back a bit here and talking about what we're seeing in the market because we feel pretty confident that we're not losing share necessarily right now, but there's a little bit of a dislocation between the Census data that we typically peg against and what we see from the actual Secretary of State data that we also collect.

To remind people, the Census data is a bit of a real-time proxy. But in the background, we really look at the Secretary of State data as the main point of reference of how we're performing. When we looked at Q1 and that data is still building out. It appears that the decline in the macro is a little bit steeper than what you see in the Census data.

And actually, our performance from a share perspective is probably a little bit better than what is printing when you look at it relative to Census data. And which makes sense if you look at some other data sources, we triangulate for things like the demand that we see in Search.

We look at things like dissolution in our base, which is a little bit elevated. We look at consumer and small business debt levels, that has a relationship with starts. SMB optimism, which is a little bit low. So all of that points to a little bit weaker macro than what we might be seeing with the Census data.

That said, we're also still actively testing the market. We had some things that we changed around at the end of the quarter, where we feel pretty confident it will reaccelerate some of our share through better conversion.

We have brand spend that's coming, which we haven't had turned on for a while because we haven't had the product experience well tuned and the sales channel back in place. And so now as we put those parts back together, we're starting to rebuild the top of the funnel as well.

And those things combined really make us feel good about the share improving as we go throughout the year, after making some of these changes in the lineup, but that have been going on for multiple quarters at this point.

On the question on prenups and kind of where we've invested and where can we leverage our investment, this is one of the exciting pieces of the SMB side, is that we're able to take a lot of the investments that we've made in the SMB space and really almost port them over to the Consumer space and also port them over to the Expert space on the legal side.

So if you think about tax as an example, this year -- we had built out practice management. That's really the interaction model between a small business and their accountant. We've now leveraged that to use that as our foundation for legal matters where a small business can interact with an attorney.

You think about some of the investments that we've made in modernizing all of our experiences from a questionnaire standpoint and all the front-end experiences that our customers have on the small business side. Well, that's actually the exact same capability required to modernize the experiences on the consumer side around estate planning.

So we're starting to see really good leverage from a technology standpoint, from one product to the next.

I'd say on legal matters specifically, that's a really interesting one, because not only do we have some of those technology capabilities that we can leverage, but we now have our own law firm in Arizona, which has been doing trademarks directly, but can also co-counsel with our affiliate network, which is one of the biggest networks of attorneys in the industry.

We can take things like our forms capability and our AI capability in Doc Assist, and we can integrate those all into an experience which will create a new way for people to interact with their attorney.

And so prenup is an example of that, and it's really just the very first example, but we expect to expand into a lot of matters over the coming quarters. So a couple big things in there and the other, the one thing I don't think I mentioned, but I probably should is, back to the share side.

We do have some tests that we know were winners as we exited the quarter. And that piece specifically is where we start to have more confidence in the conversion rate going up and the share actually building. .

And one moment for our next question. And our next question comes from Brent Thill from Jefferies. .

This is John Byun for Brent Thill. I had a question on the BOIR product.

Is the nature of that, is that mostly recurring, or is it onetime? And what shape does that come? And then is there any way to think about the margin profile of that offering versus other in your portfolio, including maybe the formation?.

Yes. So backing up on BOIR, it's a little bit of both. There's a component of the requirement which is requires anybody who formed a business before 2024 to actually file their initial filing by the end of this year. And that's sort of a onetime catch up.

We mentioned on the last earnings call that anybody who is a subscriber to our compliance solution was entitled. We just basically made them entitled to that filing. So we don't expect that to be the biggest part of the contribution. The other part, though, is that this is a filing that's required right after formation, so within 90 days of formation.

So that component is recurring as much as you have incremental formations every year. You'll have customers that are required to do that filing.

I'd say the one thing that's more strategic, though for us is, if you back up, one of the reasons we went free on formations was specifically because the biggest adjacency we have is compliance, and those are actually through subscriptions. So this is things that are required at the City, County, State, Federal level.

And it's not just about keeping your entity compliant, it's also about licenses and insurance so that you can operate as a business. So by the nature of solving multiple of these problems today, we're pretty much advantaged when any new compliance requirement pops up.

And so what we're trying to do is drive our customers into the subscription itself, which gives them the ability to stay compliant with all of these different requirements.

And BOIRs is a really big opportunity because it's something that's new, it's confusing to small businesses, and if anything, it just shows the overall value proposition of the full compliance subscription. So a lot of the testing that we're doing right now is putting them side by side, and driving customers up into that ongoing recurring service.

And on the second one, I wasn't sure I got that if there was an additional question in there. .

Yes. Is there a... .

Oh, it was about margin -- the margin profile. .

Yes. .

Yes. The margin profile there is relatively high. If you think about it on a transactional basis, as you start to move more into the complete subscription, it's still a much higher margin product than when you think about a formation transaction.

But there are costs when you start to bundle it with things like business licenses and other filings, potentially, where we actually -- the margin will come down slightly, but in all cases, it's higher than the transactional side of the business. .

