LegalZoom (LZ -27%) is experiencing a significant drop today after updating its guidance last night. The company reaffirmed Q2 revenue at $172-176 million and adjusted EBITDA at $25-27 million. However, it substantially lowered its full-year revenue guidance to $675-685 million from $700-720 million.
- The stock had already declined following Q1 results and guidance on May 9 and continued to drop despite a $75 million increase in its share buyback authorization on May 22.
- In another major update, Chairman Jeffrey Stibel has been appointed as the new CEO, replacing Dan Wernikoff effective immediately.
- LegalZoom is shifting towards a subscription-based revenue model. Stibel's extensive experience in scaling subscription technology offerings stands out as a key asset for this transition.
- Originally focused on consumers, LegalZoom now caters primarily to small businesses, which account for 90% of its sales. Services include LLC business formation, bookkeeping, tax filing, estate planning, and more.
- The company cited a softer macroeconomic outlook during its Q1 call, expecting a mid-single-digit decline in business formations for 2024. Despite macro challenges, LegalZoom launched a new product to help with FinCEN filing mandates.
Overall, the weak Q1 report and subsequent guidance downgrade likely prompted the CEO change. Given Stibel's expertise in subscription-based technology, LegalZoom aims to enhance its performance in this area. The sharp stock decline today suggests that investors are concerned about the company's ability to turn around its fortunes.
