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

Okay. Welcome, everyone, and thanks for joining this session with Life360. We might start with some disclosures. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.researchdisclosures (sic) [ www.morganstanley.com/researchdisclosures ]. If you have any questions, please reach out to your Morgan Stanley sales representative. And with that, I'd like to welcome, everyone, and give hearty thanks to both Lauren Antonoff, CEO of Life360 and Russell Burke, CFO, for joining us today. We really do appreciate the time, guys.

Happy to be here.

Yes. Absolutely.

Perfect. Well, why don't we jump into something that's really got investors' attention over the last week, the fourth quarter results? I just thought we could unpack a few things that sort of really got people's attention over the last few days. Maybe starting with at the sort of top of the P&L or even above it, which is a core driver, MAU growth. You basically talked to some seasonality there towards the back half in terms of adding users. What gives you the confidence that you can sort of accelerate through the year and achieve the 20% that you've outlined?

We came off 2025 with really strong annual MAU growth. But what we saw in 2025 is that quarter-to-quarter, especially comparing to a year ago quarter-to-quarter, it looked uneven along the way. And we see that same pattern emerging as we come into 2026. We have line of sight into really strong growth again, and I think in many ways, even stronger. But we can see the shape of it. Part of that is that we understand the dynamics when customers come in, especially when we get a big cohort of users that come in, we really understand the shape of some percent of them turn off, some percent of them turn into passive users. And that gives us pretty good visibility into that baseline of what's going to happen. On top of that sort of normal flow, there's a number of initiatives that are new and exciting that we're leaning into. Our international focus is shifting from really just looking at users that have a propensity to pay to really broadening our focus and saying, how are we winning a broader base of users, especially in markets where we see green shoots? We see real good signs of product market fit. And examples are Mexico and Brazil, which are huge markets. Even compared to markets like the U.K. and Australia today, they offer a huge opportunity. And those are places where we are putting investment very deliberately to make sure that the product has the right set of localizations that we need to be successful there, working on lower-end devices, great localization, attention to modalities beyond driving, a whole set of things that are product-led work and then complementing that with focused marketing efforts, both marketing and partnerships in those regions. So, that's one example. I'll take a break there, but there's a whole set of things in product and marketing, both in the U.S. and internationally that give us confidence.

And James, I'd like to give a little bit of context as well. I mean, we -- because there were -- there's been some questions about growth, et cetera, we wanted to give the market sort of an indication of our confidence in growth. And that's why we normally don't give guidance on MAU, but we decided to give guidance in terms of the 20% target. But that's an annual target, and that's how we think about MAU, really managing it because of these variations from quarter-to-quarter and we see that all the time. And then when we came to the guidance, we also wanted to give a little bit more transparency in terms of Q1. So, there's no surprises there. But in that context, MAU is in that -- performing in that way that we expect, and that doesn't take away from our confidence in the annual target.

Perfect. Well, I'd like to circle back to some of those ideas a little later on maybe. And then another sort of source of seasonality that you called out was on ad revenue. Can you maybe talk us through how you see the puts and takes there quarter-to-quarter and why you've got confidence that, that can deliver for you over the next 12 months?

Yes. I'll let Russell take this, but just to anchor it, we're bringing together what was a very exciting but very early ad business in Life360. And then Nativo, which is a mature business, but a business that was starting out with a lot of good advertiser relationships and publisher relationships, but no data of its own, no platform of its own. And we bring these 2 together, and we see incredible synergies and we're already starting to see the benefits of that very, very quickly. But integration does take some time. And that -- in addition to advertising seasonality, that sort of beginning of the year investment to bring those companies together is part of the story. Russell?

Right. And as we think about advertising in '26, it's definitely going to ramp up both for -- because we're moving through the integration, and we'll see the benefits of that in the second half of the year and because advertising is, by nature, something of a seasonal business. Q4 is definitely the key quarter in that respect. So, again, a few specifics. We probably expect the way it layers out is that roughly 15% of advertising happens -- revenue happens in Q1. That more than doubles by Q4, just to give you a sense of that ramp. A couple of other pieces just to help people put it together. We gave the information on Nativo's '25 revenue pre-acquisition of about $60 million. And we expect roughly 85% of that to carry forward. So, we're building that on the Life360 revenue that we were ramping up through the end of '25. And then we'll build on that quite significantly during the course of '26. We gave -- I think we gave guidance about other revenue sort of $140 million to $160 million in '26. Roughly 70% of that is advertising in the '26 year, just to give the pieces that build that up.

