Life360 reports Q2 2023 results

• Total Q2'23 revenue of $70.8 million, a YoY increase of 45%, with core Life360 Subscription revenue¹ of $47.6 million, up 57% YoY
• Annualized Monthly Revenue² (AMR) of $248.7 million, up 43% YoY
• Q2'23 net loss of $4.4 million; positive Adjusted EBITDA³ of $5.7 million, the second consecutive quarter of positive Adjusted EBITDA; positive Operating Cash Flow of $3.7 million
• Paying Circles up 17% YoY, with net quarterly additions of 62 thousand versus 73 thousand in Q1'23 despite the impact of Android price increases rolled out in April 2023
• U.S. Average Revenue Per Paying Circle (ARPPC) of $140.78 increased 42% YoY reflecting the benefits of higher pricing
• Quarter-end cash, cash equivalents and restricted cash of $64.2 million following the Q2'23 final payment associated with the Tile acquisition
• CY23 guidance reiterated for more than 50% YoY growth for core Life360 subscription revenue, consolidated revenue of $300 million - $310 million and positive Operating Cash Flow of $5 million - $10 million
• CY23 guidance for positive Adjusted EBITDA³ increased to $9 million - $14 million from $5 million - $10 million.

SAN FRANCISCO, Aug. 14, 2023 /PRNewswire/ -- San Francisco area-based Life360, Inc. (Life360 or the Company) (ASX: 360) today reported unaudited financial results for the quarter and half year ended June 30, 2023. Life360 Co-founder and Chief Executive Officer Chris Hulls said: "The Life360 business has maintained growth momentum through Q2, with Global MAUs up 29% YoY and AMR up 43% to $248.7 million. We saw good growth in Paying Circles despite the price increase for existing U.S. Android subscribers implemented in April. We added 62 thousand global net subscribers during Q2'23 compared with 73 thousand in Q1'23. The 17% year-on-year uplift in Paying Circles was supported by international Paying Circles increasing 44% YoY, with international net adds remaining at close to all-time record levels.

"We are seeing particularly encouraging results from predominantly English speaking countries (Canada, U.K., Australia) which saw Paying Circles increase 54% YoY. The launch of triple tier Membership in the U.K. is on track for early Q4'23. Our investment in the international user experience is paying off with significant gains in MAUs, Paying Circles and Revenue, and retention metrics which are closing the gap to U.S. levels.

"The April price increase for existing U.S. Android subscribers supported further gains in global ARPPC which increased 31% YoY. Android churn was largely in line with our expectations and is returning to baseline levels.

"We are seeing early promising results from Tile Membership bundling, with a greater than 10% uplift in Month 1 and Month 2 relative retention rates for subscribers who have redeemed Tile hardware. While our strategic focus with Tile remains on driving subscription revenue rather than stand-alone retail sales, we are encouraged with the 70% YoY uplift in Tile's hardware revenue from the depressed levels of a year ago, along with margin improvements. This reflects the success of our strategic initiatives to clear channel inventory and prioritize higher margin sales channels.

"Our strategy of balancing fiscal responsibility with prudent investment has underpinned the significant progress we have demonstrated in managing our cost base. Q2'23 non-GAAP operating expenses of $48.6 million decreased 2% YoY, and 5% compared with Q1'23. Our second consecutive quarter of positive Adjusted EBITDA of $5.7 million delivered a $24.4 million turnaround in Adjusted EBITDA YoY. As a result of this cost management we have increased guidance to positive Adjusted EBITDA of $9 million to $14 million for CY23.

Our balance sheet remains strong following the final payment associated with the Tile acquisition. The cash, restricted cash and cash equivalents balance was $64.2 million at the end of Q2'23, with positive Operating Cash flow expected for the remainder of CY23."

Key Performance Indicators

• Global MAU increased 29% YoY to 54.0 million, with Q2'23 net additions of 3.2 million. U.S. MAU increased 24% YoY, with net adds of 1.9 million. International MAU increased 36% with net adds of 1.3 million. Australian MAU increased 42% YoY to 1.6 million.
• Paying Circle growth maintained strong momentum in Q2'23 despite the impact of Android price increases which were implemented in April. Net additions of 62 thousand were achieved in Q2'23, with U.S. Paying Circles increasing 10% YoY despite the price increases. International Paying Circles continued to grow strongly, up 44% YoY. Our U.S. Membership plan subscribers comprise Silver 16%, Gold 80% and Platinum 4% of total.
• Global ARPPC increased 31% YoY with the benefit of U.S. price increases implemented during Q4'22. International ARPPC increased 2% YoY. The marginal QoQ decline in Global and International ARPPC was largely the result of foreign exchange impacts on international revenue.
• Net Hardware Units Shipped increased 15% from the prior quarter and 42% YoY reflecting a decreased number of returns in the current period, and backdrop of weaker consumer electronics demand in Q2'22. The Company's strategy to improve retail economics and reduce promotions supported ASP which increased 9% YoY.

