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

Good afternoon to our U.S. investors, and good morning to our Australian investors. Welcome to the 2023 Annual General Meeting of Life360, Inc. My name is John Philip Coghlan. I am the Chairman of Life360. On behalf of the Board, it is my pleasure to address shareholders at Life360's fourth AGM since listing on the ASX in 2019. Today, we're very pleased to welcome those of you participating online through our virtual meeting provided by Lumi. This allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch a live webcast of the meeting. In addition, shareholder and proxies have the ability to ask questions and submit votes. While there's been significant easing of restrictions following the COVID-19 pandemic, given that we have security holders in the U.S., Australia and other parts of the world, we have decided to hold a virtual meeting once again in 2023 to allow participation and engagement amongst our security holders wherever they may be. Should we have any technical issues, David Wiadrowski, who chairs the Audit and Risk Committee, will step in as acting Chairman. Online attendees can submit questions at any time. [Operator Instructions] Please note that while you can submit questions from now on, I will not address them until the relevant time in the meeting. Please also note that your questions may be moderated or if we receive multiple questions on 1 topic, amalgamated together. Finally, due to time constraints, we may run out of time to answer all your questions. If this happens, we will answer them in due course via mail. All questions will go through to Paul Leitner, our Deputy General Counsel. Paul will read out the question. 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 which are out of order. [Operator Instructions] Please note, while you can submit questions from now on, I will not address them until the relevant time in the meeting. Shortly, I will declare voting open on all items of business. At that time, you are eligible to vote at this meeting, a new voting tab will appear. Selecting this tab will bring up a list of resolutions and present you with voting options. To cast your vote simply select one of the options. Your vote is automatically recorded. There's no need to press a submit or enter button. You do, however, have the ability to change your vote up until the time I declare voting closed. I now declare voting open on all items of business. The voting tab will soon appear. Please submit your votes at any time. I will give you a warning before I move to close voting. To view documents relevant to today's meeting, select the Documents tab. A list of all available documents will appear. When selected, the document will open within the Lumi platform. You will still be able to listen to the meeting while viewing the documents. It is now after 4:30 p.m. in San Mateo, California on May 30, and correspondingly after 9:30 a.m. in Sydney, Australia on May 31. I have been advised by our Inspector of Election, Computershare Trust Company, N.A. The proxies have been received in respect of the total number of outstanding shares that constitute a quorum 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'd like to introduce my fellow directors in the U.S. are Chris Hulls, our CEO and Co-Founder and an Executive Director; Alex Haro, a Co-Founder and Non-Executive Director; Brit Morin, Independent Non-Executive Director; Mark Goines, Independent Non-Executive Director and Chairman of the Remuneration and Nomination Committee; Randi Zuckerberg, Independent Non-Executive Director; CJ Prober, an Executive Director. And in Australia are James Synge, Independent Non-Executive Director; and David Wiadrowski, Independent Non-Executive Director and Chairman of the Audit and Risk Committee. Also attending today are Russell Burke, our Chief Financial Officer; Paul Leitner, our Deputy General Counsel; our 2022 auditor, Doug Hart from BDO; and our proposed new 2023 auditor, Joseph Prast from Deloitte. The agenda for the meeting today will be as follows: Firstly, I will give a short address on Life360's performance for the 2022 