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LegalZoom (LZ -27%) is zooming lower today after providing guidance last night. This provider of an online platform for business formation, legal and tax document creation actually reaffirmed Q2 revs at $172-176 mln and adjusted EBITDA at $25-27 mln. However, it did lower full year revenue guidance pretty substantially to $675-685 mln from $700-720 mln.

• Recall that the stock gapped lower following Q1 results/guidance on May 9 and then continued to fall further in subsequent weeks despite boosting its share buyback authorization by $75 mln on May 22. It is clear that the company is struggling.
• And that brings us to the other big news from last night. The company's current Chairman Jeffrey Stibel has been named as CEO, effective immediately. He replaces Dan Wernikoff who will be departing the company immediately.
• Something to understand is that LegalZoom has been increasing its focus on shifting towards subscription-based revenue. The company said that Mr Stibel possesses extensive knowledge of LZ's offerings, technology infrastructure, and attorney network, as well as the competitive landscape and customer segment. What stood out was the comment that he has been an executive officer at numerous technology services companies where he successfully scaled subscription technology offerings.
• LegalZoom started out primarily in the consumer space 20 years ago, but has evolved to being focused more on small business, which now accounts for 90% of sales. The idea is that it helps SMBs file LLC business formation documents with the Secretary of State. Then they can use LZ to organize their bookkeeping/finances and separate them from their personal life. LZ also helps with filing taxes, estate planning, pre-nups, etc.
• The company did not provide much color on the guidance, but on its Q1 call, it cited a softer macro expectation. LZ said then that it expects a mid-single-digit decline in the formations macro for the full year 2024 vs original expectations of flat to low-single-digit growth. In fairness, the macro showed strong acceleration in 2H23, creating a more challenging comparison. However, while the macro has softened, compliance requirements have increased in complexity. LZ took advantage by launching a new product to assist with the filing mandates required by FinCEN.

Overall, while LZ did not say this, we suspect the combination of a weak Q1 report with downside guidance followed by this guide down prompted a change at CEO. And specifically, the new CEO has ample experience with subscription-based technology models. LZ is moving towards subscriptions, so maybe the company wants to boost its performance there. The size of today's move is pretty surprising given that stock had already fallen by more than a third just since May. We would have thought a lot of negativity was priced in already, but clearly this guidance is spooking investors and causing many to reassess when LZ can turn itself around.