Life360 - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 delivered record KPIs and solid financials: revenue $103.6M (+32% YoY), gross margin 81% (+400 bps YoY), adjusted EBITDA $15.9M (15% margin) and positive operating cash flow $12.1M.
• Revenue beat Wall Street consensus by ~$2.1M (+2.1% vs $101.5M estimate); EPS consensus unavailable from S&P Global; diluted EPS was $0.05 (vs $(0.14) YoY) [Q1 2025 revenue estimate from S&P Global*].
• Guidance updated: FY25 subscription revenue raised to $355–$365M (from $350–$360M), hardware lowered to $40–$50M (from $45–$55M), consolidated revenue held at $450–$480M; adj. EBITDA maintained at $65–$75M.
• Call catalysts: accelerating international growth (MAUs +39% YoY), advertising/data momentum, and long‑term margin opportunity from App Store payments shift (testing in June; no near‑term guidance change).

What Went Well and What Went Wrong

What Went Well

• Subscription strength and operating leverage: core Life360 subscription revenue +37% YoY to $76.2M, adjusted EBITDA up to $15.9M from $4.3M YoY, with operating expenses growth +23% YoY vs +32% revenue.
• International momentum: MAUs +39% YoY to 38.4M; paying circles +33% YoY; ARPPC +39% YoY, supported by Dual Tier launches and legacy price increases in UK/ANZ.
• Management quote (CEO): “Life360 started 2025 strongly…record highs in MAUs, subscribers…In a more cautious consumer spending environment, our performance reflects both the resilience of our business model…”.

What Went Wrong

• Hardware softness: revenue down 13% YoY to $8.9M as discounts and reduced bundled offerings weighed; units shipped down 8% YoY; hardware gross margin impacted by fixed-cost deleverage.
• App Store payment shift benefits are longer‑term: conversion/retention trade‑offs mean no near‑term margin uplift assumed; testing flows and watching appeals (Apple Pay usage unclear).
• Tariffs remain a headwind: pet device launch pivoted to international markets to mitigate tariffs; retail hardware demand expected to stay soft near term.

Transcript

Speaker 1

Q&A, please raise your hand by pressing the raise hand icon at the bottom center of your screen, and your line will be unmuted in turn. Participants who have joined by telephone will be in a listen-only mode throughout. As a reminder, we will make forward-looking statements regarding future events and potential financial performance during this call, which are subject to material risks and uncertainties that can cause actual results to differ materially from such statements. A summary of these risks may be found in the risk factor section of our Form 10-K filing with the SEC dated February 27, 2025, and in our most recent Form 10-Q.

These forward-looking statements are based on assumptions that we believe to be reasonable as of today's date, May 12, 2025, and we have no obligation to update these statements as a result of new information or future events except when required by law. Additionally, we will present both GAAP and non-GAAP financial measures on today's call. These non-GAAP measures are not intended to be considered in isolation from, a substitute for, or superior to our GAAP results, and should be read in conjunction with the company's consolidated financial statements prepared in accordance with GAAP. A description of these non-GAAP financial measures, as well as a reconciliation to the nearest GAAP financial measures, are included at the end of the company's earnings media release issued earlier today, which has been posted on the investor relations page of the company's website.

We have posted an updated investor presentation on the investor relations page, which includes additional complementary graphics and data. Please note that it has been provided as an additional reference and that we will not be using the presentation as an exhibit during today's call. We will begin with an overview of results from our Co-founder and CEO, Chris Hulls, followed by a business update from our Chief Operating Officer, Lauren Antonoff. Then our Chief Financial Officer, Russell Burke, will walk through the Q1 2025 financials. Chris will return with comments on our updated 2025 outlook before we open up the call for Q&A. We ask that participants please limit themselves to one question to ensure that we can hear from as many of you as possible. With that, I'll turn the call over to Chris.

Speaker 3

Good afternoon to everyone joining from the U.S. and good morning to those tuning in from Australia. Thank you for being here for our first quarter results call. Life360 started strong in Q1 2025, achieving record-breaking results across both monthly active users and paying circles while continuing to advance our broader vision of becoming a super app for everyday family life. These results underscore the strength of our product-market fit, the value of our subscription model, and the resilience of our business in an uncertain environment. Our member base grew 4.1 million new MAUs this quarter, reaching 83.7 million, up 26% year over year. We also saw strong momentum in our subscription business, with paying circles growing 26% year over year to 2.4 million, including a record Q1 net increase of 137,000 paying circles. International expansion continues to be a powerful growth driver.

