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

Good afternoon to our U.S. investors, and good morning to our Australian investors. Welcome to the 2024 Annual General Meeting of Life360, Inc. My name is John Philip Coghlan, and I am the Chairman of Life360. On behalf of the Board, it is my pleasure to address shareholders at Life360's fifth AGM since listing on the ASX in 2019. Today, we are very pleased to welcome those of you participating online through virtual meeting platform 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, shareholders and proxies have the ability to ask questions and submit votes. We've decided to hold a virtual meeting once again in 2024 to allow participation and engagement amongst our securityholders wherever they may be. Should any technical issues; David Wiadrowski, who chairs the Audit and Risk Committee will step in as acting Chairman. [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 note that your question 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 e-mail. All questions will go through to Susan Stick, our General Counsel. Susan will read out the question and 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] Shortly, I will declare voting open on all items of business. At that time, if you are eligible to vote at the 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 and there's no need to press a "Submit" or "Enter" button. You do, however, have the opportunity 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. It is now after 4:30 p.m. in San Mateo, California on May 29 and correspondingly after 9:30 a.m. in Sydney, Australia on May 30. I have been advised by our Inspector of Election, Computershare Trust Company N.A., that 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 would like to introduce my fellow directors. In the United States 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 Nonexecutive Director and Chairman of the Remuneration and Nomination Committee; Randi Zuckerberg, Independent Nonexecutive Director; CJ Prober, a Non-Executive Director. 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; Susan Stick, our General Counsel and our 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 2023 fiscal 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's mission is to keep people close to the ones they love. During 2023, we made significant progress towards achieving this mission with meaningful enhancements to our members' experience, including continued benefits from the Tile acquisition. We now show users what their family members are up to, whether they're driving, walking or cycling, and we put pets and other valuables on the Life360 map. We're very proud that we deliver the peace of mind that comes with our location sharing and safety features to more than 66 million monthly active users across the globe as of March 2024. 2023 was a pivotal year for the company as we leverage our growth and scale to significantly reduce our net loss and achieve positive operating cash flow and adjusted EBITDA. Life360 met or exceeded all of the guidance metrics we provided to the market for 2023. Revenue growth of 33% to $304.5 million benefited from continued strong momentum in our subscription business with revenue increasing 44% year-on-year. At the same time, GAAP operating expenses increased just 4% year-on-year and reduced 1% year-on-year when excluding variable sales commissions, reflecting a disciplined approach to cost. The strong revenue growth combined with cost restraint underpinned a greater than $60 million year-on-year improvement in each of net loss, EBITDA and adjusted EBITDA to negative $28.2 million, negative $20.8 million and a positive $20.6 million, respectively. A similar $60 million improvement in operating cash flow delivered the first full year of positive cash flow of $7.5 million. Life360's balance sheet is strong, finishing the 2023 year with cash, restricted cash and cash equivalents of $70.7 million. During 2023, Life360 progressed against the strategic objectives designed to cement our marketing-leading position in family, safety and security. Our strategy to grow our audience delivered a 26% year-on-year uplift in monthly active users to more than 61 million at December 2023. International growth was particularly strong, increasing 40% year-on-year with a record number of international MAU additions. Our goal to drive membership resulted in a 21% year-on-year increase in global Paying Circles to 1.8 million. This outcome is particularly impressive in the context of U.S. price increases, which helped lift global ARPPC by 25% year-on-year. and reflects the loyalty and engagement of our member base. Our strategy to expand internationally saw Paying Circles outside of the U.S. increase 43% year-on-year with a particularly strong performance from the predominantly English-speaking countries of Canada, the U.K. and Australia. We launched our U.S. model of triple tier membership in the U.K. in October 2023 and in Australia and New Zealand in April 2024 with encouraging early results. Finally, our focus on maintaining financial discipline while continuing to invest for growth underpinned the 33% year-on-year increase in revenue and the achievement of positive adjusted EBITDA. Chris will outline in his address the initiatives underway in 2024 to deliver on our ambitious aspirations for the company. At Life360, our mission is to keep people close to the ones they love. Our environmental, social and governance initiatives reflect our commitment to simplifying family safety and security. During the year, we dispatched almost 39,000 ambulances and protected more than 300 billion miles with Life360 crash detection. The user testimonials we receive on a daily basis show real-world impact of our digital services. I would like to express my gratitude to my fellow Board members for their invaluable contributions to Life360 over the past year. Shareholders and employees are great beneficiaries of their wise counsel and dedication. I would also like to extend my appreciation to you, our shareholders, for your ongoing support of the company. Finally, on behalf of the Board, I thank our talented colleagues for their hard work and commitment to excellence. In particular, I acknowledge Chris Hulls and his entire leadership team for creating a culture of innovation, creativity and collaboration. Their vision for a fully integrated and differentiated family, safety and location platform drives the many growth opportunities that lie ahead for our company. I'll now hand over to Chris Hulls, who will provide an update on the company's performance.