Operating Results

Revenue

• Q2'23 Consolidated subscription revenue increased 46% YoY (including hardware subscription) to $52.7 million. Life360 core subscription revenue increased 57% YoY supported by the 17% YoY uplift in Paying Circles, and 31% higher ARPPC.
• Q2'23 Hardware revenue increased 70% YoY due to an increase in the number of units shipped and higher ASP.
• Q2'23 Other revenue increased 8% YoY reflecting the strategic shift to a single data partnership from January 2022, and the terms associated with the arrangement.
• June AMR increased 43% YoY reflecting strong subscription revenue momentum.

Gross Profit

• Q2'23 gross profit margin increased to 77% from 60% in the prior year period, reflecting the uplift in subscription only margins to 88% due to higher pricing, and the benefit from a one-time adjustment which reduced product costs recorded to cost of revenue in connection with the discontinuation of certain battery-related membership benefits. Hardware gross margins increased due to higher average sales price and a one-time adjustment in connection with the discontinuation of certain battery related membership benefits.

Operating expenses

• Q2'23 YoY operating expenses decreased 6% from the prior period, largely due to lower research and development costs resulting from reduced headcount. Commissions were higher YoY in line with the growth in subscription revenue, however were largely offset by lower other sales and marketing expenses and paid acquisition.

EBITDA and Adjusted EBITDA⁷

• Q2'23 delivered a positive Adjusted EBITDA contribution of $5.7 million versus an Adjusted EBITDA loss of $18.7 million in the prior corresponding period as a result of continued strong subscription revenue growth and the impact of additional cost efficiencies implemented in January.

Balance Sheet and Cash Flow 

• Life360 ended Q2'23 with cash, cash equivalents and restricted cash of $64.2 million, with unrestricted cash increasing by $1 million from Q1'23.
• Q2'23 net cash provided by operating activities was $3.7 million. The differential to Adjusted EBITDA of $5.7 million was due to non-recurring workplace restructuring costs, adjustments relating to an inventory write-off and membership changes, and timing of manufacturing payments.
• Q2'23 net cash used in investing activities was $0.5 million which related to payments for internally developed software.
• Q2'23 net cash used in financing activities of $15.1 million relates to final payments associated with the acquisition of Tile, taxes paid for the net settlement of equity awards offset by proceeds from the exercise of options.

Earnings Guidance⁸

For CY23, Life360 expects to deliver:

• Core Life360 subscription revenue growth in excess of 50% YoY;
• Hardware revenue growth of 0% to 5%;
• Other revenue of approximately $26 million;
• Consolidated revenue of $300 million - $310 million;
• Positive Adjusted EBITDA of $9 million - $14 million;
• Positive Operating Cash Flow of $5 million - $10 million; and
• Positive Adjusted EBITDA and Operating Cash Flow for the remaining quarters of CY23.⁹

Investor Conference Call

A conference call will be held today at 9.30am AEST, Tuesday 15 August 2023 (Monday 14 August U.S. PT at 4.30pm). The call will be held as a Zoom audio webinar.

Participants wishing to ask a question should register and join via their browser here. Participants joining via telephone will be in listen only mode.

Dial in details

Australia: +61 2 8015 6011
U.S.: +1 669 444 9171
Other countries: details
Meeting ID: 934 1063 7470

A replay will be available after the call at https://investors.life360.com

Authorization

Chris Hulls, Director, Co-Founder and Chief Executive Officer of Life360 authorized this announcement being given to ASX.

About Life360

Life360 operates a platform for today's busy families, bringing them closer together by helping them better know, communicate with, and protect the pets, people and things they care about most. The Company's core offering, the Life360 mobile app, is a market leading app for families, with features that range from communications to driving safety and location sharing. Life360 is based in San Mateo and had approximately 54 million monthly active users (MAU) as of June 30, 2023 located in more than 150 countries. For more information, please visit life360.com.

Tile, a Life360 company, locates millions of unique items every day by giving everything the power of smart location. Leveraging its superior nearby finding features and vast community that spans over 150 countries, Tile's cloud-based finding platform helps people find the things that matter to them most. In addition to trackers in multiple form factors for a variety of use cases, Tile's finding technology is embedded in over 55 partner products across audio, travel, wearables, smart home, and PC categories. For more information, please visit Tile.com.

Life360's CDIs are issued in reliance on the exemption from registration contained in Regulation S of the US Securities Act of 1933 (Securities Act) for offers of securities which are made outside the US. Accordingly, the CDIs have not been, and will not be, registered under the Securities Act or the laws of any state or other jurisdiction in the US. As a result of relying on the Regulation S exemption, the CDIs are 'restricted securities' under Rule 144 of the Securities Act. This means that you are unable to sell the CDIs into the US or to a US person who is not a QIB for the foreseeable future except in very limited circumstances until after the end of the restricted period, unless the re-sale of the CDIs is registered under the Securities Act or an exemption is available. To enforce the above transfer restrictions, all CDIs issued bear a FOR Financial Product designation on the ASX. This designation restricts any CDIs from being sold on ASX to US persons excluding QIBs. However, you are still able to freely transfer your CDIs on ASX to any person other than a US person who is not a QIB. In addition, hedging transactions with regard to the CDIs may only be conducted in accordance with the Securities Act.