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. Thank you to our shareholders for joining the Annual General Meeting today. Life360 is cementing its position of the world's leading family safety membership service, offering an all-in-one solution designed for modern life. During 2022, the company demonstrated pleasing progress against our strategic objectives. We achieved our largest ever annual growth in global monthly active user around 49 million. We delivered accelerating momentum in core subscription revenue with strong Paying Circle growth and the early impact of meaningful price increases. Our pricing power demonstrates the considerable value that we are delivering to our members. We executed the Tile integration strategy, bringing together the Life360 Tile and Jiobit teams into a single company. We built the platform to support the bundled Life360 and Tile membership offering, which launched during the first quarter of 2023. And finally, we established a path to profitability beginning in 2023. This goal is underpinned by strong revenue momentum at an integrated leaner and scalable cost base. Annualized monthly revenue for the month of December increased 61% to USD 224 million, a measure of the strength of Life360's recurring revenue. We have seen continued strong momentum into the first quarter of 2023, achieving positive adjusted EBITDA, 1 quarter earlier than our expectations. Life360 delivered calendar year '22 revenue of $228.3 million, a year-on-year increase of 103%. This performance benefited from strong core Life360 subscription revenue growth of 54% on a like-for-like basis and the contributions from the Tile and Jiobit acquisitions. Adjusted EBITDA loss, excluding stock-based compensation and non-recurring items of a negative $40.1 million reflected investment to accelerate the integration of Life360 Tile and Jiobit. The EBITDA loss was a negative $85.2 million and net loss was a negative $91.6 million. Life360 ended the calendar year '22 with cash, restricted cash and cash equivalents of $90.4 million. This included the net proceeds of a $32.2 million from our November capital raise, which was well supported by shareholders. The company is in a strong position to navigate the uncertainties of the broader macroeconomic environment. At Life360, we're progressing our environmental, social and governance activities, a reflection of our commitment to the communities that we serve. Initiatives are underway across all 3 ESG pillars. I'll make special mention of the progress we made with our people policies as we brought together the Life360 Tile and Jiobit terms during calendar year '22. Our corporate values were refreshed, and we established a new approach to create a culture of belonging with further details available in the annual report. Undoubtedly, the key contribution Life360 makes to the community is our mission to simplify safety, so families are connected and protected. During the year, we dispatched more than 34,000 ambulances as well as billions of safe arrival notifications, illustrating the peace of mind our core proposition delivers. I would like to express my appreciation to my fellow Board members for their contribution to Life360 over the past year. Shareholders greatly benefit from their expertise and guidance. On behalf of the Board, I thank our colleagues, including those who unfortunately have had to leave the business, for their hard work and commitment. We are grateful for their talent and dedication, which have contributed to the successful integration of the Life360 Tile and Jiobit businesses and established the next important steps in our strategy. I acknowledge Chris Hulls and his leadership team for their work in implementing our vision for a fully integrated and differentiated location platform. Finally, I would like to thank our shareholders for their ongoing support of the company and participation in the November 2022 capital raising. Life360 is better positioned than ever to deliver on our mission to offer peace of mind designed for modern life. I'll now hand it over to Chris Hulls, who will provide an update on the company's performance. Chris?