International MAUs rose 39% year over year, and paying circles were up 33%, even with price changes to legacy subscribers outside of our core triple-tier markets. Importantly, average revenue per paying circle in international markets grew by 39% year over year, thanks to our updated premium pricing strategy. These improvements are enabling us to further scale our multi-tier approach in international markets. In today's environment, where economic uncertainty, shifting markets, and everyday anxieties weigh heavily on families, people are seeking stability and trust more than ever. Life360 meets that need. Whether it's knowing your child got home safely, being alerted to a car crash in real time, or simply staying connected across generations, our platform offers peace of mind in a world that can feel unpredictable.

Our Q1 performance reflects not only the strength of our model, but the growing demand for services that bring peace of mind in a world that feels increasingly uncertain. As a daily essential for millions of families, we're not just helping people through uncertain times, we're building something they can rely on no matter what lies ahead. That's the kind of value that resonates with consumers today, and it's the kind of reliable durability that investors can feel confident about. We're also encouraged by a recent federal court ruling related to Apple's App Store policies that allows apps to direct users to external payment platforms. In response, we are implementing web-based checkout options with our first updates launching in June. We're taking a thoughtful, compliant approach and will test different flows to optimize the user experience.

While still early, we see this as a meaningful opportunity and are moving quickly to position ourselves for long-term benefit. Before I turn it to Lauren, I want to share a milestone that brings Life360's journey full circle. As many of you know, the idea for Life360 was born in the wake of Hurricane Katrina when it saw how hard it was for families to reconnect after disaster. That moment inspired our mission to keep families safe and connected when it matters most. Today, nearly two decades later, we're proud to announce a partnership with AccuWeather, the global leader in weather forecasting. This collaboration will bring real-time, location-specific severe weather alerts to our members. It's a powerful evolution of our platform, combining our core location technology with critical life-saving information. It's a reminder that Life360's mission is as relevant today as when we started.

With that, I'll turn it over to Lauren to share more on what she's seeing on the front lines.

Speaker 0

Thanks, Chris. 2025 is off to a strong start. We're creating enduring value by helping families stay connected to the people, pets, and things they love. Most of our growth continues to come organically through word of mouth and referrals. Even in our most mature U.S. regions, we're seeing strong momentum, underscoring the meaningful runway ahead. While penetration is increasing, we continue to believe that we're still early in our journey, both in the U.S. and especially in international markets. As we scale, our clear objective is to create long-term, durable value in a disciplined way, not just short-term wins. We've put an emphasis on experimentation so that we're continually learning from our customers and discovering what works. Our results reflect this: consistent subscriber growth, increased engagement, and expanding lifetime value. Internationally, we remain significantly under-penetrated.

Given the huge opportunity, we're executing full-funnel marketing campaigns across our focus markets to boost brand awareness and drive malgrowth. We're also increasing the value we deliver to members beyond these regions by expanding emergency dispatch features, including SOS and Crash Detection, to drive global adoption of our premium tiers. Our freemium model remains the heart of our strategy. We introduce users to the platform and then guide them towards premium features that offer unmatched peace of mind. That's what drives our consistent, compounding subscriber growth. Given the importance of our free member base, this year we're focused on elevating the core Life360 app experience. In Q1, we launched a major update to our iOS map, delivering a faster, more intuitive interface and improved location accuracy. We're working on a similar update for Android for later this year.

We're also making progress on new premium experiences tailored towards specific use cases like pet safety to deepen engagement and broaden our value proposition. These enhancements, paired with targeted marketing, are designed to accelerate conversion of free users into long-term subscribers. Speaking of marketing, I want to make sure you all caught the latest iteration of our Family Proof Your Family brand campaign, which launched a couple of weeks ago. It confronts a hard truth that most brands would shy away from. We want to destigmatize the anxieties and intrusive thoughts that occur whenever our kids step out the door. The hero creative, aptly named, "I Think of You Dying," illustrates a mother's worst fears in a morbidly comedic way by imagining all the horrible ways she worries about how her daughter could die.

