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

Thanks very much everyone today for joining us. My name's [ Peter Marks ] from the Australian Research Team. I'm very happy today to have the Life360 management team here to chat about the business. Thanks very much for your time. We've got Lauren Antonoff, Chief Executive Officer, and Russell Burke, Chief Financial Officer. Thanks again for your time. In terms of housekeeping, we've got 35 minutes. I am going to ask the first few questions, but we do have... We're going to open up the floor... Q&A. So if you do have a question, please put your hand up and we'll get a mic to you as soon as we can.

But with that, Lauren, Russell, maybe we can start quite high level. Bit of an introduction to Life360. What do you do? What are the problems that you're solving for customers?

I'll take that. We are the leading family connection and safety app, and the way we sort of rose up, helping families sort of concerned with safety. And we got really outstanding popularity and really well known for families who are having teen drivers and they were worried, you know, they wanted to make sure that teenagers were safe. What's interesting is that demographic represents about 1 third of our users. The reality is that all sorts of people in all sorts of family configurations use us because they feel connected to the people that they are close with. You know, people just check. I know I like to check the app and see if my daughter's gotten home from school. I like to just sort of check in before I call. And it's a great app for coordination. And so the use cases that we see broadly, especially in our 100 million member free user base, are really quite diverse. And they sort of anchored on safety, expanded to connection and coordination, and we're extending from there.

Is there any use case that sort of surprised you as it's developed?

You know, it's full of surprises. I mean, I just, I'll talk about some of the stories that have happened in my life in the past year. Actually, I'll do an older 1. So the thing that brought me to Life360 was something that we didn't do, but it was I had lost my dog, and so I was really worried about that. And I had researched pet trackers, and they were all like short battery life, impractical. You know, they wouldn't really work for sort of a busy exec like me. And it was actually 1 of those trackers was owned by Life360, and that's kind of what got me interested in the company. So when we set about to make our own, the first pet tracker that we really made as a product, owning the company, we set out to design for regular busy people with a much longer battery life. And when our battery runs out, we still keep it going. Still acts like a Tile, so we have that extended battery life. Anyway, the other day, my cat wears 1 of these trackers. It's kind of too big, I think, for a cat. It was really designed, our first release was designed more with dogs than mine, but I put it on my cat to just see how it worked. And it looks really cute. He's a gray cat and it's a pink tracker. And so I left it on him and it turns out it's a good thing because he sometimes likes to sneak out the door. So the other day we were going to dinner and my cat sort of snuck out the door and we had to rush off. So we left the door open and we left him outside. And I'm sitting at dinner and I get a notification that your cat got home, which is like a really great feeling. And that feeling of like everything's OK in the world, that's the feeling that Life360 gives people. That's the thing that brings people back. That's the reason. That feeling is the reason that we have 100 million members coming to us every month and growing. So that was 1 example. Can I keep going? Please. I've got a couple of these stories. I think these are like the greatest stories. Okay, so another 1. We recently moved from the Bay Area to Los Angeles, and left a car up here thinking, when we're up here we might want a car, and it got stolen. My husband says, I think I put a Tile in that car. And so we look, and sure enough, the car is over in Stockton. I don't know if you know where Stockton is, but it's not close to where we live. And we told the police, and the police literally were able to go and reclaim our car because we had put a Tile in it. And so we had put a Tile in it because we were worried about losing the car when we park it, which happened. But the benefit is being able to find it when you need it. And that's, again, the sort of safety net that Life360 has. I'll do 1 more story. OK, so last 1. I'm sitting next to my husband, this is like 2 weeks ago, and I get, there's like a notification, it's sort of a distinctive alert from my phone. And my husband says, what's that? And I said, it's a flight landing notification. But our immediate family, my kids and my husband, we knew where they all are, we knew they weren't traveling. So I looked at my phone, and it was my brother, circle with my brother, and he had just landed in Los Angeles where I live. And it turns out he was dropping my niece off at school, and he was just in town for the day, and I said, well, let's get together. We were actually able to get together in person. And so this is 1 of the things that's so unique about Life360. You know, we're not a platform about being connected digitally. We are a platform about real life and bringing people closer in the real life world. And then the follow on of that is like the next week I was here for some meetings and my brother saw the flight landing notification and he called me and he said, when are we having coffee? And we did. So it's just these kind of delightful stories. Every time I meet somebody and I tell them I work at Life360, they tell me a story. They want to share how it makes them feel, how it impacts their lives. Most of the stories are great and fun like this. Sometimes the stories are scary or tragic, but it always makes us feel like we're doing really important work.

That's a great overview. Maybe if we can quickly touch on the competitive environment. I guess for those again that may not be familiar with the story, could you just sort of frame it up how you, I guess, see your competitive positioning versus something like Apple's products? And how the company competes with those larger platforms.

