Life360, Inc. (360) Earnings Call Transcript & Summary

Good afternoon to our U.S. investors, and good morning to our Australian investors. Welcome to the Annual General Meeting of Life360, Inc. My name is John Coghlan, and I am the Chairman of Life360. On behalf of the Board, it's my pleasure to address shareholders at Life360's 2020 AGM, our first as a publicly listed company on the ASX. Today, we are very pleased to welcome those of you participating online through our virtual meeting platform provided by Lumi, in partnership with our share registrar, Computershare. This allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch a live webcast of the meeting. In addition, shareholders and proxies have the ability to ask questions and submit votes. Due to the COVID-19 pandemic and the constraints that has created, we thought it prudent to take steps to discourage a physical public gathering and encourage attendance online. We hope that holding a virtual meeting will allow participation and engagement amongst our shareholders. Questions can be submitted at any time. [Operator Instructions] Please note that while you can submit questions from now on, I will not address them [indiscernible] time in the meeting. Please also note that your questions may be moderated or, if we receive multiple questions on one topic, amalgamated together. Finally, due to time constraints, we may run out of time to answer all your questions. If this happens, we'll answer them in due course via e-mail. We've endeavored to answer the questions that were supplied in advance of the meeting in our prepared remarks. All questions will go through to Jeremy Liegl, our General Counsel. Jeremy will pass the question on to me to read out. I will either answer the question or pass it to the most appropriate person to answer. We reserve the right to rule out questions not relating to the AGM or out of order. Voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. At that time, if you are eligible to vote at this meeting, a new polling icon will appear. Selecting this icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. There is no need to press a submit or enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare voting closed. If you are a CDI holder, you will not be able to vote using the online voting system and must have submitted your CDI voting form ahead of the meeting, in accordance with the procedures in the notice of meeting. CDI holders would therefore not see a polling icon on their screens. I now declare voting open on all items of business. The polling icon will soon appear. Please submit your votes at any time. I will provide advanced warning before I move to close the voting. It is now after 4:30 p.m. in San Francisco, California on July 30 and, correspondingly, after 9:30 a.m. in Sydney, Australia on July 31. I have been advised that a quorum is present for the matters to be considered at this meeting. I therefore declare this AGM open, and welcome each of you to the virtual platform. Before I proceed with the business of the meeting, I would like to introduce my fellow directors. In San Francisco are: Chris Hulls, our CEO and Co-Founder and an Executive Director; Alex Haro, a Co-Founder and Nonexecutive Director; Brit Morin, Independent Nonexecutive Director; Mark Goines, Independent Nonexecutive Director and Chairman of the Remuneration and Nomination Committee. In Sydney are: James Synge, Independent Nonexecutive Director; and David Wiadrowski, Independent Nonexecutive Director and the Chairman of the Audit and Risk Committee. Also attending in San Francisco today are Russell Burke, our Chief Financial Officer, who happens to be an Aussie; and Jeremy Liegl, our General Counsel and Corporate Secretary. Our auditor, Aftab Jamil from BDO, is also in attendance. The agenda for the meeting today will be as follows: first, I will give a short address on Life360's performance for the 2019 year and an overview of the company's strategy. This will be followed by a presentation from our CEO, Chris Hulls. I will then outline the meeting procedures and continue to the formal items of business. Let me start by saying that 2019 was a tremendous year of growth for Life360, and then one in which we achieved the key targets outlined in the IPO prospectus. Our operating metrics reflect the achievement of impressive scale. We reached a global monthly active user base of more than 27 million, a year-on-year growth rate of more than 47%. In our listed home of Australia, we grew even more strongly, with an MAU base of more than 570,000, a year-on-year growth rate of around 90%. Equally impressively, more than 80% of this growth was achieved from word of mouth. Our strong financial performance for the year is reflected in an annualized monthly revenue of USD 75.4 million, a year-on-year growth rate of 66%. 2019 was a year of significant investment in expanding the functionality and quality of the Life360 service. We undertook our first major product redesign, which laid the foundation for the recent launch of our new membership model. This investment included the expansion of our international infrastructure, and we now have users in 195 countries, and we support 12 languages. And finally, Life360 finished 2019 with a strong balance sheet and a cash balance of $64.1 million. At June 2020, the balance sheet continued to be robust with a cash balance of $58.4 million. The strength of our balance sheet and the flexibility of our discretionary expense model have been particularly important in the context of the rapid change in the operating environment brought on by the COVID-19 coronavirus pandemic. I'm very proud of the response of the Life360 team during this difficult time for the company and the world. The next important step in our company strategy, the launch of our membership model, has been implemented on schedule while the entire company has been working remotely. The launch of our membership model is the culmination of a more than 10-year vision for Life360, but it is the beginning of a journey, not as destination. The platform we have established, our excellent growth profile and the proceeds from our IPO in May 2019 all support the execution of this vision. Chris will provide more detail during his address. We're optimistic that the additional features will expand the relevance of our services to a much wider range of families and drive long-term growth in revenue and value. In closing, I'd like to thank my fellow Board members for the contribution they have made to Life360 since the IPO in May 2019. Shareholders greatly benefit from their expertise and wise counsel. I would like to make particular mention of our Australian-based directors, James Synge and David Wiadrowski, who have greatly assisted us in establishing our ASX listing. I'd also like to thank our talented people for their hard work and commitment, particularly in the challenging circumstances brought about by COVID-19. I'd like to acknowledge the inspirational leadership of Chris Hulls, who has ensured that Life360 hardly missed a beat as the entire company transitioned to remote work on very short notice. The on-time launch of the membership model in these circumstances is testament to the quality of the Life360 team. And finally, I'd like to thank you, our shareholders, for your continued support and the confidence you have demonstrated in the future growth opportunities for Life360, especially in the face of a challenging marketing environment. I'll now hand it over to Chris Hulls, who will provide an update on the company's performance, in particular the recent launch of our new membership model. Thank you, Chris.