Thanks, John. Good morning to our shareholders, and thank you for joining us today. I am pleased to be able to provide you with a brief business update and illustrate how Life360 continues to deliver against our strategic objectives. We are already a beloved app for families to keep track of their kids' safety, and our goal is to become the #1 brand that makes everyday life better for families at all life stages. John mentioned earlier that in 2023, we delivered 26% year-on-year growth in MAU. We delivered accelerating momentum in the first quarter of 2024 with year-on-year growth of 31% and record net additions for the first quarter. Our current international Triple Tier markets of focus, Canada, the U.K. and Australia, all performed strongly in 2023 and continue to do so in the first quarter of '24. During 2023, global Paying Circles increased 21% year-on-year, a very good outcome in the context of the significant price increases we implemented in the U.S. global average revenue per Paying Circle was 25% higher year-on-year. Together, these drivers underpinned a 52% year-on-year increase in core Life360 subscription revenue, which delivered ahead of guidance. We've seen continued strong momentum in Paying Circles in the first quarter of 2024 across both U.S. and international markets with 21% year-on-year growth and record net additions for the first quarter. These strong metrics are reflected in the continued strong growth of Life360's recurring revenue. Since our Australian IPO in May 2019 and Life360's annualized monthly revenue has more than quadrupled $274 million, and we have seen a further 19% year-over-year uplift in March '24. Before I outline our strategic initiatives for 2024, I'd like to provide a glimpse into our long-term aspirational goals. Given our user base and the role our product plays in our members' lives, we're being intentional about where we're headed for the future. We aim to be the #1 brand to make everyday family life better for all life stages. As we grow our relevance to an ever broader range of families, we see opportunities to significantly increase our monthly active user base, deliver our first $1 billion of revenue through innovation in our business and progress on our pathway to significant EBITDA margins. During FY '24, we have focused on 4 key initiatives: Growing our audience is about continuing to build on our very large existing base of more than 66 million monthly active users. The growth momentum of this user base has primarily been fueled by organic word of mouth, and we are investing in product experiences that encourage our members to tell other people about Life360. In addition, we are developing new features that give members more reasons to engage with the app using our vast data resources to provide insights to make family life easier. We're also investing in marketing to cement Life360's position as a recognized brand leader for everyday family life. Finally, our international expansion remains core to our growth strategy. Scaling paid offerings include a focus on growing both paid subscriptions and the number of Tile devices in use. We see these as 2 sides of a connected experience that helps us address the needs of members at all life stages. Examples include adult children who are worried about aging parents and pet parents concerned about their furry loved ones. We are very excited about the ways in which Tile devices can expand their use cases and allow us to deliver more value to members. Work is underway on the first new Tile release since the acquisition. We continue to see a large international growth opportunity for subscriptions and Tile device sales. Our Triple Tier offering launched in the U.K. in October 2023 and in Australia and New Zealand in April 2024. Creating new revenue streams involve us building new growth opportunities that benefit from our enormous free user base of 66 million MAU. Earlier this year, we announced the creation of new advertising revenue stream that we believe offers partners reach to these free users. We have consistently spoken of the potential that our investment in the core user experience and the scaling of our MAU base would provide for the future. We are encouraged by the success of early testing and see the opportunity to deliver an attractive platform to advertisers while continuing to provide a great user experience. Expanding profitability reflects our commitment to delivering profitable growth. In my report a year ago, I outlined how Life360 was a pivotal stage to leverage scale in the cost base and deliver a path to profitability. Our disciplined approach to cost in CY '23 and continued strong revenue momentum combined to deliver our first full year of positive adjusted EBITDA. This ongoing approach underpins our expectation of a trajectory to positive EBITDA in CY '25 and ultimately, strong EBITDA margins. Finally, turning to our earnings guidance. Life360 has maintained the FY '24 earnings guidance included in the Q1 '24 results announcement released on 10th of May 2024, ninth of May, U.S. Pacific Time. 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 16, 2024, 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. As set out in the notice of meeting, voting on 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 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, if you've not already done so, you can cast your vote using the electronic voting 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. 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 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 in the proxy materials. The first resolution of the meeting is the reelection of Brittany Morin as a Director of the company. Information relevant to Brit's proposed reelection is set out in the information that accompanied the notice of meeting. The Board, with Brit Morin abstaining, unanimously recommend shareholders vote for this resolution. I now invite Brit to address the meeting in relation to her reelection.