If I was going to add just something in terms of why this works so well, take, for example, Life360, before we had big companies approach us, they wanted to work with us, but we have limited inventory. And that meant we couldn't necessarily sort of meet the targets that they were looking to, and we might be just too small for them to deploy their advertising revenue. Nativo, on the other hand, for them, it was harder to break into the room to get new business because they're not well known, they're a smaller company. And you put the 2 together, for us, all of a sudden, we now have really extensive inventory through Nativo's base of publishers. And for them, they have this great door opener. They drop our name and people want to talk with them. And so those 2 things come together. And now we have a Life360 ad business that's ready to scale. So it's pretty exciting.

Yes, it is. And I want to come back to that as well. I guess one other thing that you called out briefly that I'd like a little more color on, if possible, is some of the one-off costs that you'll incur in Q1 that are non-recurring that sort of wash out, including advertising and exit retail?

No, absolutely. And again, we wanted to be sort of transparent because we're doing a lot of things in Q1 that are very intentional. Most of them are really sort of directed towards investing that will help drive that growth in the latter part of the year. So, they include things like the Nativo acquisition concluded in the very early part of January. So, we're now bringing that team on. To some extent, I think about it as sort of a fixed cost that will help us really drive that advertising business. So, there's roughly $6 million of operating expense that we're bringing in Q1.

So to be clear, Nativo is a negative EBITDA contribution in Q1?

Well, they were essentially a breakeven business on a -- they didn't have the scale. That's the interesting thing. With the combined companies, we will have the scale to really drive a bottom line contribution there as well as really strong gross profit margins. So, that's the beauty of bringing them on, combining there the 2 businesses and we see very much beyond just the combination of the businesses with the synergies that we can get both on revenue and to some extent, on costs. I mean, there -- again, that's a scale benefit. So, even considering that core Nativo business, it will go from breakeven to a positive contribution. In terms of the other things that are happening in Q1, there's a few things happening on the devices business. We're very excited about sort of experimenting with Pet GPS and really collecting a whole lot of learnings there. But part of that is experimenting with low price for the device, which will drive some negative margins for that hardware accounting piece in Q1. We're also exiting brick-and-mortar. It's an intentional decision to be able to focus on direct-to-consumer or on other digital channels like Amazon. And then we -- as the business matures and as our marketing matures, we did a couple of things in Q1 that we haven't done before. So, we took an ad in a Super Bowl streaming mode and some ads in the Winter Olympics. So, that was about another $3 million of commitment. But I wouldn't -- that may or may not be a one-off, but it was something that we haven't done in Q1 before, just to give that context of what we're doing in Q1 that will benefit the rest of the year. And it's not -- it doesn't change our overall guidance for the year for adjusted EBITDA. It just changes that profile a little between the quarters.

Yes. But that's a meaningful amount of money for a quarter for us.

It is, especially for the -- essentially the lowest revenue quarter in the year.

Totally. Okay. So, I think we've sort of covered off some of the building blocks of the result. Why don't we take a step back? And I'd be keen -- I'm not sure the sort of knowledge levels of the business in the room. But just you guys are family safety and connectivity app with close to 100 million users.

Yes.

Can you maybe help us understand the value that the app brings in terms of relying on some of the most sort of compelling -- a really compelling user experience that sort of underscores the value that you bring?

Yes. I'll share a couple of experiences. The classic kind of safety features are often around just finding out if somebody is in an emergency. And one example that I heard recently was somebody who had found out that their father was actually -- an adult who found out that their aging father had been in a car accident, found out about it through the app and was able to go and give care and make sure things were okay. Those kind of reports we get all the time. The thing that's exciting is that we're starting to grow out from that and really impact people's lives in quite a diverse number of ways. My personal most common use case, my husband is in charge of feeding us. He's the one who takes care of us and our family, and I like to check the app to find out when I'm getting fed. Those kind of everyday use cases are also important. And the thing that really distinguishes Life360 from a lot of other platforms is that we are emotionally resonant. People get a dopamine hit when they check Life360. They're doing it not just to make sure things are okay, not just as defense, not just as safety, but because they love that -- they love the people, pets and things that they share in the app. This is one of the reasons why bringing pets in is so compelling. And it's one of the things that we're leaning into as we reimagine the application experience and build in other capabilities like capabilities to address aging parents.

