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

Greetings, everyone, and welcome to our second quarter 2026 Earnings Conference Call. This call is being conducted as a Zoom audio webinar. [Operator Instructions] We will make forward-looking statements during this call, which are subject to risks and uncertainties. A summary of these risks can be found in the Risk Factors section of our Form 10-K filing with the SEC dated March 2, 2026. These statements are based on assumptions we believe reasonable as of today, August 10, 2026, and we have no obligation to update them, except as required by law. We will also present both GAAP and non-GAAP financial measures. Reconciliations are included in our earnings press release on our Investor Relations website. This is an audio-only call with no slides. Our updated investor presentation is available as a reference on our IR website, along with our quarterly shareholder letter from our CEO and CFO. The letter goes into additional detail beyond our prepared remarks on this call. We will begin with a business update from our CEO, Lauren Antonoff. Then CFO, Russell Burke, will review financial results and outlook, followed by Q&A. CRO James Selby will be joining the call to answer questions. [Operator Instructions] I will now turn the call over to Lauren.

Good morning, and good afternoon. Thank you for joining the call. We hit a major milestone in Q2, crossing 100 million monthly active users. That's tens of millions of families who trust us every day to keep them connected and safe. Our Q2 results show our disciplined execution paying off. We added 4.6 million active members to reach over 102 million MAU, and we delivered our strongest Q2 Paying Circle growth on record with 185,000 net subscription adds. The signals we pointed to in Q1 delivered as expected, including strong demand, deepening penetration and steady growth on higher-end devices. Importantly, we ended Q2 back on our MAU glide path. International MAU grew 20% year-over-year, with the U.S. growing 14%, driven by improved brand awareness, funnel efficiencies and the value we bring to everyday family life. We had tailwinds from unaided brand awareness, which rose an impressive 4 points in the U.S. during a quarter with lower marketing spend. We're also building momentum internationally. We launched new go-to-market initiatives in Brazil and Mexico and saw unaided brand awareness there increase from 9% to 14% in Brazil and from 10% to 16% in Mexico. Both countries are now around that 3% penetration mark, where we've historically seen growth rates accelerate. We're reinforcing this momentum with new partnerships, including AT&T Mexico, who featured Life360 in their back-to-school campaign across television, radio, cinema, retail and digital. In Germany, we launched our first local campaigns in Berlin and Cologne, and we're seeing a measurable lift in registration there. We've also been having some fun with global cultural moments. We tapped into the World Cup and brought Disney's Toy Story 5 into the app. Members around the world sent 180 million Quick Notes tied to those touch points alone. We're proving that cultural relevance is a meaningful lever for member engagement and delight. Meanwhile, our subscription business continues humming along with 27% growth in paying circles. As we get ready to relaunch Pet GPS, we've updated our pricing for new subscribers, and we're shifting into a bundled Pet GPS offer that starts with Silver. This is a deliberate choice of subscription scale over near-term monetization as we build pets into a long-term driver of subscription growth. Moving on to our advertising platform. We've largely completed the integration and are shifting focus to commercializing what we've built. Advertising has become a substantial revenue stream contributing $22 million this quarter, with revenue tied to the Life360 app growing the fastest. Most importantly, we're starting to prove the advantage that our platform and our audience deliver. Our testing shows that campaigns using our audience data see call-to-action rates up to 47% higher than campaigns using third-party targeting. One example is a top grocery store chain that saw a lift of over 40% in store visits from a single campaign with exceptional performance among the 21 to 24 year olds. These are compelling results. We're still early in the ads business, but our direction is clear. The momentum is building, and we have a long runway ahead. With so much opportunity in front of us, leveraging AI is essential. AI continues to accelerate both how we build Life360 and what we believe the platform can become. More than 100 million members use Life360 to navigate family life, creating real-world data that no competitor can replicate. One of the earliest benefits we're seeing is from our proprietary AI-powered monetization engine, which continues to deliver exceptional performance by automating our use of first-party data to deliver the right message to the right member at the right time. We're now experimenting with the same approach applied to engagement and retention to support member growth. On the product side, we're leveraging AI as we start to build more dynamic experiences for different types of families, and we're expanding our Family AI Lab, led by Executive Chair and Co-Founder, Chris Hulls. We entered into an agreement to acquire the team and technology from SuperDuper. What stood out to us about SuperDuper is that they're using AI to understand the real complexities of everyday family life, the calendars, e-mails, schedules and errands scattered across dozens of apps and to connect those dots into a single meaningful picture. This work is bringing us closer to making family life easier, more coordinated and a little more fun. As we crossed 100 million monthly active users, our disciplined execution has brought our once ambitious targets of 150 million MAU and $1 billion in revenue within sight alongside continued margin expansion. We're tailoring our product experiences for more members in more geographies and more life stages with new capabilities like Morning Check-In, Live Progress and our Apple Watch app. We're building new lines of business that didn't exist a few years ago, including advertising, pets and next, aging parents. Each takes time to nurture, and all are significant growth opportunities built on our established platform and the trust families place in us. And each makes Life360 more essential to everyday family life. A strong Q2 momentum heading into back to school and our upcoming Pets launch set us up for a strong second half across products, subscriptions, advertising and international. I'm looking forward to showing you more of that momentum in the back half of the year. And with that, I'll turn it over to Russell to share more detail about our performance and outlook.