Most of us who are mothers aren't eager to admit that we worry about the people we love and imagine all these worst-case scenarios about how they might get hurt. It is one of those shared experiences that hits home and is really resonating. We took an innovative approach and tapped into a real human truth, albeit one that's almost too taboo to say out loud, to highlight the power at the core of the Life360 experience: peace of mind and the love we have for our families. Families trust us because we show up for them every day. That trust and our relationship with our members is how we've won the right to build a family super app as the foundation of a business that lasts and scales far into the future.

Hardware is a key part of how we go beyond the phone to make everyday family life better. Over the past quarter, we've made huge strides in our hardware strategy, which is designed to drive Life360 subscription growth. I'm thrilled to share that you can now activate and use Tile within Life360 without a separate Tile app. This lets our BLE trackers serve as an entry point to the Life360 ecosystem. We're nearing full integration of Tile into the Life360 app, which will soon become the default activation platform for all new devices, a major step in streamlining the experience and driving engagement. In Q1, we saw continued growth in the number of U.S. premium subscribers linking Tile devices to their account, despite challenging environments for consumers, further reinforcing how hardware enhances our broader subscription model.

We expect member growth to accelerate as Life360 becomes the primary on-ramp for Tile customers. As you know, we're also preparing to expand our hardware lineup to better serve evolving family needs. Our first GPS-enabled tracking device for pets remains on track for a Q4 launch. Some of you may have already seen early beta versions in the app. Initially, we planned to launch in the U.S., but in light of recent tariff impacts on devices made in China, we made a call to shift the focus of our initial rollout to key international markets. This strategic pivot mitigates tariff exposure and accelerates our entry into new global markets ahead of broader distribution in 2026. I'm super proud of the team for leveraging a challenge to expedite our international plans while mitigating risks. This flexibility is another way that we're leveraging the value of our expanding global presence.

Q1 was also an exciting time for our advertising platform. We launched a successful case study with Uber, showcasing how our airport landing notifications drove a 12% click-through rate and over 60,000 rides, well above industry benchmarks. We started alpha testing our first native ad format, Geo-Contextual Notifications, which we plan to test launch with new partners in Q2. You can think of this as a way to alert members when someone in their circle stops by a local grocery store or coffee shop. It's a great opportunity to add something to the shopping list. These ads allow brands to reach families at relevant real-world moments while delivering value to our members. We're designing ad experiences with the explicit goal of making everyday family life better. The experiences we've created with Uber and AccuWeather are great examples of this mindset in action.

I'll add that we see AI as a critical component of delivering uniquely relevant connections between advertisers and consumers. The integration of the Fantech team expands our personalization tools and accelerates our delivery of smarter, privacy-first audience insights. We recognize that tariffs may weigh on ad budgets near-term, particularly in retail and DTC, but the capabilities we gain by bringing ad expertise in-house strengthen our long-term position. With enhanced off-site targeting and measurement offerings, we're well-positioned to drive better ROI for advertisers alongside experiences designed for our members. This is a huge opportunity, though we recognize that it'll take time to scale. In parallel, our data business continues to grow. We're seeing consistent progress with Laser.ai and early progress at Hubble, which we believe has long-term potential to enhance device discovery and unlock future enterprise revenue opportunities.

We recently formed a strategic partnership with Aura, expanding our reach through their employee benefits channel and creating new opportunities. At Life360, we're not just delivering growth. We're executing on a strategic plan to deliver consistent long-term growth. We're innovating with purpose to make everyday family life better, and we're executing with consistency. That's how we plan to win, not just in 2025, but over the long term. With that, I'll hand it over to Russell to walk through the financials and our continued focus on increasing profitability.

Speaker 2

Thanks, Lauren. Thank you all for joining us today. As a reminder, the Q1 financials I'll be referencing are unaudited and denominated in U.S. dollars. We are really pleased to report record-breaking Q1 results, driven by continued strength in our subscription business and growing contributions from our other revenue streams. Q1 revenue increased 32% year-on-year to $103.6 million, reflecting strong momentum in both subscription and other recurring revenue. Subscription revenue grew 33% year-on-year, accelerating from Q4. Core Life360 subscription, which excludes hardware subscriptions, increased 37%, driven by 26% global paying circle growth and 8% higher ARPPC. This performance reflects improved retention across U.S. markets, supported by targeted marketing and deeper product engagement. Hardware revenue declined 13% year-over-year to $8.9 million, primarily due to softness at physical retail and increased discounts. Gross margin in hardware was impacted by fixed cost deliverage.