Got it. So, there's an element of protection against the worst case, but also some -- like a real sort of, what would you call it, just peace of mind every day.

Yes. Yes. One of the capabilities we introduced last year was these no-show alerts. And so this is -- we observed that we have a number of customers who will repeatedly check the app until somebody arrives at a location. And while that is a lot of engagement, it's not necessarily like the best engagement because they're feeling worried and the app is sort of scratching an itch, but it's sort of in -- it's a scenario where we thought we could do better. And so now they can set an alert and many, many people are adopting this. They can set an alert and just tell me if the person doesn't arrive. If they arrive on time, then I don't have to worry. And that's an example of how we're using our focus on family, not just to give the information that someone's arrived, but to really understand what's happening for that member of the family and how do we help make their life better, in this case, reduce anxiety. We're working on a lot of new capabilities. I'm going to -- we're going to stop pre-telling the world about those before we ship them, but we're working on a lot of capabilities that we'll see coming out through the year that address other family-specific scenarios in a really differentiated way that are powered by the magic of location, but they're not just telling you where somebody is.

Yes. Got it. Okay. Now, I just can't let you go without asking the question that's been so dominant throughout this conference about AI. What -- when you think about the risks, the points of your business model that offer the most resilience and about the opportunities that you see in front of you with AI, could you maybe just help investors understand what's at the top of the list for each of those categories?

Yes. First of all, it should be clear to all of us that AI is fundamentally changing the world. It's changing how we work, and it's changing family life. We don't know all the way that those changes will surface, but there are things that we understand really well. We're already seeing significant changes in the way our teams work that are allowing us to scale more efficiently. For example, it used to be that to experiment and optimizing our funnel, our teams would have to think of a hypothesis. They'd have to do a bunch of work to test that hypothesis, then they'd wait and measure it and then they do the next experiment. Now, we have AI coming up with hypothesis and running those tests in ways that are helping us drive some of those conversion improvements that you already see coming through in the acceleration of revenue growth. So, a lot of really great progress already. And that's sort of in the how we work side of things, and I think that's a huge opportunity. On the product side -- and I'm going to be very focused on opportunity. On the product side, classically, people sort of check the app. They look at it briefly. They leave. And it's mostly about telling you where someone is. What we can do now with AI is start to understand more about the dynamics of what's happening in families and serve more as an orchestration layer for family life. We can understand more about where you're going, and we can give more guidance potentially in natural language to help you get through your day and juggle all of the kids and all of the complexities of family life. So, I expect that over the next year, 2 years, 3 years, we'll see significant evolutions in the way that people interact with the app. And maybe that brings me a little bit to the risk side of things, although I don't think it's a risk. I imagine that over time, people are going to spend a lot less time on their cell phones. And so we're talking about, hey, we want people to engage with the app, but apps won't exist in the world the way they exist today. And if we just depend on people visiting the app in the way they do today, I think we'll miss out on the real opportunities where people are starting to interact with devices in more ambient ways. They're starting to interact through voice interactions. And so the thing that we're starting to look at already is how do we make sure that we're ahead of the curve on those evolutions as people are starting to adopt different devices and more voice ways of interacting for things, how do we make sure that our services are addressing the family needs in whatever modalities that people need and not really bound to the -- necessarily the platform, the profile that they interact with us today.

And just to reinforce a couple of pieces, James. I mean, Life360 deals with real families moving through the real world with nearly 100 million users globally. So it's much harder to -- that's not something that's immediately disturbed by AI. It will be enhanced by AI is the way we look at it. So, that we actually see as an opportunity. And then to the question that you didn't ask, but has come up quite often, we've seen quite strong adoption through the company for AI. We've still got a ways to go there, but we're definitely right across the company, doing things more efficiently, doing things faster. We're going to use that extra efficiency to do more with what we have now. We're a relatively small headcount in terms of the evolution as a company. So, we can take those efficiency gains and really help us move faster and quicker.

I'd like to draw a couple of those points together. You talked about just the ability to really accelerate your product initiatives. You've talked about conversion from free to paid also improving because of the value that you're creating. Should we then infer that there's real durability to that trend of conversion rates going up to paid?