Thanks, Lauren. Q2 delivered strong financial results across our core business, and our transition to an AI-native operating model is introducing some new revenue and cost dynamics worth walking through. All figures are unaudited and in U.S. dollars. Total revenue grew 38% to a record $159 million. Subscription revenue grew 31% to $115.6 million with core subscription up 34%, driven by 27% Paying Circle growth and 5% higher ARPPC. U.S. subscription revenue grew 28% and international grew 45% with particular strength in the U.K., Australia and New Zealand, and Canada. Advertising revenue was $22 million, growing sequentially and up substantially year-over-year, reflecting the build-out of our managed service offerings both on and off app, and contribution from programmatic advertising. Hardware revenue was $9.8 million, down 20%, reflecting our strategic exit from -- for Tile from brick-and-mortar retail and some Pet GPS inventory constraints as we completed a production line move. Other revenue grew 25% to $11.6 million, and annualized monthly revenue reached a record $537.2 million, up 29% year-over-year. Gross margin was 80%, up from 78% in Q2 last year. There are 3 distinct dynamics across our revenue lines. Subscription gross margin increased to 87% from 85%, reflecting continued cost optimization. Advertising gross margin was 57%. This is down from last year and largely reflects the fact that we are scaling the advertising business by building out a managed service operation, which under GAAP brings costs that impact gross margin. These include traffic acquisition costs, technology and hosting, personnel costs, and data and content licensing. Due to changes in revenue mix, we now expect advertising gross margin to normalize towards 65% to 70% on a GAAP basis in Q4 as we exit 2026. Hardware gross margin was 43%, up from 17% a year ago, but that increase was largely a onetime item, primarily a $3.6 million tariff refund that we'd expected later in the year. Excluding that refund, hardware gross margin would have been closer to 7%, more representative of where we've been trending as we complete our retail exit. We're pricing the Pet GPS device itself relative to competing devices to drive adoption, consistent with our strategy of using devices to complement the member experience rather than drive revenue or margin on their own. And we expect a loss at the device gross profit level initially. Given the average pet lives of 10-plus years, we're building this customer relationship for the life of pets and beyond. The Silver Pet GPS bundle will be priced at $99 annually. We don't expect Pet GPS to be a material revenue contributor this year as the category continues to build. Operating expenses were $127 million, up 43%. As we've previously discussed, our operating expense profile has changed slightly this year, partly due to deliberate investment decisions but also due to the fact that we've brought on a level of fixed operating costs that don't exactly match the timing of revenues due to seasonality. But importantly, they do not impact our overall growing operating leverage. R&D grew 47% to $47.4 million flowing from advertising engineering head count, expanded platform infrastructure and continued product investment. Sales and marketing grew 35% to $52.3 million, reflecting higher variable platform commissions on subscription growth and the addition of Nativo's sales organization, partly offset by growth media that we intentionally shifted into Q3. General and administrative expenses grew 57% to $27.2 million, primarily personnel and technology costs from scaling the business, along with our hardware warehouse relocation and final Nativo integration costs. In Q2, we reshaped our technology organization to accelerate our transition to an AI-native operating model, reallocating investment from certain roles toward AI-native capabilities and workflow redesign rather than backfilling them. That reallocation is already producing results by enabling us to move faster. Taking one example, our personalization engine built on the same foundation is generating real revenue impact, and we're accelerating investment in it based on that early performance. We expect this transition to build faster execution and meaningful operating leverage over time with that benefit compounding from 2027 onward. GAAP net income was $5.1 million, including a $4 million tax benefit with basic and diluted EPS at $0.06. Adjusted EBITDA was $31.1 million, up 53% at a 20% margin versus 18% a year ago. Compared to the 16% outlook we gave for the quarter, the timing of the tariff refund drove our actual result about 3 percentage points higher and operating leverage added 1 percentage point. Operating cash flow was $23.8 million, up 79%. We ended the quarter with $467.7 million in cash, cash equivalents, restricted cash and short-term investments. In May, our Board authorized a multiyear repurchase program of up to $225 million, and we repurchased $13.2 million of stock in the quarter, leaving $212 million available. We'll continue to be strategic about the pace of repurchases, balancing capital return and offsetting dilution with continued investment in long-term growth. On guidance, we're reiterating our full year revenue outlook of $650 million to $685 million. Within that, we're raising subscription revenue guidance to $475 million to $480 million, up from $470 million to $475 million and lowering hardware revenue guidance to $35 million to $45 million, down from $40 million to $50 million reflecting device pricing and volume chips. Advertising and other revenue guidance are unchanged at $98 million to $150 million and $42 million to $45 million, respectively. Our full year adjusted EBITDA outlook of $130 million to $140 million also remains unchanged, reflecting operating leverage flow-through offset by advertising mix shifts. A couple of modeling points for the balance of the year. Even with some growth media moving from Q2 to Q3, we expect Q3 adjusted EBITDA margin of approximately 18%, showing continued sequential improvement from Q2 while excluding the tariff benefit. We expect Q4 operating expenses as a percentage of revenue to be below Q4 2025, and we expect Q4 2026 adjusted EBITDA margin to exceed the 22% margin we delivered in Q4 2025. The financial set-up into the back half is strong. Revenue acceleration, margin expansion and Paying Circle and MAU growth are all pointed in the same direction. We look forward to demonstrating that in the quarters ahead.