And obviously, John, the more success we can have in moving, shifting some of the volume into our compliance subscription, then the recurring nature of that is beneficial for us from an LTV standpoint.

So we've learned a lot on the BOIR front in the first quarter, but still lots of testing happening that could flex the recognition between our transaction and subscription line. .

And one moment for our next question. And our next question comes from Trevor Young from Barclays. .

Great. On the new free cash flow guide, it plies down a little bit year-on-year at the midpoint. Meanwhile, EBITDA growing kind of mid high-teens at the midpoint.

Can you just talk through some of the puts and takes there on cash flow and working capital items influencing that? And is some of that delta, some of the incremental tax burden that I think Noel will talk to?.

Yes. Thanks for the question, Trevor. You hit the nail on the head. It's -- the free cash flow conversion from adjusted EBITDA is down year-over-year, and that's primarily due to high -- increased expectation for estimated cash tax payments.

And it really stems from having moved through NOLs, interest expense deductions from previously held debt, R&D credits and Section 174 impacting our structurally -- our cash tax expectations. So that's the biggest driver of the variance year-over-year.

Obviously, there's a lot of timing and estimation in there that could influence the ultimate outcome, and we'll refine estimates as we move forward, but we did want to call out the higher tax obligation. .

Okay. That's helpful.

And presumably, over time, we start to migrate more towards kind of a statutory corporate rate?.

Over the long term, that's what we would expect, yes. .

And one moment for our next question. And our next question comes from Matt Condon from Citizens JMP. .

My first one is just, can you talk about the progress you're making with MyLZ and just getting buyers back on the platform? And then also, secondly, just big picture, what's the opportunity with your attorney network and extending experts beyond what currently exists in the platform?.

Yes. Thanks for the questions, Matt. Well, there's been a lot of progress with MyLZ, especially as we look back over the last 6 months and start with the outcomes that we're just driving a lot more of our customers to MyLZ itself to have their account serviced, to ask questions, to fulfill compliance requirements directly through it.

In fact, that's where most of our BOIR leads are coming and actually fulfilling the order. So they're coming right now after formation. All of our tax filing was done through MyLZ in the prior season. We leveraged some third parties as well. And you can see what that did from a net promoter standpoint.

So we continue to think of it as a pretty strategic property, and one that still has not been fully realized. We mentioned in the upfront comments that we've doubled the post-formation monetization off a relatively small base. We keep looking at MyLZ as the main point of contact to have with customers and introduce them to all of those services.

And do it in a way which is essentially taking the burden off our formations flow for doing attach. So it's very, very strategic. As we think about expanding our attorney network, we actually don't need to necessarily expand our attorney network.

This is much more of a different business model so that we can participate in specific legal matters by having a co-counsel model through our own law firm and partnering with the existing network that we have.

Over time, I anticipate as we get into much more specialized matters or different matters that go beyond some of the conversations that our customers have around generalized advice today, we can keep adding to it. And that's not really a concern for us because the value proposition for attorneys is extremely high.

So today, we're really focused on how do we leverage the network that we have? How do we expand and learn as much as we can in the matters that are like deeply adjacent? And think about things like employment matters, think about immigration, think about things like prenup and divorce.

These are all things that happen off estate planning or formations. So they're just really strong adjacent matters that the attorneys that we have today already support. So it's -- that's one of the most exciting parts, by the way, of the strategy. I mean, this is one of the things that gets me very excited.

You can look across just about every industry at this point, and there's a tech-enabled service or a tech-enabled expert other than legal, which is mind-blowing.

And if you think about what we bring to the table with the highest brand recognition in the space and existing attorney network, all the tech capabilities, like this feels really good, and this is obviously just the first step -- but we know what we're doing here, and it's just going to be more about how do we expand into different matters and keep refining the opportunity.

And so, this is going to be one to watch over the next couple of quarters. .

And one moment for our next question. And our next question comes from Josh Beck from Raymond James. .

This is Kishan Patel on for Josh Beck.

How do you think about managing expenses as a function of the macro environment, should conditions improve or worsen through the balance of the year? And then how should we think about the relative growth rates of transaction versus subscription revenues in '24 and maybe the years beyond?.

This is Noel. Thanks for the question. I would say I'll mention that we reiterated our guidance for the full year for both top and bottom line. We feel pretty confident in terms of our forecast and the visibility we have into it, related to the bottom line, in particular.

And we're going to watch that very closely and be very prudent around managing expenses to give ourselves the best chance to meet or exceed both our revenue guide as well as our profitability. But we feel like we have some levers in the business.

And if the macro is much softer than we expect or much stronger than we expect moving forward, there's a healthy portion of our P&L that adjusts naturally. Our performance marketing is a really big line item, and that's ROI-based, and so that will adjust to the macro itself.

And then we'll obviously watch headcount and some of the other more discretionary spend items to make sure we match it to what we're seeing in the overall performance of the business. .

On the relative growth of transaction versus subscription, what I think you'll see here depends a little bit on how well we can commercialize the opportunity on BOIR into subscriptions. And if we're able to do that, we would continue to expect that subscriptions would be outpacing transactions.

