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United States securities and exchange commission logo
May 3, 2021
Dan Wernikoff
Chief Executive Officer
LegalZoom.com, Inc.
101 North Brand Boulevard, 11th Floor
Glendale, California 91203
Re: LegalZoom.com, Inc.
Draft Registration
Statement on Form S-1
Submitted April 6,
2021
CIK No. 0001286139
Dear Mr. Wernikoff:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1
Prospectus Summary
Our Customer Journey, page 5
1. Where you discuss your
net promoter scores in the prospectus summary, please disclose
your scores as well as
the scores for traditional offline attorneys.
Our Competitive Strengths, page 7
2. Please explain what is
meant by your aided and unaided brand awareness percentages.
Dan Wernikoff
FirstName LastNameDan Wernikoff
LegalZoom.com, Inc.
Comapany
May 3, 2021NameLegalZoom.com, Inc.
May 3,
Page 2 2021 Page 2
FirstName LastName
Key Business Metrics, page 17
3. We note you disclose adjusted EBITDA margin here without presenting
the comparable
GAAP measure of net income margin. Similarly, on page 67 you discuss
adjusted
EBITDA and adjusted EBITDA margin without discussing the comparable
GAAP
measures. You also include a discussion regarding the factors that
contributed to the
change in adjusted EBITDA and free cash flow in your MD&A Overview
without
providing comparable information for your GAAP results, and you
include similar
disclosures in the MD&A Non-GAAP section before your GAAP results of
operation and
liquidity discussion. This comment also applies to disclosures in your
Business section.
Wherever you present a non-GAAP measure or a discussion on non-GAAP
results, please
ensure that you present the GAAP measure or GAAP results discussion
with equal or
greater prominence Please revise. Refer to Question 102.10 of the
Non-GAAP
Compliance & Disclosure Interpretations and Item 10(e)(1)(i)(A) of
Regulation S-K.
Risk Factors
We have identified material weaknesses in our internal control over financial
reporting..., page
32
4. You state that you are in the process of designing and implementing a
plan to remediate
the material weaknesses that you have identified in your internal
control over financial
reporting. Please revise to clarify what remains to be completed in
your remediation plan.
Also, disclose how long you estimate it will take to complete your
plan and any associated
expenses that you have incurred or expect to incur, if material.
Lastly, revise the
Summary of Risk Factors in the Prospectus Summary to include a
discussion of this risk.
Refer to Item 105(b) of Regulation S-K.
Market Industry and Other Data, page 56
5. We note your disclosure that certain statements in the prospectus are
derived from studies
you commissioned from Kantar Consulting and Magid Consulting Inc.
Please
file consents from those firms as exhibits to the registration
statement or tell us why they
are not required. Refer to Rule 436 of Regulation C and Section 7 of
the Securities Act.
Management s Discussion and Analysis of Financial Condition and Results of
Operations
Key Business Metrics, page 68
6. You state that the number of transactions is an important metric
because your new
customers generally begin their LegalZoom journey with a transaction.
To clarify the
extent to which you have been able to attract new customers to your
platform, please also
disclose the number of new customers that you acquired for each period
presented, or
advise.
Dan Wernikoff
FirstName LastNameDan Wernikoff
LegalZoom.com, Inc.
Comapany
May 3, 2021NameLegalZoom.com, Inc.
May 3,
Page 3 2021 Page 3
FirstName LastName
7. You state that consumer transactions comprised one-third of total
transactions in
2020. You also state that you expect the proportion of consumer
transactions to decrease
over time as you invest more in small business and growth in estate
planning transaction
"normalizes." In an effort to add context to such disclosure and to
understand any shift in
the composition of your transaction customers, please tell us and
revise to disclose
the amount of consumer transactions in 2019. Also tell us the
percentage of transaction
revenue derived from each of consumer and business formation
transactions in both fiscal
2019 and 2020. To the extent any growth in consumer transactions is
believed to be
related to the impact of the COVID-19 pandemic, revise to include a
quantified discussion
regarding such impact and discuss the potential impact to your results
of operations should
this trend not continue. Similar revisions should be made to your risk
factor disclosures,
as necessary. Refer to Item 303(b)(2)(ii) of Regulation S-K.
8. You state that the majority of "newly acquired subscriptions" are
included in the unit
count once they are at least 60 days past their subscription order
date. Please tell us
whether subscription units that automatically renew are counted the
same or revise to
clarify how those subscriptions are counted. Also, tell us why
subscription units acquired
through your partner integrations and by customers in the United
Kingdom are counted
upon purchase.
9. We note the number of subscription units grew significantly between
2019 and 2020, and
that you aim to continue to grow this metric by increasing attach
rates and retention rates.
Please revise to define these terms as used in this context.
Additionally, you state that
your business depends on subscribers renewing and expanding their use
of your platform.