We will now open up the call to question and answers. [Operator Instructions] Also a reminder, joining us today is James Selby to discuss questions related to advertising. With that, we'd like to open up the call to Lafitani Sotiriou from MST.

Congratulations on a great result. And good to see MAU is back on track with a clear record for second quarter Paying Circle additions. Can I first clarify something Russell said and then I've got a question for Lauren and James. Russell, did you say when the 25% increase to Silver package and 13% increase to Gold will be implemented from? Has that already gone through that price hike? Or is that still to come through? And my question for Lauren and James, so we're starting to see some big brands coming through that are being associated with Life360 like Disney, easyJet. You've got AT&T in Mexico, and you've got Apple Watch integration. Some of that isn't strictly on the advertising side. But can you talk us through -- are you looking at this more from a one company approach? Are you sort of starting softly like you did with Uber and then expanding? How should we consider the next sort of couple of quarters in, in what we should expect to see on the advertising front with some big brands?

So let me quickly cover the pricing question first. We're in the process of implementing that, so you'll actually see that fairly soon. And just to emphasize, it is on -- for new subscribers only.

And then going into the brands, I mean, I think it's super exciting, the brands that are coming to us and want to work to us in the way that brands are responding to us when we approach them. We do start from a full company, what are the ways that we want to work together. For Disney, for example, we put together a vision for how we like to work with Disney. Often, these partnerships, like you saw with Uber, will start with let's do something first and then build confidence to build that relationship as it goes. And often, we will consider whether advertising is part of that, whether it's early or late. I don't know, James, do you want to add anything to that?

