Matt Condon: Very helpful. Thank you.
Operator: And thank you. [Operator Instructions] And our next question comes from Josh Beck from Raymond James. Your line is now open.
Kishan Patel: Hi, there. This is Kishan Patel on for Josh Beck. Thanks for taking our question. 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?
Noel Watson: Hi, 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.
Dan Wernikoff: 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.
Kishan Patel: Got it. Thank you very much.
Operator: And thank you. [Operator Instructions] And our next question comes from Elizabeth Porter with MS. Your line now open.
Elizabeth Porter: Great. Thank you very much. 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? Thank you.
Dan Wernikoff: 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 third 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.
Elizabeth Porter: Understood. Thank you very much.
Dan Wernikoff: Thanks, Elizabeth.
Operator: And thank you. [Operator Instructions] And our next question comes from Ella Smith with JPMorgan. Your line is now open.
Ella Smith: Good afternoon. Thank you for taking my question. 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?
Dan Wernikoff: 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.