Forward-looking statements

This announcement and the accompanying conference call contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Life360 intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements regarding Life360's intentions, objectives, plans, expectations, assumptions and beliefs about future events, including Life360's expectations with respect to the financial and operating performance of its business, including subscription revenue, hardware revenue, consolidated revenue, Adjusted EBITDA, and operating cash flow; its capital position; future growth; and the impact of past price increases on future results of operations and churn; and the impact of past price increases on future results of operations and churn; user engagement, conversion and retention and subscriber churn; the strategic value and opportunities for Tile; operating cost savings, including through reduced commissions as well as Life360's expectations of any changes to the information disclosed herein. The words "anticipate", "believe", "expect", "project", "predict", "will", "forecast", "estimate", "likely", "intend", "outlook", "should", "could", "may", "target", "plan" and other similar expressions can generally be used to identify forward-looking statements. Indications of, and guidance or outlook on, future earnings or financial position or performance are also forward-looking statements. Investors and prospective investors are cautioned not to place undue reliance on these forward-looking statements as they involve inherent risk and uncertainty (both general and specific) and should note that they are provided as a general guide only and should not be relied on as an indication or guarantee of future performance. There is a risk that such predictions, forecasts, projections and other forward-looking statements will not be achieved. Subject to any continuing obligations under applicable law, Life360 does not undertake any obligation to publicly release the result of any revisions to these forward-looking statements to reflect events or circumstances after the date of this announcement, to reflect any change in expectations in relation to any forward-looking statements or any change in events, conditions or circumstances on which any such statements are based.

Although Life360 believes that the expectations reflected in the forward-looking statements and the assumptions upon which they are based are reasonable, Life360 can give no assurance that such expectations and assumptions will prove to be correct and, actual results may vary in a materially positive or negative manner. Forward-looking statements are subject to known and unknown risks, uncertainty, assumptions and contingencies, many of which are outside Life360's control, and are based on estimates and assumptions that are subject to change and may cause actual results, performance or achievements to differ materially from those expressed or implied by such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include risks related to the preliminary nature of financial results, risks related to Life360's business, market risks, Life360's need for additional capital, and the risk that Life360's products and services may not perform as expected, as described in greater detail under the heading "Risk Factors" in Life360's ASX filings, including its Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 15, 2023 and other reports filed with the SEC. To the maximum extent permitted by law, responsibility for the accuracy or completeness of any forward-looking statements whether as a result of new information, future events or results or otherwise is disclaimed. This announcement should not be relied upon as a recommendation or forecast by Life360. Past performance information given in this document is given for illustrative purposes only and is not necessarily a guide to future performance and no representation or warranty is made by any person as to the likelihood of achievement or reasonableness of any forward-looking statements, forecast financial information, future share price performance or any underlying assumptions. Nothing contained in this document nor any information made available to you is, or shall be relied upon as, a promise, representation, warranty or guarantee as to the past, present or the future performance of Life360.

Non-GAAP Financial Measures

We collect and analyze operating and financial data to evaluate the health of our business, allocate our resources and assess our performance.

EBITDA and Adjusted EBITDA 

In addition to total revenue, net loss and other results under GAAP, we utilize non-GAAP calculations of earnings before interest, taxes, depreciation and amortization ("EBITDA") and adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"). EBITDA is defined as net loss, excluding (i) convertible notes and derivative liability fair value adjustments, (ii) provision (benefit) for income taxes, (iii) depreciation and amortization and (iv) other income (expense). Adjusted EBITDA is defined as net loss, excluding (i) convertible notes and derivative liability fair value adjustments, (ii) provision (benefit) for income taxes, (iii) depreciation and amortization, (iv) other income (expense), (v) stock-based compensation, (vi) Form 10 transaction costs, (vii) acquisition and integration costs, (viii) non-recurring workplace restructuring costs, (ix) inventory write-offs, (x) adjustment in connection with membership benefit, and (xi) gain on revaluation of contingent consideration.

The above items are excluded from EBITDA and Adjusted EBITDA because these items are non-cash in nature, or because the amount and timing of these items are unpredictable, are not driven by core results of operations and render comparisons with prior periods and competitors less meaningful. We believe EBITDA and Adjusted EBITDA provide useful information to investors and others in understanding and evaluating our results of operations, as well as providing useful measures for period-to-period comparisons of our business performance. Moreover, we have included EBITDA and Adjusted EBITDA in this media release because they are key measurements used by our management team internally to make operating decisions, including those related to operating expenses, evaluate performance, and perform strategic planning and annual budgeting. However, these non-GAAP financial measures are presented for supplemental informational purposes only, should not be considered a substitute for or superior to financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP financial measures used by other companies. As such, you should consider these non-GAAP financial measures in addition to other financial performance measures presented in accordance with GAAP, including various cash flow metrics, net loss and our other GAAP results.

The following table presents a reconciliation of net loss, the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA:

Key Financial Metrics:

Cost of Revenue (GAAP to Non-GAAP reconciliation):

Operating expenses (GAAP to Non-GAAP reconciliation):

Note: The financial information in this announcement is unaudited and may not add or recalculate due to rounding. All references to $ are to U.S. $.

SOURCE Life360

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