Yes. I think the only thing I would add is that the brand partnerships really give this fantastic halo effect, making the Life360 brand better known, and that helps us push that into, yes, bigger partners and new partners.

Can I just clarify? So there's -- you talked to the platform being in place. Nativo's now all set. How should we look at the ramp-up from here in advertising? Maybe you can even just talk to the seasonality. How much is typically in the fourth quarter in terms of the overall revenue for the advertising part of the business?

I'm going to let James answer this, but I couldn't help but chime in because the thing that's really exciting for me, it's not only are we getting some of these great brand relationships, but we're starting to be able to demonstrate the value that we can deliver based on our unique real-world data. So James will answer some of those details though.

Yes. So as we noted, the first half has really been about the tech integration and now it's really about scaling that integration and taking that to market. We had a really fantastic Cannes Festival where we had a great setup there. We've been doing many regional marketing events that have been -- gone pretty well. And a lot of the campaigns just start show real-world proof points, much like what Lauren spoke about earlier with one of those grocery chains. So again, great proof points and that motion in the market is really taking steam.

And just on the financial aspects of that, Laf, our guidance is really unchanged from what we've said before. We do look to sort of Q4 as being the sort of seasonally high period in the advertising business. And we've said before that we expect Q4 revenue to be approximately sort of double that of Q1. I should also just further clarification on the price increases that they are for U.S. subs only at this point.

Thanks, Laf. I'd like to open it up now to Mark Mahaney from Evercore.

All right. Two questions, please. First, just go through, Russell, why the -- or, Lauren, why the increase in subscription revenue, expected results or guidance for the full year, just go through those factors. That sounded positive. And then want to make sure I understand this recovery to growth in MAUs. Is there something in the linearity of the quarter that proves that to you, that 16% is kind of a deceleration from last quarter? So what makes you -- what convinces you that your MAU growth is back on track and potentially back to that 20% goal that had been set at the beginning of the year?

We might have to bounce around a little because there's a lot in there. But I'll start with the motivation on price increase and then let Russell talk about the implications of that. And then we'll come back to the MAU question. So from the price perspective, we've made our priority really growing the number of subs rather than the price per sub. But as we were learning about and testing how to get the most scale out of the PET GPS, what we learned is that bundling it in and bundling in at the lower tier was the way we were going to get the biggest growth. That caused us to look at pricing. That's a lot of value for that tier, and we decided to make a modest increase. So it's a $2 increase on the monthly. It's an equivalent increase on the annual, and then we made adjustments to match that in Gold basically. Russell, do you want to talk about what that means?

Yes. No, from a pure technical point of view, Mark, it's sort of similar to what we've seen before with price increases. The -- it's a relatively small impact over a period of time for increases to new subs, especially where we're testing that out and perhaps have a holdback group. The larger potential down the road somewhere is across the existing user base. To your question on MAU, I think it's really a factor of that growth that you referred to is over the whole quarter period-over-period, whereas as we've talked about, that trajectory was really building up over the quarter. So the exit rate is a bit higher than the average for the quarter.

Yes. I'll just add to that. Not only did we end the quarter with just really good pace, but we've got a lot of stuff in store in the back half of the year. Q3 is when we did back to school. We have a lot of exciting things in pets. So we have the momentum we built up in Q2 that really drove the good result there, coupled with a number of initiatives in the back half of the year.

Thanks, Mark. Next, I'd like to open it up to James Bales with Morgan Stanley, please.

I'd like to firstly cover off on MAU. Can you maybe help us understand about what you're seeing on back-to-school performance? And what gives you the confidence in a reacceleration into quarters 3 and 4?