While direct-to-consumer and online sales remain solid, retail store performance continues to be soft, in line with broader consumer electronic trends. Looking ahead, we anticipate these demand patterns to persist. While we anticipate partial tariff exemptions for our devices, we do expect tariffs to impact both revenue and costs in the near term. We've already adjusted our strategy based on current conditions and remain prepared to adapt further as the landscape evolves. Importantly, hardware continues to serve as a strategic on-ramp into our subscription ecosystem, supporting long-term value creation even as short-term demand fluctuates. Other revenue grew 99% year-over-year to $12.8 million, driven by strong contributions from advertising and data partnerships, which are both performing in line with expectations. March annualized monthly revenue reached $393 million, up 38% year-over-year, underscoring the strength and durability of our high-quality recurring revenue streams.

Gross profit grew 39% year-over-year to $83.5 million, with gross margin expanding to 81%, up from 77% in the prior year. This improvement was driven by a favorable revenue mix, including higher margin and other revenue. Operating expenses, excluding commissions, increased 21% year-over-year, demonstrating continued operating leverage as revenue and gross profit outpace spend. R&D increased 12%, primarily reflecting investments in people, technology, and third-party services. Sales and marketing rose 43% due to investments in brand and acquisition campaigns ahead of key product launches. Commissions grew in line with subscription revenue, and G&A grew 9%, consistent with overall company growth and continued organizational scaling. We continue to deliver meaningful progress on profitability. Net income was $4.4 million, a sharp improvement from a $9.8 million loss in Q1 of last year.

Adjusted EBITDA rose to $15.9 million, up from $4.3 million in Q1 2024, our 10th consecutive quarter of positive adjusted EBITDA, driven by strong subscription growth and disciplined cost management. For modeling purposes, investors should expect that Q2 this year will include higher sales and marketing investment, along with the impact of some personnel costs shifting from Q1 and Q3. As a result, Q2 will represent our trough for adjusted EBITDA in 2025, with profitability expected to rebound in the second half as earlier investments support global growth initiatives. Looking briefly at the balance sheet and cash flow in Q1, we ended the quarter with $170.4 million in cash, cash equivalents, and restricted cash, up $9.9 million from Q4. Operating cash flow was positive for the eighth consecutive quarter at $12.1 million, slightly below adjusted EBITDA due to the timing of receipts and payables.

Investing outflows of $4.3 million were primarily related to cash paid for the Fantech asset acquisition and internal software development. Financing inflows were $2.2 million and related mainly to net proceeds of option exercises and RSU settlements. Thanks for your attention. I'll now hand back to Chris to walk through our updated earnings guidance.

Speaker 3

As we look ahead, we remain confident in the durability of our business, which delivers peace of mind to families and is built to perform through cycles. Despite ongoing economic pressures and cautious consumer spending, our subscription growth remains strong and consistent. We're actively managing the impact of new tariffs on our hardware products and have already adapted our strategy, shifting the launch of our Pet Tracker device to focus initially on international markets, where we continue to see strong performance. This pivot reflects both the strength and flexibility of our model and our commitment to optimizing return on investment. We remain on track for a Q4 2025 Pet Tracker launch and continue to view hardware as a strategic differentiator, one that drives long-term subscription growth and deepens engagement across our ecosystem.

We're executing with focus, expanding internationally, scaling our connected device portfolio, and growing our advertising business with discipline while closely monitoring evolving market dynamics. Across all areas, we remain disciplined on cost and committed to long-term value creation. We are a durable, high-impact business serving families today and creating meaningful value for the future. With the resilience of our subscription model and proactive mitigation of tariff-related cost pressures, we are updating our full year 2025 guidance, reaffirming consolidated revenue of $450 million-$480 million, subscription revenue of $355 million-$365 million, raising the range by $5 million from our previous outlook based on our strong start to the year, hardware revenue of $40 million-$50 million, adjusting the range $5 million from our previous outlook to account for consumer demand sensitivity.

Other revenue, which includes partnership and advertising, of $55 million-$65 million, and positive adjusted EBITDA of $65 million-$75 million. That concludes our prepared remarks, and now I'll turn the call over to RJ, who will manage the Q&A portion of our call today.