Thank you, John, and good morning to our shareholders. I am pleased to be able to provide you with a brief business update and a deeper dive into the operating metrics driving Life360's performance. 2022 was a tremendous year of progress for the company in delivering against our strategic objectives, and we're seeing strong momentum in the Q1 results we recently delivered to the market. John mentioned that during 2022, we achieved our largest ever annual growth in monthly active users, and we've seen continued progress in Q1 with a 33% uplift to around 51 million users. We have seen continued strength in our returning monthly active users or RMAU, reflecting the increasing engagement of our user base. We believe we have absolute top-tier retention for a mobile app with users who signed up nearly a decade ago just is engaged with the product as they were when they initially registered. During CY '22, Global Paying Circles increased 23% year-on-year with U.S. Paying Circles growth achieved even while implementing significant price increases during Q4. As we guided to in November, Q4 subscribers were stable at Q3 levels, reflecting the onetime impact on churn as we implemented price increases across the existing iOS subscriber base. During Q1, Paying Circles returned to growth with global net subscriber additions of 73,000, ahead of the 69,000 achieved in Q1 '22. This is a very positive result, given the magnitude of the price increases implemented in Q4 '22. During Q1, International Paying Circles increased 50% year-over-year with net adds at close to all-time record levels. The ARPPC chart reflects the achievement of significant price increases across all our U.S. iOS monthly membership tiers, including our legacy product lines. Price increases were already in place for new monthly Android subscribers and have extended to existing monthly Android subscribers during Q2. The impact from the size and timing of these price increases is reflected in the U.S. ARPPC chart with a 43% uplift to $140 in Q1. These strong operational metrics are driving significant growth in Life360's recurring revenue over the course of 2022 with a further uplift in Q1, which delivered 41% year-over-year growth. Quarterly annualized monthly revenue delivered a significant uplift in Q4 of 2022 and a further step up in Q1, reflecting the benefit of price increases. AMR has more than tripled since our IPO in May of 2019. John provided an overview of the 2022 financial results, and this slide highlights the progress we have made in Q1. Subscription revenue growth of 56% reflects the Paying Circle additions and ARPPC uplift as I've just outlined. Hardware revenue increased 3% year-over-year. Our primary focus is on driving subscription revenue rather than stand-alone retail sales. And this year-over-year growth was achieved despite significant reductions in headcount, marketing and R&D expenses in our devices business. We will continue to be disciplined in regard to our spending in this part of the business as part of our emphasis on cash flow. Despite this conservative level of investment, we are continuing to make meaningful improvements to our devices lineup including our Anti-Theft Mode, use case bundles and most recently, a newly announced partnership with Google to leverage Android phones to expand our network reach in the future. Other revenue of $6.5 million reduced 21% year-over-year. We made the strategic decision to shift to a single aggregated data partnership and the prior corresponding quarter included revenue from the previous agreement. We earlier provided guidance for Life360 to achieve adjusted EBITDA profitability from Q2 '23 onwards and for full year CY '23. We have achieved this milestone a quarter early with Q1 '23 positive adjusted EBITDA of $0.5 million. The impact of price increases, combined with better-than-expected net subscriber additions delivered ongoing strong momentum in subscription revenue. This positive trend, coupled with the impact of additional cost efficiencies implemented in January, supported the achievement of our adjusted profitability target ahead of schedule. In a time of macro uncertainty, we are focused on balancing fiscal responsibility with prudent investment to position the business for long-term success. We have a strong balance sheet with cash, restricted cash and cash equivalents of $76.1 million at March 2023 quarter end. Turning to our focus on the remainder of 2023 and our continued mission to simplify safety for families. There are 4 pillars to our strategy, each of which build on the progress we achieved in CY '22. We are investing in the core as we continue to believe we have significant opportunities to improve the user experience and further differentiate ourselves from our competitors who have much more limited functionality. We are driving membership through a bundled Tile offering, which is fully rolled out in the U.S. market. We are excited about opportunities over time to improve paid user conversion and retention, and while it is early days, we are excited by what appears to be a material improvement in retention, which is a signal we are hoping for a launch. While the initial launch did not focus on increasing top-of-funnel conversion, in coming months we will be rolling out user flows that more aggressively bring people into the Tile experience. We expect this to drive increases in conversion in the second half of the year, in particular during our critical back-to-school season. We anticipate another year of strong momentum with guidance of more than 50% year-over-year growth in subscription revenue. We are expanding internationally and have established a dedicated management team based in the U.K. with the U.K. launch planned for the second half of 2023. Additionally, we are committed to improving the international user experience for the global core features. The international rollout of tiles on the Life360 map is underway with completion expected in coming days. And finally, we are maintaining financial discipline and driving financial leverage, building on revenue momentum strong gross margins and tightly managed OpEx to support our path to profitability. Our CY '23 earnings expectations are unchanged from the guidance we provided with Q1 results. Core Life360 subscription revenue growth, excluding Tile and Jiobit, in excess of 50% year-over-year. Hardware revenue growth of 0% to 5%. Other revenue of approximately $26 million, consolidated revenue of $300 million to $310 million. Positive adjusted EBITDA and operating cash flow of $5 million to $10 million with positive adjusted EBITDA for each quarter of CY '23 and positive operating cash flow anticipated on a quarterly basis beginning with Q2 '23 and for full CY 23. With that, I will hand back to John to conduct the formal part of the meeting.