There is the potential, and I think it's more likely that we see transactions with more strength towards the end of this year because a portion won't upgrade into compliance. Of course, we're going to drive as much as we can, but we also expect LLCs to see more strength on a year-over-year basis, as we get to the end of the year.

But as you look longer term, the strategy hasn't changed. We want the mix to be more heavily towards subscribers, and we'd expect that mix to improve. We've kind of flipped the model from being 40/60 subscription/transaction to being the inverse over the past 5 years, and we want to drive that further as we go forward.

One last thing I'd say also on the expense side, it's worth mentioning is even though we're reintroducing some brand spend, the overwhelming majority of our marketing spend is really performance-based and it's high variable expense where we can move it up and down.

But we're ROI-driven and so we can pretty much react to any macro direction that we see. And we've said this before, as the macro gets weaker, we almost become a little bit stronger in the industry because of our balance sheet, and we could be a little bit more aggressive than a lot of our competition.

So that still feels like it's a good opportunity, either direction the macro goes. .

And one moment for our next question. Our next question comes from Elizabeth Porter with MS. .

Great. This is Elizabeth from Morgan Stanley. I think last call we talked about the consumer and the estate plan coming back into focus.

I just wanted to get an update of where you are on kind of refocusing towards this opportunity? And how that could help some of the transaction side of the business? And is LTV to CAC similar on this side of the business as it is on the small business side?.

Great. Thanks for the questions, Elizabeth. Maybe it's worth, again, just reiterating on the consumer side, the first point is that the investment that we're making here is relatively low effort, because it's leveraging a lot of the investments that we've made on the small business side.

But one of the things that as we step back and think about the broader opportunity, while it's not a massive revenue component of our business today, it is a pretty material transaction in terms of it's 1/3 of the size relative to business formations.

And most consumers that are coming through our ecosystem or actually, I should say, all solopreneurs who come through our ecosystem are consumers. And they should be thinking about their estate in the context of forming a business. So it has high relevancy.

When we think about the opportunity here, it really reopens some of the brand spend opportunity because it broadens the audience that we can reach. And we also know that a lot of people have product awareness on the estate planning side with LegalZoom. So it sort of reintroduces that component as well.

And then the final piece I'd say that's interesting here is that it's just -- it's a great intro into other legal matters. If you're helping with the estate plan, you're essentially sort of the tip of the spear of all family matters. And so we wanted to make sure that we create a really strong experience.

So we've rebuilt a lot of the core product experience. We've refreshed some of the fulfillment capabilities, so it's more efficient. And I think you'll continue to see us introducing improvements in that product over the next couple of quarters. On the LTV to CAC side, it's a little bit different than SMB. It has less of a subscription component to it.

So we don't spend as high into the category because we're not trying to get to just a 1-year return like we try to do on the small business side, and then we have all the subscriptions thereafter. In this case, we spend to a component of the first year revenue. So the LTV to CAC is a little bit different here. .

And one moment for our next question. And our next question comes from Ella Smith with JP Morgan. .

So first in, I was hoping to ask on the macro. You mentioned that you have confidence in the business formation macro longer term, exceeding pre-pandemic growth.

How do you think about -- can you remind us your thought process around that? And how do you think about the longer term path reaching 30% volume share?.

Yes. On the macro, I mean, if you really step far back and you think about before the pandemic -- this year, we're still up roughly 50% to that level in FY '19.

And I think all of those tailwinds that we always talk about, you don't need a lot of capital to start a business, you have access to enterprise level capabilities and software without a significant cash outlay, there's different industries -- like people doing businesses off social platforms, you have things like NIL, you have gig platforms that exist.

So we think all of that's still there. We know that post pandemic there's been some oscillation. You can see like there's been high growth rate 1 year, and then it's sort of regroups and you'll see almost like a decline in the following year.

And it almost feels like it's just normalizing to what has been a longer term 4% to 5% CAGR in a macro that we feel like as you even go further out, it's going to be easier for smaller businesses, solopreneurs to form. So overall, we feel good about it. Obviously, there's some wobbliness in the short-term, but the long-term looks healthy. .

That's clear.

And as a follow-up, do you have any comments about business failures so far this year and maybe how that compares to years past?.

Yes. The way we measure it might be a little bit different. You typically see people measure it by bankruptcy rate and maybe a precursor oftentimes or something that's a more simple thing [ as someone ] just shutting their business altogether, and that's a dissolution.

We offer dissolution services to our customers, and they were extremely elevated in Q1, almost up 40% year-over-year.

But one of the things that we're recognizing is whenever a new compliance requirement is introduced into the industry and it's -- and there's a cost associated with it -- in many ways, it's kind of healthy because it shakes out businesses that weren't necessarily in operations.

And they realize that, "Oh, I need to shut this down or else I could be held criminally liable or I have other fees that I'm going to have to pay." And so there is a component of the elevation and dissolutions that could be tied to BOIR and some of the messaging we're doing to our own base.

But I would also say that generally speaking, dissolution rates have been a little bit higher than they have historically been as well. .

And thank you. And there are no further questions at this time. This concludes today's conference call. Thank you for participating, and you may now disconnect..