Thanks, John. As a seasoned technology executive and long-standing Board member, I would be honored to continue serving on the Life360 Board of Directors. My experience in leading and scaling technology companies provides a valuable perspective as Life360 continues to innovate and grow. Furthermore, my experience is running Brit + Co, a platform that engages tens of millions of women each month plus offline ventures, an investment firm for early-stage technology start-ups, gives me a unique lens on the opportunities that Life360 still has laying before us. Life360's mission to bring families closer together through technology is more relevant than ever. And as a mother of 3, I attest to using the product many times a day. I'm excited about the company's future and the potential to positively impact millions more families like mine worldwide through enhanced safety, connection and peace of mind.

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

No questions.

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

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

Thanks, John. I remain as excited about the future prospects of Life360 as when I first met Chris and invested in Life360 over 15 years ago. I was one of the earliest outside investors in the company and played a large role in bringing Life360 to the ASX for its IPO. I believe my long history and deep understanding of the company and my broader experience of scaling businesses will be an asset to the Board. I feel honored to have been a part of the journey today. And were I to be reelected, I look forward to serving all shareholders as we continue to grow our offering to members worldwide.

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

No questions.

Thank you. I put to the meeting proposal 1b. The proxies received are on the screen. On your electronic voting call through the voting icon, please now select for or withhold next to proposal 1b. [Voting]

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

Thank you, John, and good morning to my fellow shareholders. I'm delighted to offer myself for reelection to the Life360 Board of Directors. I've now served on the Board for 5 years and have developed a deep understanding of the Life360's business, its strategy and its culture. During this time, I've chaired the Audit Risk Committee and overseen the implementation and strengthening of controls and governance within the business. I'm a hands-on director, and so outside the formal Board and committee meetings, spend time in the business with key executives, continue to increase my knowledge of the business and to support them in their roles and the execution of the business strategy. Prior to joining Life360, I was a senior assurance partner at a big-4 accounting firm for more than 25 years and bringing significant experience and knowledge in financial reporting, technical accounting and audit, along with risk management skills. I also focused on the technology and media and telco industries in that time. I currently sit on 3 public company boards and 1 non-for-profit Board. I believe I have the time and capacity to manage all these commitments, and this is reflected in my attendance record at all Board and committee meetings across all of my Boards. I look forward to your support today and working with the Life360 Board into the future.

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

There are no questions.

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

Proposal 2 relates to the grant of restricted stock units and performance restricted stock units to Chris Hulls under the company's amended and restated 2011 Stock Plan. The Board, with Chris Hulls abstaining, unanimously recommends shareholders vote for this resolution. The resolution is set out on the slide. I will now address any questions regarding the grant of restricted stock units to Chris. Susan, do we have any questions?

No questions.

Thank you. I put to the meeting proposal 2. 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 proposal 2. [Voting]

As the next resolution relates to the grant of restricted stock units to myself, I propose to hand the chair to David Wiadrowski for this item.

Thank you, John. Proposal 3 relates to the approval of the grant 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 grant of restricted stock units to John. Susan, do we have any questions?

No questions.

Thank you. I put to the meeting proposal 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]

I'll now pass the chair back to John.

Thank you, David. Proposal 4 relates to the approval of the grant 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 grant of restricted stock units to Brit. Susan, do we have any questions?

No questions.

Thank you. I put to the meeting proposal 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 proposal 4. [Voting]

Proposal 5 relates to the approval of the grant 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 grant of restricted stock units, James. Susan, do we have any questions?

No questions.

Thank you. I put to the meeting proposal 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 proposal 5. [Voting]

Proposal 6 relates to the approval of the grant of restricted stock is to Mark Goines under the company's amended and restated 2011 Stock Plan. The Board, with Mark Goines abstaining, unanimously recommend shareholders vote for this resolution. The resolution is set out on the slide. I will now address any questions regarding the grant of restricted stock units to Mark. Susan, do we have any questions?

No questions.

Thank you. I put to the meeting proposal 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 proposal 6. [Voting]

Proposal 7 relates to the approval of the grant of restricted stock units to David Wiadrowski under the company's amended and restated 2011 stock plan. The Board, with David Wiadrowski abstaining, unanimously recommend shareholders vote for this resolution. The resolution is set out on the slide. I will now address any questions regarding the grant of restricted stock units to David. Susan, do we have any questions?

There are no questions.

Thank you. I put to the meeting proposal 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 proposal 7. [Voting]

Proposal 8 relates to the approval of the grant of restricted stock units to Randi Zuckerberg under the company's amended and restated 2011 Stock Plan. The Board, with Randi Zuckerberg abstaining, unanimously recommend shareholders vote for this resolution. The resolution is set out on the slide. I will now address any questions regarding the grant of restricted stock units to Randi. Susan, do we have any questions?