Thank you, Chris. If shareholders have any questions on the updates, which 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 April 17, 2023, 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 this 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'm 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, if you have not already done so, 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 are a CDI holder attending the online meeting, 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. Voting today will be conducted by way of a poll on all items of business. 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 move on to the business of the meeting. The proxy 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 in the proxy materials. That brings me to the resolutions. The first resolution of the meeting is the reelection of Mark Goines as a Director of the company. Information relevant to Mark's proposed reelection is set out in the information that accompanied the notice of meeting. The Board, with Mark Goines abstaining, unanimously recommend shareholders' vote for this resolution. I now invite Mark to address the meeting in relation to his re-election.

Thanks, John. After a long experience serving on a public school board and working with company serving families on their concerns and needs and serving on several boards of fast-growing companies, I have tremendous empathy for families, challenges and interest and management's focus on scaling their business. It's been a delight serving on the Life360 Board of Directors supporting our millions of users and helping to guide the company and I've never been more optimistic about the potential of our services to help families and communities to live safer, happier lives, and I thank shareholders for their continued support.

Thanks very much, Mark. The resolution is set out on the slide. I will now address any questions regarding Mark's reelection as a director. Paul, do we have any questions?

No, there are no questions relevant to this item.

Thank you. I put to the meeting Resolution 1(a). The proxies received are on the screen. On your electronic voting card, through the voting icon, please now select for or withhold next to resolution 1(a). [Voting]

The next resolution of the meeting is the reelection of Alex Haro as a Director of the company. Information relevant to Alex's proposed reelection is set out the information that accompanied the notice of meeting. The Board, with Alex Haro abstaining, unanimously recommend shareholders' vote for this resolution. I now invite Alex to address the meeting in relation to his reelection.

Thanks, John. As one of the founders, I am deeply honored to be a part of the Board of Life360 with a strong focus on technology and an unwavering commitment to building the best possible experience for our consumers. I am dedicated to driving our growth and ensuring we are able to meet the needs of families all around the world. I continue to be more and more excited by the day of the potential of Life360 and appreciate the opportunity to continue to drive Life360 forward. I thank shareholders for their continued support.

Thank you, Alex. The resolution is set out on the slide. I will now address any questions regarding Alex's reelection as a director. Paul, do we have any questions?

No, there are no questions relevant to this item.

I put to the meeting Resolution 1(b), the proxies received are on the screen. On your electronic voting card, through the voting icon, please now select for or withhold next to Resolution 1(b). [Voting]

The next resolution of the meeting is the reelection of Randi Zuckerberg as a Director of the company. Information relevant to Randi's proposed reelection is set out in the information that accompanied the notice of meeting. The Board, with Randi Zuckerberg abstaining, unanimously recommend shareholders' vote for this resolution. I now invite Randi to address the meeting in relation to her reelection.

Thank you so much, John. It has been an absolute honor serving on the Board of Life360. And I can say with my very unique blend of expertise in both technology and the arts stemming from early days as a Facebook employee and being a creator of Facebook Live. It has been a real privilege to shape Web 2 technology, which has touched lives of billions across the globe. And throughout my journey, I've personally witnessed the transformative power connectivity and its profound impact, especially on families around the world. I'm also a working mother myself, with children who use Life360, I deeply understand the significance of safety and peace of mind in today's fast-paced world. I have personally faced the challenges of striking a balance between work, family and the need to stay connected with our loved ones. And it is this firsthand experience that really fuels my own personal dedication to ensuring that Life360 remains the leading platform in simplifying safety for families, empowering them to embrace life to the fullest and removing the burden of everyday worries. Thank you very much to all shareholders for their continued support.

Thanks very much, Randi. The resolution is set out on the slide. I will now address any questions regarding Randi's reelection as Director. Paul, do we have any questions?

No, there are no relevant questions to this item.

I put to the meeting Resolution 1(c). The proxies received are on the screen. On your electronic voting card, through the voting icon, please now select for or withhold next to Resolution 1(c). [Voting]

Resolution 2 relates to the approval of the company's amended and restated 2011 Stock Plan for the purposes of Listing Rule 7.2 of the Australian Securities Exchange. The Board unanimously recommends shareholders vote for this resolution. The resolution is set out on the slide. I will now address any questions regarding the approval of the company's amended and restated 2011 stock plan. Paul, do we have any questions?

No, there are no relevant questions to this item.

Thank you. I put to the meeting Resolution 2. The proxies received around the screen. On your electronic voting card, through the voting icon, please now select for against or abstain next to Resolution 2. [Voting]

Resolution 3 relates to the issue of restricted stock units to Chris Hulls under the company's amended and restated 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 restricted stock units to Chris. Paul, do we have any questions?

No, there are no relevant questions to this item.

Thank you. 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]

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. Resolution 4 relates to the approval of the issue of restricted stock units to John Philip Coghlan under the amended and restated company's 2011 stock plan. The Board, with John Philip 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 restricted stock units to John. Paul, do we have any questions?

No, there are no relevant questions to this item.

Thank you, Paul. 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]

I will now pass the chair back to John.

Thank you, David. Resolution 5 relates to the approval of the issue of restricted stock units to Brit Morin under the company's amended and restated 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 restricted stock units to Brit. Paul, do we have any questions?

No, there are no questions relevant to this item.

Thank you. 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]

Resolution 6 relates to the approval the issue of restricted stock units to James Synge under the company's amended and restated 2011 Stock Plan. The Board, with James Synge 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 restricted stock units to James. Paul, do we have any questions?