So it's early on back to school. But so far, we really -- we're seeing really great results not only from the beginning of back to school, but we're actually still getting benefit from the advertising that we did in Q1. So one of the factors that is helping to drive some of the good numbers we're seeing is just increase in brand awareness, both in the U.S. and in those newer international markets. And that makes everything else that we do more -- customers are more receptive to those things. I don't know, Russell, if there's more detail that you want to add.

No, I actually don't think there's a lot more to say on that, so let's leave it at that.

Thanks, James. Next, we'd like to open it up to Andrew Boone from Citizens.

I wanted to go to pet and just understand your progress with pet in the quarter. I'll leave it at that.

This is something I'm super excited about. We're really gearing up for a lot of exciting things later this month. We moved our manufacturing, so we had inventory come down for a while, and we've got that back going again. We've made some improvements there as well. One of the biggest changes, I think, is a new go to market. So before, we sold the device as a standalone. Now we're going to be selling it bundled. We think that's both a better customer experience, and it's good for the business. So it's a win-win there. And then one of the most exciting things is that when we release the Pet GPS, we also introduced the Pet Finder Network. And this was a way to bring the value of pets to every member and also help us understand who has pets. The adoption there -- we have now over 8 million pets registered. The adoption there has really exceeded our expectations, and it made us realize that there's a real opportunity to serve pet parents throughout our base whether or not they get the tracker. And so we're going to be doing more things that are good for pet parents on the free tier, and then those things get even better when you have the paid tier.

Thanks, Andrew. Next, we'd like to open it up to Julian Mulcahy.

Just a couple of questions from me. Firstly, Russell, with the tariff benefit you got, you've said that you got it earlier than you expected. Was that the magnitude you're expecting in the full year? And is that why guidance hasn't changed on EBITDA? And secondly, maybe for Lauren. The conversion rate of free to paying has been edging up for nearly 2 years now. Is there anything you're doing differently now that you weren't previously? And how far do you see that conversion rate lifting from the current levels?

Thanks, Julian, and welcome back. I'm going to cover the first part of your question in a little more detail about guidance. You asked specifically about the tariff refund. And you're absolutely correct. We had expected that in the second half, and that is sort of built into our guidance as such. But there's a timing difference there that came into Q2. And that's why we gave the sort of specific details of the impact on adjusted EBITDA in Q2, so you could sort of lay that out. But talking -- you're talking about guidance generally in addition to that, in the second half where we are seeing a little bit of a bump in subscription revenue, which is why we increased guidance there, but there's also some other shifts. For marketing, we laid off marketing a little in Q2 and just made an intentional decision to push that into Q3. That's the -- our regular sort of back-to-school period and so that -- the small incremental margin on higher subscription revenue, we're essentially investing into marketing in Q2 to support growth and particularly in international territories as we start to push harder there. And then while advertising is building as we expected, we do recognize that there's really elevated seasonality as we've talked about for advertising. And that does create a little bit of a higher risk, and that's why we're leaving revenue and adjusted EBITDA guidance unchanged even though we raised in Q1.

And I'll take the question on the conversion rate. I really should let James do it because his team has done the work here, but I'll take it anyway. So the thing that drives conversion is customers understanding the value that you have in your product. It's partially what we build, but it's just as much customers figuring out that, that stuff is in there. So we have some great benefits like roadside assistance and things like that, that even many of our paying members don't know about. And so what we've done is -- this is one of the places where we've leveraged AI. What we've done is create an engine that takes the member profile that looks at their behaviors. It looks at their families, and it creates a model. And it does -- runs all of these tests to get the right message about our capabilities in front of the right member at the right time. And that's one of the big drivers that's improving conversion. Of course, we continue to improve the features. We have things like Pet GPS. But I would say the bigger jump right now is our ability to get that information in front of customers at the right time.

And how much further does it go, do you think?

It's hard to say. There's definitely more gas in the tank. Right now, we're asking the team to broaden the technology platform so that we can use it not just for revenue, but those same sort of discoverability challenges are important for engagement. How do we get free members to use more of our capabilities so that they are more likely to create a new circle with bringing more friends or more likely to stick around with us? So I think it's got a lot of runway ahead of us, but I couldn't give you an exact target.