Yes. I think we've got a long runway. The balance between conversion rates and penetration into the base, it's a little -- the way I think about it is that we're going to continue to create new value in the app, which will drive more and more people to convert over time. And we're going to do that by layering in new scenarios and new ways to drive values like pets, for example, we'll follow that with aging parents. And those are just a couple of point examples of the areas where we know that people face challenges in their families. There's complexity in family life, and we can use technology to go solve those problems.

Your question does bring to light the metric that is more indicative of short-term revenue driving, which is Paying Circles, which have been accelerating. The growth in Paying Circles has been accelerating, and that's a result of multiple things that we're doing through the process from more efficient marketing to really optimizing the experience through the funnel. But that's something that's really helping us drive that 30-plus percent subscription growth each year.

And maybe an initiative that's quite linked to that is pet hardware. And you've talked to really investing hard in subsidizing that, getting adoption and every device is associated with a subscription. Can you maybe help us understand, has that started playing out? Is that in your internal metrics for the next 12 months? What's the duration to really sort of engage pet owners who you sort of talked about 5 million who've registered their pets who aren't paying subs?

Yes. Certainly, that is ramping up in this year. Right now, we're in a phase where we're really doing a lot of price testing. We're doing a lot of messaging testing, understanding the best way to ramp. We've just -- we're just -- so what duration does this play out in? There's a lot more that we can do with pets. And so I would say we're just getting started. You'll see ramp during this year, and you'll see us continue to invest and improve and enrich those services and capabilities probably over multiple years.

Yes. Perfect. I'd like to switch tack and circle back to advertising. So, we touched on that briefly, but can you maybe correct my narrative here? You launched ads. It was a little more complex and harder than you thought. You found what you think is a really great fit with Nativo. And that enables you to leverage your first-party data and serve a lot more ads outside of the app off-site, maybe at lower rates, but it's an order of magnitude potentially or maybe too higher than the ads that you can serve in the app.

In terms of volume.

In terms of volume. And that creates a much sort of more sustainable and longer-term growth profile.

I think you said it really well. Yes, yes. I think you said it really well. We had a vision for how Life360 ads could meet -- help brands connect to families. But execution on that, there were a lot of pieces that we needed to build. And frankly, we needed more inventory to be able to meet the kind of scale that large advertisers wanted. And so we're bringing together an advertising platform, a scaled sales team and established relationships with our first-party data and app experience that people are excited, brands are excited to associate themselves with and it's helping us get near-term momentum and long-term scale.

And because Nativo has a full stack ad tech system and we have access to that now for the first time, there's a couple of other benefits. One, it allows us to keep control completely of the data, which is important from a privacy point of view. And secondly, it helps with the economics because we're not sharing pieces of that with various middlemen in the process.

Right. And the user experience presumably is protected because most of the advertising is associated in the consumer's mind at least with Life360.

Yes. It's certainly not cluttering up our experience. We are very transparent with how we use data. We're actually investing to be even more transparent and make it easier for people to understand how we use their data to have control over that. But the experiences that we have in the app, if you use the app today, we had a panel recently and we asked how do you experience ads in Life360. We had some people say, "Oh, I don't think it has ads." And somebody say, well, what about the Uber landing notifications? And they said, that's not an ad. And I think that notion of being able to deliver experiences that are valuable that people don't experience as ads that people experience as a benefit. So if you're going into a store and you get a notification that says like, hey, there's a discount available or something like that, that's actually not necessarily an ad, that can be a benefit, especially if you have control and you can decide whether or not you want that experience. And so when we think about introducing new ads into the product, we think about what is that user experience? Is it earning its right to be there? Is it earning -- is it delivering value for our members so that they see it as a sufficient amount of benefit that it's worth that experience?

So, things like ridesharing when there's a real need you've landed in an airport, things like QSR promotions based on location have been touted. Can you help us imagine what other potential partnerships would be sort of really prioritized versus just display ads at scale?