So the functionality, some of the functionality we deliver, things like being able to find a person based on their cell phone's location. It's similar to functionality that you would get in something like Find My, you know, or Tile trackers are similar to AirTags or, you know, there's other pet trackers out there. What's really different is our experience. You know, we have grown to the levels that we've grown to at the same time as Find My has been out there. And most of our users are on iOS. They have the option. They know about Find My. Some of them use Find My. But the use case and the way that we've designed and the set of experiences and services that we have around location tracking are just fundamentally different. Their job is find a device. Tell me where that device is. Our job is keeping your family safe and connected. And it produces different experiences. I think maybe the easiest example is location history. You know, from Apple's perspective, history is a liability, right? They don't want to keep that data, they could get into privacy things. For us, it's our job. You know, it's our job to be able to tell you where your family's been, so that you can have conversations with your family, or just that record. And so, what is a feature for us is something that for them would be a no-fly zone. And so we continue to be preferred by people who use both as the thing that they check an average of 5 times a day in the U.S. And that's not the way people use things like that.

Very helpful. Maybe if we are move to subscribers and users, and I guess the overall opportunity there. Just to cover off on the U.S., I think 17% of all mobile phone users in the U.S. are now Life360 customers. So giving, that feels like a high number to me.

Yes, well let's talk about that. Is it accelerating as it? First, let's talk about the business a little. So the app is free to download. Anybody can download it. Anybody can use it. And that's a big part of our motion is making sure that we're really there broadly. We see ourselves as the #1 brand in everyday family life. We want to be there for everybody all the time. And then we monetize it through both subscriptions and now ads. So that's the overall motion. The way that we are best known in the states is that sort of family safety thing. Use case, and so when you talk to people, when I meet people and they, you know, if they're not like Life360 users, they say, oh, I don't use it because I don't have teenagers. To have kids, and the opportunity for us that we're just breaking into is helping people understand that actually the majority of our users don't necessarily have teenagers. The majority of users use it in all sorts of different ways. You know, the story with my brother or the story with my car. There's all these use cases that are super valuable in sort of every kind of close circle. So we think we're sort of early in that journey, and if you look at the data, we're still growing in the states where we're the most penetrated, and some of the biggest states, we have a lot of room to go in terms of penetration. So we think there's a huge amount of opportunity in the U.S., especially as we add things like our device integration, the work that we're doing around pets, and we're working on a roadmap for aging parents as well.

Super helpful, and just on that, I guess the dispersion in penetration by state, my understanding is you're more penetrated in the more central states and less in the coastal areas. Why is that and how do you think that will evolve over time?

It's a little hard to know exactly why history unfolds the way it does. The app was originally conceived as something families might use in an emergency. So the Hurricane Katrina story, I think, it resonated with early adopters. And there's a lot, you know, we tend to be really popular with places where there's lots of nuclear families, a lot of the traditional families, I think that's where we've gotten an uptake, sort of a higher density of those kinds of families. And we're sort of making our way to the coast, we're sort of spreading out from where we got that initial traction. But I don't think that there's necessarily inhibitors for us growing deeper into other states. We're seeing that growth come along as well.

It just got started a little later. Yes. And I guess probably the last follow-up to that, is there a natural ceiling in terms of penetration? Like, what are the highest areas? Like, how high could it go?

Yes. I can't figure out why people wouldn't want Life360. And to the extent that, actually, I have a friend, she's on Life360, her husband who is also a dear friend is not. And he's like, oh, I don't wanna be tracked. And we think of that kind of use case as a problem that we can go solve. How do we give somebody who is a reluctant, call them a reluctant share, how do we serve them and keep them safe and keep them connected when you need it without maybe being seen all the time? So even those kind of use cases, we think that over time we can broaden our appeal. Actually, this year we introduced temporary location sharing, so the ability to, you know, if you and I were going to meet up for a drink later, I could just share my location. You actually don't need to download the app to that. Or if we're going to meet up on a regular basis. I think we could create a circle where the location sharing isn't on all the time, we have to sort of turn it on. And so we're expanding into those kind of use cases. I think as we sort of look at what actually works for members in our circles and to adapt the app to meet those needs, I think sky's the limit. So I think 17 looks like a very small number to me.

Yes, it's almost like a privacy concern that you need to get people past. Is that...?

Yes, I think we need to create experiences where people feel like they're in control. So there's a lot of people who sort of grew up, especially younger people who sort of grew up in a world where location sharing was the norm. And so that's sort of like the easier case as the population ages, as that group gets sort of larger. That's sort of the easy case. I think where we have to look at how do we create experiences that are a little different are that aging parent generation. They don't always, you know, you can tell your kid, like, hey, if you're going to take the car, I want you on this app. But you can't tell your mom that. And so a lot of, as we're getting to aging, 1 concern we hear is like, I don't want to be treated like a kid, I can take care of myself. But they do kind of want to be plugged in to what's going on in the family, and they do want somebody there in case of emergency. So how do we create experiences that thread that needle, that give that connection without you having to know every time I stop by and get a burger at that place? So we are working on experiences that thread that needle.