Thanks, Julian. Next, we'd like to open it up to Rob Sanderson from Loop.

Yes. Two questions for me, please. Just a question on the pricing update, just the rationale behind sort of new users only. Do you think you're -- it seems like you're delivering a lot of value to the existing base as well. Why not raise the price across the board? Is it just sort of wanted to go slow and test the market reaction at the higher prices? Anything you can maybe share on the decision to just limit that to new users? And then a question, Russell. Advertising gross margin, you went through a lot of detail on how the mix implications and everything we should be considering as we're modeling. It seems like that's -- you're kind of landing right where I was modeling to start with. I just -- I'm curious, like did something change with that? Or are you just trying to provide incremental color to sort of get consensus into sort of more reflective of what you expect with mix dynamics?

I'll take the new user question. Then I'll let Russell answer the second half. So the key thing for -- the reason we decided to adjust price in the first place was about scaling the pet business. And that is about literally getting new subscribers. So the problem we were trying to solve was new subscriber problem rather than a dollar maximization problem. We want to be really careful when we raise -- when we consider raising prices on the base because we want to get that. We want many, many more subscribers as opposed to sort of the optimal revenue change. So we believe that we're going to learn a lot from the new members, and then we'll decide how to take those learnings and consider what we want to do in the base. But the initial decision is really motivated around getting more new subscribers, more new sticky subscribers.

And in -- as far as the margin detail go, yes, that's exactly the intention, was just to provide some more detail to help with modeling. We're really excited about the potential for -- with the acquisition that gives us that full stack advertising range. And coming with that is the highly valuable sort of managed services piece, which we think is a real opportunity but does have slightly lower margins than some of the other parts of the business. So we just want to delay that out. And the other aspect, obviously, as we've talked about, is that as we scale the business, there are some fixed costs inherent there, which we'll be able to gain leverage on and therefore, grow margins as the business scales.

If I could add a follow-up to that, Russell, just so it's clear. Your exit rate on Q4, that's pretty -- obviously, a really heavy seasonal quarter. So we should expect some seasonality again on the margins as we build through 2027 just from -- as we're building our models?

Yes. I would build seasonality into it. Over time, we will be able to increase generally as a result of leverage, but there's definitely going to be seasonality impacts.

Thanks, Rob. Next, we'd like to open it up to Andrew Gillies from Macquarie.

Can you hear me?

Yes.

Perfect. Just glad the question was asked around the 4Q EBITDA margin. Just a quick clarification on that though. Does that apply to the whole business? I mean there are a couple of other things going on at the group level. How much is sort of that strong seasonality? Are there any sort of underlying things on the margin side from the 4Q that we should be thinking about sort of dragging into 27? And then I've got a follow-up as well.

What I would say is the subscription revenue margins are very stable. In fact, we've managed to push them up a couple of points in the last couple of quarters, and they are very stable and not really subject to seasonality. The pieces that are subject to seasonality is obviously the advertising business that we've talked about and also the hardware business, and that will be particularly affected this period by what we've talked about with the Pet GPS device, which will impact margins but give us considerable benefit in the longer run on subscription revenue.

Perfect. And then just a quick follow-up maybe for Lauren. Just on the Apple Watch launch, some of the underlying subscription dynamics you've spoken, quite a lot about pets and some other things. But just curious as to what you're seeing on the Apple Watch launch and really the rationale for how that improves potentially subscription dynamics, particularly in the U.S. but elsewhere as well.

Great. So first of all, Apple Watch has not yet launched. It is in beta. So you guys noticed it before we were ready to sort of bring it out to the world. We want to make sure that it's a really great experience. And it's intended to be part of our free tier. It is not intended to be a subscription driver. The idea is that we want the families that join us, both free and paid, to be able to bring their whole families on to the map. And we know that families that are more engaged, that have more people have a higher tendency to say. They get more value, and they have a higher tendency to get subscribers. So we're not planning to monetize it directly, but we get that indirect benefit of appealing to more families at earlier life stages, providing more value and hopefully, win the right to serve them a subscription value.