Speaker 1

Thanks, Chris. As a reminder to participate in the Q&A, please raise your hand by pressing the raise hand icon at the bottom of your screen within the Zoom app. You will need to unmute yourself to ask a question. With that, we can start with Mark Mahaney from Evercore. Mark, are you there?

Yes, I am. Thanks, RJ. Okay, two questions, please. The U.S. price increases, you refer to them. Your learnings from those price increases in terms of maybe your long-term, I do not know, value proposition, the gap you have between the prices you are currently charging and what you are offering to customers. So learnings from the price increase. Then secondly, can you talk about, as you have gotten a little bit more into this ad revenue generation and looks like growth is pretty good there, your thoughts about the long-term, like how do you think about how big that could be, you know, three to five years down the road and any new learnings that give you greater insight into how much advertising revenue potential there is for the business long-term? Thank you very much.

Speaker 3

Sure. I will take the first question, and then I will let Lauren take the second. They are somewhat tied together. If you look at pricing, I think what you can see very clearly is we are leaving a lot on the table. Every time we have raised price, it has been taken very, very well by our consumers. It is not surprising because we are a very low-cost product in relation to what we offer, in particular in relation to legacy competitors if you were to buy similar premium products. The vision, which we have been consistent about, is build an amazing product, give a strong value surplus so people feel really good about what they are getting. While we are growing, it is not the right move to harvest to the maximum. At some point, when growth slows down and we are more mature, yeah, sure, we might take up price.

We can see we have not yet even once really kind of chipped away at retention. That is down the road. I do think it should give investors and, quite frankly, the entire team, we take a lot of confidence that we do have a long way to go. I think we have also seen just even more broadly, many have been surprised by just how much resilience consumer subscriptions have once they become part of people's daily routines, which we clearly are. We do not see any short-term huge price increases, in particular in the U.S. We are more focused on adding value. As we launch some of these new hardware products we have, like PETS, we will eventually have Seniors. That is ways that we can push people to higher price points.

We really want to make sure that no matter what, our customers are getting that really good feeling of what they're paying for us because it is a differentiator for many of our legacy competitors who really have priced to perfection. Part of how we want to enable ourselves to keep the price low is through ads because if we have tasteful ads, that's a whole nother revenue stream. I'll let Lauren quickly hit on that because she really has been the mastermind behind the ad business. It's something that she's fully set up since she's been here. Over to you, Lauren.

Speaker 0

Thanks, Chris. We have said before that we think that the ads business has the potential to scale sort of on the same level as our subscription business. We continue to be really bullish about the potential. We also recognize that we're super early. We are seeing really good progress, both good signals and then actually realizing the kind of results that we are hoping to see as we ramp the business. Feeling really bullish. I think what makes us special with ads is that we see this relationship between the value we're delivering advertisers and the value that we're delivering customers. That mindset that really connects customer value and advertiser value is a big unlock and makes us feel good about the investments we're making and the potential to create magical experiences that are ad-powered.

Okay. Thank you, Lauren. Thank you, Chris.

Speaker 2

Mark, just circling back to your comment referencing the U.S. price increases, just so we're clear on that. We adjusted our annual plan prices in the early part of this year. As you will remember, the annual plan was at a significant discount from the monthly plan. We have just made some adjustments to that. That is the effective price increase for the U.S. in this quarter.

Thank you, Russ.

Speaker 1

Great. Thanks, Mark. I'd like to turn now to Laff from MSC. Laff, are you available?

I am, and I appreciate the opportunity to ask a question. I just wanted to follow up on a couple of these new partnerships/investment with Aura, as well as AccuWeather. Weather, sorry. Can you, is there revenue associated with either of these over time? Are you paying anything for AccuWeather? What's the ultimate strategy there? If you could just talk us with the employment benefit channel for Aura, what does that mean? Where do you guys fit in? How is the revenue going to work?

Speaker 3

Sure. I will take Aura and I'll let Lauren do AccuWeather because that is very much in her domain. It was a deal she led with the team. On Aura, it's a company we've had a long-standing personal relationship with, just getting to know them because they're also in the family safety space. They grow very differently than us. They have a number of channels that we haven't developed. The one that we're working with them on is B2B2C through employee benefits. I'm not sure since we have some Australians on the call, I'm not sure how similarly it works for Australian employers. If you are part of a U.S. medium or large corporation, you usually get benefits offered to you as part of your annual election of benefits. That is an opportunity for companies to sell products and services.