Thanks, John. I'm delighted to be able to speak to shareholders and provide a brief business update at our first-ever AGM. As John mentioned, 2019 was a tremendous year of growth for Life360, with the achievement of the target set out in our IPO prospectus. The COVID-19 pandemic has meant that the world has become a very different place in 2020. But despite all that, Life360 has continued to grow, and we have delivered the next important milestone in our long-term strategy. I wanted to first provide a snapshot of our operating performance in 2019 and give you an update on our more recent performance in 2020. This slide shows the history of Life360's revenue by half year. As you can see, we delivered an impressive performance in 2019. And in 2020, we have continued our growth trajectory despite the impact of COVID. An important driver of our revenue performance is the growth of our Paying Circles or subscribers. During COVID, we have seen an impact on our top-of-funnel acquisition as lockdowns were implemented, particularly in the month of April. When families were not able to leave their homes, they naturally use our app less. However, throughout the crisis, subscriber retention has remained strong, and we returned to growth in June. I'd like to turn now from our operating metrics to speak briefly about the launch of our new membership offering. This initiative has been the focus of the company in the time since our IPO and, as John mentioned, is the culmination of our vision for Life360. Being able to provide families a one-stop shop for peace of mind for all their safety needs is what allows us to live up to the 360 in our Life360 name. We recently conducted an investor briefing to give a detailed view of what the membership offering encompasses. I invite any shareholders who are not able to participate to view a replay on the Investor Relations section of our website. Being a one-stop shop is a critical component to our new offering. As you can see on the left-hand side of this slide, customers would need to spend $256 each month for a family of 4 and subscribe to at least 8 different providers to match what Life360 can offer for 1/10 the cost. The reason we're able to do this is because our growth is supported by word of mouth, and we have mobile economics on our side. We're able to use our existing infrastructure to launch new services at a fraction of the cost of legacy providers. Our new membership offering sets us up for much bigger reach as a company. Prior to membership, our product was focused on 2 life stages: families with teens and families with college-age kids. Membership expands our reach to both older and younger families. And what we offer now is just the beginning as we plan to incorporate even more features and value over time. Our goal is to become so essential that signing up for Life360 membership is something that parents will do instinctively, in the same way that 20 years ago, drivers would sign up for AAA in the U.S. or NRMA in Australia. Finally, I'd like to provide you with a view of the current environment. While the outlook remains uncertain, given the evolving COVID-19 situation in the U.S., Life360's performance during the June quarter demonstrates the strength and resilience of our business model. We will retain our disciplined approach to expenditure while we resume investment in paid user acquisition to accelerate growth as the operating environment returns to normal. We expect to see growth in MAU and Paying Circles in Q3. However, the pace of growth will be subject to COVID-19 conditions in the U.S., including the resumption of back-to-school activities. We also expect the heightened concern around health and safety, combined with the launch of the membership offering, to only strengthen the use case for families over the long term. In addition, the membership offering is expected to drive significant growth in average revenue per Paying Circle. Operating cash outflow in the CY '20 full year is expected to reduce versus CY '19. Thanks for your attention, and I'll now hand back to John to conduct the formal business of the meeting.