I think there are things that will align to other areas that we're working on. So, for example, you can imagine with Pet GPS that over time, we'll do things like talk to you about your pet's activity level and if your pet is being sufficiently active. Well, that lends itself to the question of like, well, what else can I do to help my pet's health? And you imagine that there are many brands out there that are oriented around pet health, whether it's pet insurance, whether it's veterinary care services that are interested in your pet's health. And when we pair the services that we have around your pet's activity level with things that are related to it, it's actually useful, like what are the resources available to me as a pet owner? One of the things we've been doing, you've heard me in the past talk about the redesign that we're doing in the app. We're trying to create space so that we can introduce rich experiences, not just see your pet on the map, but explore your pets' activity. The scenario that I'm really excited about that we will eventually bring to market is one where you can know who in the family is really walking the dog. This is the age-old debate. Who actually takes care of the dog? And so when we do those kind of things, that creates space and opportunity for us to bring in partners that work in those spaces, whether it's pets or aging parents or other parts of family life, that's relevant to people and that people find valuable.

That introducing responsibility, that might impact user growth.

Yes. Yes.

Now, I also wanted to touch -- make sure we touched on international. You basically called out 3 countries that you're prioritizing that was incremental to what you sort of outlined previously. Can you maybe help us understand why those 3 countries and the pathway to really scaling it and making it a success? And maybe how similar it might look in much lower-income countries than where you've started the international expansion?

Yes. I'll start this and maybe Russell will follow up. Those 3 countries you're referring to are Germany, Mexico and Brazil. These are all countries where we have some green shoots where we have organic adoption. When we look at going into a country, we want to see, is there a resonance? They're different, though. Germany is interesting because it looks more like the United States and some of the ways that it's used in some of the economics. Brazil and Mexico are more different. I think we've been a little bit surprised at how well they're monetizing organically, and so that makes it even more attractive to look at those places. But some of the use cases there are more different. Some of the sensitivities are more different. Some of the safety concerns that people have are different. And so in each of these regions, we're really looking to say, what does the product need to do to be locally relevant? How do we need to evolve the product. And we're making changes, everything from making sure that we work great on lower-end Android devices and that we start to get smarter about modalities beyond driving, for example, those kinds of things. And then looking in those markets at, are there partnerships or advertising vehicles that are different than what we've used in other places that really makes sense to galvanize that early-stage growth in those countries.

Yes. And as we understand more, I think we're getting more sophisticated in our approach. And Lauren mentioned Brazil and Mexico. It's sort of an interesting case study because we wouldn't necessarily be expected those to be the next cab on the rank, if you like, in terms of subscription. But it's now clear that there's a portion of the population that is absolutely willing and keen to subscribe. In other lower-income countries generally, yes, that may be the case there. There will be a substantial piece of the population that is likely to remain as free users that we can monetize through advertising. So, it will be a dual approach in that respect.

Yes. Interesting. It will be fascinating to see how that goes. I guess one of the other questions that I get asked a lot is that you -- a few years ago, now you refreshed the whole sort of pricing model. There's been no price rises over the last couple of years. Is that something that you feel is on the horizon? Or do you still have to see some of these initiatives flow through into the value proposition before you pull that lever?

So, a couple of things. Well, first, internationally, we have taken price in the last couple of years. So, it's not totally true that we haven't taken price. But our focus right now is very much on growth. That's growth in MAU and that's growth of our subscription base. If you look at -- we're very proud of having 2.8 million Paying Circles, but it's also a much smaller number than I'd love to be working with. And so I want to get that number to be much, much larger before we really shift our focus on getting the maximum value for each individual circle. And so our attention right now is on that growth.

Yes. Got it. Okay. And then the metrics that you've outlined for the long term, you've basically talked to 150 million.

Long term?

Well, yes, you're getting pretty close there on some of them already. I guess the margin profile, in particular, looks really aggressive in terms of how much has to drop through by the time you get to $1 billion in revenue translating to 35% margins. Do you see those metrics going hand-in-hand? Or are these things that might not necessarily correlate?

They'll definitely happen at different times. But it doesn't mean that they're not very clear goals that we see a very clear pathway to -- for each of them. And to specifically address the adjusted EBITDA margins, we do have a very clear path. And I've talked about even this year, we continue to step up. We continue to make use of operating leverage as we scale, and that's a big factor. The more we scale, the more we're able to take advantage of that. And by Q4 this year, our run rate will be significantly higher than the 22% margin that we delivered in Q4 '25. So, you can see that we are very, very clearly on that pathway.

Perfect. We're out of time, but thank you both so much for your time.

Thank you.

We really appreciate it.

Thanks, James.

Thank you.

Thank you all.