Usually, how it works is you get a little bit of a discount, but once people are on, you get very, very low churn because it comes directly out of your paycheck. We have long wanted to look at that channel, but we're not a sales org, really a consumer products org. That is changing as Lauren builds out the ads team. Aura has a great in already to that channel, and they're selling a similar-ish product. When I say similar-ish, the features aren't the same, but it's family safety. They're more taking the consumer online and digital safety side of things, whereas everyone knows what we do. Very complementary. They have essentially a plug-and-play sales force that can market our product through that channel. It's essentially a rev share. We haven't disclosed specifics, but there should be revenue associated with that.

It's going to take some time to ramp up, and they will also be an advertiser on the platform, but we're very excited about the long-term potential to sell that way.

Speaker 0

I'll take the AccuWeather angle. The idea, actually, for working for AccuWeather started when we were re-envisioning the app and really thinking about what we wanted to do for members. Chris mentioned the full circle nature of thinking about weather emergencies and those kinds of things. We approached them about how we could deliver that kind of value for our customers and then also what we could do for them in terms of letting them reach our audience. We have made sort of a good relationship and a good foundation. We're starting with delivering customer value and really figuring out how to make the mechanics work. There were a lot of new capabilities we had to build in order to deliver those kind of alerts to members in certain areas and certain times. We're focused on that first.

We think that there's a lot of value to be delivered on this from both sides, including commercial value over time. We are starting simply by making the right experiences work, building the foundation.

Speaker 2

Laff, just in terms of the revenue flow for Aura, we do expect to start seeing some advertising revenue in the current year and the employee benefits starting next year. There is definitely a good level of expectation in terms of revenue flow there. The advertising piece is part of our roadmap and part of what we look for for 2025.

Got it. Thank you.

Speaker 1

Great. Thanks, Laff. Now I'd like to turn to Maria with Canaccord. Maria, are you available?

Yes, thanks so much. Thanks so much for taking my question. I just wanted to ask about your subscription business, which continues to do really well. I guess, have you seen any sort of changes in consumer behavior, whether sort of consumers opting for less expensive plans or maybe downgrading? I mean, obviously, the business continues to do well. I just want to emphasize that. What is the main reason behind a full-year increase in guidance for the subscription segment?

Speaker 3

We have not seen any slowdown. If anything, the opposite, which is great. Our view, which I hope does not get battle-tested when the tariffs were raging, we thought it might, is that when people get anxious, what are the categories that do well? Home security, firearms. As much as I do not like to be in those buckets, they do do well. I think we are a peace-of-mind product from a very low cost. We have been stress-tested before during COVID, even though we lost 70% of our downloads for a few weeks when everyone was locked down. We did not get much subscription churn. I think what we see is when people get anxious, Life360 is considered more of an essential item, and it is not very expensive. We are optimistic that even if there is a recession, we will do better than our peers.

I'm sure if there's something extremely bad, we'll take some hit. But as of now, we're really not seeing anything. As it relates to guidance, we had a record quarter. We were not necessarily expecting that early on. Oftentimes, we have a good quarter, and it bounces down. It was well ahead of what our expectations were. We're updating guidance as a result. Russell, I don't know if you have anything to add to that.

Speaker 2

No, I mean, that's the rationale. Because we're essentially adding to paying circles early in the year, just the nature of the subscription model is that that tends to flow through the balance of the year. We've got a good level of visibility on subscription revenue and thus the increase or the raise to our guidance for subscription.

Speaker 3

One very small addition. International and U.S. is doing very well. We are an organic business. International is sometimes very hard to forecast. That is really on track, which is a huge driver of the long-term outlook.

Thank you so much for the call.

Speaker 1

Thanks, Maria. Next, we'd like to turn to Wei Sim from Jefferies. Wei, are you available?

Can you guys hear me?

Yep.

Okay, great. I just wanted to ask a question just on the Aura partnership. I noticed that they also have some, I guess, deal with MetLife going on. Is the idea that we will get access to the MetLife channel on a look-forward basis? It is essentially kind of like a hunting license for them, and we get a rev share for that.

Speaker 3

Exactly.

Sorry, just the other one is on the financial side of the Aura thing. The $25 million that we announced, does that give us equity in Aura? How much? And is that cash, or is that kind of like offset for advertising credits? How does that part work? Thanks.