Thank you very much, Chris. If shareholders have any questions on the updates that Chris and I have presented, please ask them now, and I will address them in turn at the end of the meeting. The notice of meeting was distributed on July 13, 2020, and I propose to take the notice of meeting as read. Before moving on to the various resolutions to be considered today, I will now briefly outline the meeting and voting procedures for today's meeting. As set out in the notice of meeting, each of the resolutions will be conducted by a poll. The results of the poll will be released on the ASX and will be available on the company's website as soon as possible after the meeting. As Chairman of the meeting, I will vote all directed proxies in accordance with the directions provided by shareholders. I am also holding undirected proxies in my capacity as Chairman of this meeting, and I intend to vote all such proxies in favor of all resolutions. As shareholders, you can cast your vote using the electronic voting card that you received when you registered via the online virtual platform. You are able to vote between the commencement of the meeting and the closure of voting, as announced during the meeting. If you have any questions about casting your vote online, please refer to the online meeting guide that was issued with the notice of meeting. We will display the number of proxy votes received for each resolution as well as the terms of each proposed resolution ahead of voting on each resolution. I will now move on to the business of the meeting. The proxy materials accompanying the notice of meeting included detailed information, explanations and rationale around each of the items of business. For this reason, when I come to introduce each resolution, I do not propose to summarize any of the information, explanations or rationale for the resolutions, which were included to the proxy materials. That brings me to the resolutions. The first resolution of the meeting is the reelection of Alex Haro as a director of the company. The Board, with Alex Haro abstaining, unanimously recommend shareholders vote for this resolution. The resolution is set out on the slide. I would like to briefly remark that Alex is a Co-Founder of the company and previously the President of the company and also the CTO. He is an invaluable contributor to the Board, and he is a Nonexecutive Director. I will now address any questions regarding Alex's reelection as a director. Thank you. It appears there are no questions. I put to the meeting resolution 1. The proxies received are on the screen. In line with the company's bylaws, shareholders have the option to vote for or abstain for resolution 1. On your electronic voting card, through the voting icon, please now select for or abstain next to resolution 1. [Voting]

The second resolution of the meeting is the reelection of Mark Goines as a director of the company. The Board, with Mark Goines abstaining, unanimously recommend shareholders vote for this resolution. The resolution is set out on the slide. Mark is a Nonexecutive Director, the Chairman of the Remuneration and Nomination Committee, and he is a Vice Chairman of a company called Personal Capital, an online personal wealth management company. I will now address any questions regarding Mark's reelection as a director. Thank you. It appears there are no questions. I put to the meeting resolution 2. The proxies received are on the screen. In line with the company's bylaws, shareholders have the option to vote for or abstain for resolution 2. On your electronic voting card, through the voting icon, please now select for or abstain next to resolution 2. [Voting]

The third resolution of the meeting is the approval of the amendment and restatement of the 2011 Stock Plan for the purposes of Delaware law. The Board unanimously recommend shareholders vote for this resolution. The resolution is set out on the slide. I will now address any questions regarding the amendment and restatement of the 2011 Stock Plan for the purposes of Delaware law. Thank you. It appears there are no questions. I put to the meeting resolution 3. The proxies received are on the screen. On your electronic voting card, through the voting icon, please now select for, against or abstain next to resolution 3. [Voting]

The fourth resolution of the meeting is the approval of the company's amended and restated 2011 Stock Plan for the purposes of ASX Listing Rule 7.2. The Board unanimously recommend shareholders vote for this resolution. The resolution is set out on the slide. I will now address any questions regarding the approval of the amended and restated 2011 Stock Plan. Thank you. It appears there are no questions. I put to the meeting resolution 4. The proxies received are on the screen. On your electronic voting card, through the voting icon, please now select for, against or abstain next to resolution 4. [Voting]

Resolution 5 relates to the issue of 230,000 options to acquire fully paid ordinary shares of common stock in the company to Chris Hulls under the company's 2011 Stock Plan. The Board, with Chris Hulls abstaining, unanimously recommend shareholders vote for this resolution. The resolution is set out on the slide. I will now address any questions regarding the issue of options to Chris. Thank you. It appears there are no questions. I put to the meeting resolution 5. The proxies received are on the screen. On your electronic voting card, through the voting icon, please now select for, against or abstain next to resolution 5. [Voting]

Thank you. As the next resolution relates to an issue of restricted stock units to myself, I propose to hand the Chair to David Wiadrowski for this item. David?

Thank you, John, and good morning and good afternoon to all shareholders. Resolution 6 relates to the approval of the issue of restricted stock units to John Philip Coghlan under the company's 2011 Stock Plan. The Board, with John Coghlan abstaining, unanimously recommend shareholders vote for this resolution. The resolution is set out on the slide. I will now address any questions regarding the issue of options to John. Thank you. It appears there are no questions on this resolution. I put to the meeting resolution 6. The proxies received are on the screen. On your electronic voting card, through the voting icon, please now select for, against or abstain next to resolution 6. [Voting]

I will now pass the Chair back to John.

Thank you, David. Resolution 7 relates to the approval of the issue of restricted stock units to Brit Morin under the company's 2011 Stock Plan. The Board, with Brit Morin abstaining, unanimously recommend shareholders vote for this resolution. The resolution is set out on the slide. I will now address any questions regarding the issue of options to Brit. Thank you. It appears there are no questions. I put to the meeting resolution 7. The proxies received are on the screen. On your electronic voting card, through the voting icon, please now select for, against or abstain next to resolution 7. [Voting]