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.
John Byun: Yes. Is there a…
Dan Wernikoff: It was about margin – the margin profile.
John Byun: Yes. Thank you.
Dan Wernikoff: 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.
Noel Watson: 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.
John Byun: That’s very helpful. Thank you.
Operator: And thank you. [Operator Instructions] And our next question comes from Trevor Young from Barclays. Your line is now open.
Trevor Young: Great. Thanks. 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? Thanks.
Noel Watson: 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.
Trevor Young: Okay. That’s helpful. And presumably, over time, we start to migrate more towards kind of a statutory corporate rate?
Noel Watson: Over the long-term, that’s what we would expect, yes.
Trevor Young: Okay. Great. Thank you.
Operator: And thank you. [Operator Instructions] And our next question comes from Matt Condon from Citizens JMP. Your line is now open.
Matt Condon: Thank you, guys for taking my questions. 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? Thank you.
Dan Wernikoff: 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.