You also state that subscription services are highly dependent upon
your transaction
products. Tell us what retention, expansion or conversion measures are
used to evaluate
your business and revise to include a quantified discussion of such
measures. Specifically
address your consideration to include churn rates and the ratio of
gross subscription unit
additions to transactions as previously disclosed. Refer to SEC
Release No. 33-10751.
Business
Our Market Opportunity, page 100
10. We note your discussion of serviceable addressable market (SAM) and
total addressable
market (TAM) is based on data from 2017. Please tell us how you
considered whether
this information is still relevant to the current market and address
whether you adjusted
any of this information for current market information or trends.
Our Products and Services, page 106
11. You state that subscription services automatically renew at the end of
each term unless
notice of cancellation is provided in advance of the renewal date.
Please revise to clarify
whether subscriptions can also be cancelled during the renewal term
and if so, state
whether pro-rata refunds for unused services are provided.
Dan Wernikoff
LegalZoom.com, Inc.
May 3, 2021
Page 4
Culture and Team, page 113
12. Please revise to provide a description of your human capital
resources, if material, as
required by Item 101(c)(2)(ii) of Regulation S-K. Disclose the number
of contractors and
consultants that you employ.
Principal and Selling Stockholders, page 141
13. Please disclose the natural person or persons who exercise the voting
and/or dispositive
powers with respect to the securities owned by entities affiliated
with TCV.
Notes to Consolidated Financial Statements
Note 2. Summary of Significant Accounting Policies
Revenue Recognition, page F-14
14. Please describe for us the performance obligation(s) included in your
transaction services
and what promises are included in each performance obligations. Also,
tell us how this
impacts your inclusion of filing fees in the transaction price. Refer
to ASC 606-10-25-14
and 32-2.
15. You state that in arrangements in which you are not the principal, you
record revenue on a
net basis and you specifically refer to services under your legal
plans as being recognized
on a net basis. Please tell us whether there are other services that
are recognized on a net
basis. In this regard, we note your Supplemental Terms of Service for
Subscriptions and
Third-Party Services agreement refers to services provided by other
parties such as
accounting, logo design and credit monitoring companies.
Note 13. Commitments and Contingencies
Legal Proceedings, page F-32
16. While we acknowledge that you have not recorded any loss or accrual
related to your
various pending litigation cases because the amount of loss is not
probable or reasonably
estimable, given the fact there is at least a reasonable possibility
that a loss may have
occurred requires disclosure of either an estimate of the reasonably
possible loss (or range
of loss) or a statement that such an estimate cannot be made. Please
revise. Refer to ASC
450-20-50-3 and 50-4.
Note 15. Stock-based Compensation, page F-35
17. You state that for 6,353,153 time-based options granted to certain
executive
officers, vesting for 50% of their unvested options will accelerate upon
a CIC event.
FirstName LastNameDan Wernikoff
Please revise to disclose the unrecognized compensation expense related
to such awards
Comapany NameLegalZoom.com,
and the amount of such expenseInc. that may be recognized upon
effectiveness of the
May 3,offering.
2021 Page 4
FirstName LastName
Dan Wernikoff
FirstName LastNameDan Wernikoff
LegalZoom.com, Inc.
Comapany
May 3, 2021NameLegalZoom.com, Inc.
May 3,
Page 5 2021 Page 5
FirstName LastName
18. Please provide us with a breakdown of all stock option and RSU awards
granted during
2020 and to date through 2021, and include the fair value of the
underlying common stock
used to value such grants. To the extent there were any significant
fluctuations in the fair
values from period-to-period, describe for us the factors that
contributed to these
fluctuations, including any intervening events within the company or
changes in your
valuation assumptions or methodology, underlying common stock used to
value such
awards as determined by your board of directors.
General
19. Please supplementally provide us with copies of all written
communications, as defined
in Rule 405 under the Securities Act, that you, or anyone authorized
to do so on your
behalf, present to potential investors in reliance on Section 5(d) of
the Securities Act,
whether or not they retain copies of the communications.
20. Given that you intend to use a portion of the proceeds from this
offering to repay the
credit agreement with JP Morgan Chase Bank, an affiliate of one of
your underwriters,
please tell us whether you are required to have a qualified
independent underwriter in
accordance with FINRA Rule 5121.
You may contact Brittany Ebbertt, Senior Staff Accountant, at (202)
551-3572 or
Kathleen Collins, Accounting Branch Chief, at (202) 551-3499 if you have
questions regarding
comments on the financial statements and related matters. Please contact
Matthew Crispino,
Staff Attorney, at (202) 551-3456 or Jan Woo, Legal Branch Chief, at (202)
551-3453 with any
other questions.
Sincerely,
Division of
Corporation Finance
Office of
Technology
cc: Jonie Ing Kondracki