Super helpful. I'm going to ask about recent trends, but before I do that, I'll just flag that I will ask if there's any questions from the audience after this. So just put your hand up if you do have 1 and we'll get a mic to you. Yes, can we talk about recent trends? Obviously very topical recently. Can you comment on what you're seeing in the third quarter, or if there's anything you would call out in terms of back to school, or anything you've tried differently in terms of growing subscribers and users?

Back to school is always an exciting time for us. It's the time historically when we do see a lot of growth. We left Q2 sort of feeling like we were on the glide path that we had set out. And, you know, the initiatives and the kind of motions we set out in Q2 are going well. So I don't know if there's anything more that we want to...

Yes, I think we talked at Q2 about how we'd sort of move through those sort of technical difficulties we had earlier in the year, where yeah, that trajectory was very much in evidence at the end of Q2. That gives us a lot of confidence in terms of you how we're moving towards the rest of the year and the sort of the stated goals and targets that we have. And you, I think everything that we're seeing, you sort of works works to that, whether it's the product initiatives that are rolling out or international expansion. All of those sort of contribute to that accelerated growth.

Okay. Is it worth covering off on the technical issues and how you've, I guess, fixed those?

Yes, I can speak to that. We uncovered, around the beginning of the year, we uncovered a break in the funnel where, really, users, especially on lower end devices, early in their journey. So we have extensive monitoring, which when you're using the app, and we have good monitoring on our marketing funnel, but in between, when people have decided to get the app, before they're fully registered and set up, there was a gap in monitoring, and there had been, 1 was an edge monitoring technology where some traffic wasn't getting through. There was another couple of problems sort of in that early usage place that was kind of putting an anchor on grows a little. And so what we've done is put great end-to-end funnel marketing in place to make sure that that never happens again. And we fixed the problems that we found. And so that was a very sort of tactical short-term blip that put us a little behind where we wanted to be for the year, but that didn't change the trajectory.

That's super helpful. I might just check if there are any questions in the room.

Can you talk about monetization, how you get free users to subscribe and advertising?

Yes, so we have these 2 monetization engines. We both have free users that choose to convert. And the conversion pattern there is about 1 third of members will convert when they sign up. They sort of see the value props, and we suggest that they might want to. We see some conversion there. Another set of people convert sometime in that first year. They get to know the app, they try it out, and they decide to convert. And then the third set of users is any time over the long tail of usage. And we do see members that convert, you know, after being a member for 3 years, then they'll convert. We also see members, you know, that are not that will convert stay members for a while. When they churn, they churn back to free, and then sometimes they subscribe again. So we do see some of that behavior as well. A couple of years ago, we sort of recognized that in addition to the percentage that do convert, that we have a huge base of members that are getting a lot of value from us. They love us a lot, and it costs a lot to serve them. And we know a lot about them, and that really made the advertising business feel like a good value exchange where we could continue to invest in giving the service for free, especially as we expand around the world, and monetize it through ads. And we sort of started very innocently on an ad journey where we just didn't know a lot about the business. We've learned a lot and come a long way. And as we grew, we made the decision to buy a technology platform to help us accelerate that business. And that is now integrated and going well.

Got plenty of questions on that. I think we have another 1 at the back of the room if we could get a mic.

It's more concerned about the technology, of the trackers, the 1 that you mentioned which you use for your pet. Does it function the same way as Find My does, where it connects to devices that are nearby and then spreads the signal, or is it direct to satellite?

So we have 2 kinds of trackers. We have Tile trackers and we have the pet GPS. The Tile tracker works like Apple's AirTags. It uses Bluetooth, and it advertises, the device says, "I'm here, I'm here, I'm here." And when a phone walks by that has our technology on it, so the 100 million people that are using us, when 1 of those people walks by, then we know it's there and we show it. So that's how the Tile trackers work. The pet GPS is a GPS-based product that talks directly to cell phones. And so you don't need a phone nearby. It's real time, so it's very different than a Bluetooth experience. And I say it's like having a cell phone taped to your dog. And now your dog can text you. We that's not exactly true, but we introduced a feature called Zoomie Alert. Do you know what Zoomies are? People have pets. Zoomies are when your dog kind of runs crazily back and forth, it's really cute and runs around. And we, you know, we do location tracking. We can see that kind of movement. So we decided it would be really cute when your dog is, you know, full of joy and excited to create an alert where you see that on your phone. And it's a delightful experience. It's super fun to know when your dog is, like, freaking out and excited.

Wow.