I'll take the first half. I'll let Russell answer the investment-related questions. You basically said it as well as I can. MetLife is the biggest benefits provider. Aura has spent a lot of time establishing that channel. We will have access to it exactly like you said. We will have a portion of rev share. There is some complexity in terms of how we price and all that. We're very optimistic it's going to do very well. The first year will be a learning year, and it will scale from there.

Speaker 2

Wei, in terms of the revenue side, yeah, we do have high expectations over a period of time for the revenue flow from this partnership. Again, it'll be sort of starting to establish those pieces. The investment itself, you will see, is in the form of a convertible note. We would absolutely expect it to flow into equity at some point in the future.

Okay, got it. Thank you.

Speaker 1

Thanks, Wei. Next, we'd like to invite Andrew from Citizens JMP. Andrew, are you there?

Thanks so much for taking the question. We've been seeing pet and beta in our own usage. Can you talk about any early results from pet tracking? What are kind of the expectations that as pet does go live in 2024 and 2026? Thanks so much.

Speaker 3

I will let Lauren answer that one, A, because she's been spearheading it, and B, she has this tiny little dog who got lost. That's part of the reason she joined to begin with. I call it a rat, but we still saved the rat. Lauren, since you're so passionate about it, why don't you chime in on that one?

Speaker 0

Okay, I will do that. The things that you're seeing in beta are not really performance testing. They're small-scale in order for us to basically put water through the pipes and make sure that we can deliver a great end-to-end experience for our customers. They help us refine the experience. We use it ourselves. We do a lot of, well, in tech, we call it dog fooding. It makes a lot of sense here when we're talking about pets. We use our own product, and we let other customers use it. We find issues we need to refine. We find problems before we ship. We don't really have performance insights or those kinds of things. The product is on track. We're excited about what it's going to do.

We're being a little bit, we're taking a little bit more conservative approach, I think, in the world of tariffs than we might have otherwise, just in terms of volumes, pulling back from retail a bit and really focusing on direct-to-consumer, in part because it gives us the most flexibility to be responsive as the external environment changes. This year is really a great learning experience. We're planning to get some decent volume. I'll let Russell talk about specific numbers if he wants to add anything. All things are looking good. We're excited.

Speaker 2

Yeah, I don't think we're talking about sort of specific numbers yet. As we've said, we've pivoted our plan somewhat. This year is going to be a good test. We expect to see some good flows there.

Thank you.

Speaker 1

Thanks, Andrew. Next, I'd like to turn to Wei Wing from RBC. Are you there?

Speaker 2

Hi, guys. Yeah, I'm here. Thanks. Yeah, just my question is around the Apple App Store changes. How do you expect them to play out for 360? Should we expect to see an immediate step up in margins, or is it going to be more gradual? How do we think about this?

Speaker 3

I would say take a long-term lens, not a short-term lens. For those who have known us a while, we've been pretty consistent. I think we're being slowly proven right that over time, Apple will lose more and more leverage for a number of reasons, namely antitrust and government scrutiny. It was happening much more overseas. Now it's come to the U.S. with arguably the biggest ruling that is beneficial for us. The reason I'm saying don't make any short-term assumptions, this is going to get a little esoteric, but there are different types of credit card processing, including Apple Pay, which is very different than in-app purchase. It's unclear how much we can use Apple Pay, which is what we really need to have lower friction. I would be getting very esoteric if I went fully into it.

If I get a little more abstract, we're testing a number of flows. We're trying to see what we can get away with. We're watching very carefully the appeal process because there have been many starts and stops. If I'm a betting man, Apple's actually going to have to make the App Store more competitive with credit card because they know their monopoly is going away. In the long term, I'd say this adds validation that that 22.5% or whatever percentage it is that we pay for payment processing will be going down. I definitely would not see an immediate benefit unless we get some pretty big news on Apple Pay. As of now, we don't know. We have not changed our forecast or guidance based on this decision yet.

If things change, we will announce that and be very excited to share.

Speaker 2

Okay, thanks so much. That's all from me.

Speaker 1

Thanks, Wei Wing. Next, I'd like to turn it over to Mark from Steeple. Mark, are you available?

Speaker 0

Yeah, hey, guys. Thank you very much. I wanted to ask you just on the advertising side. I know, obviously, very uncertain times for all businesses. Given that you're a newer ad platform, are you still seeing the interest in testing out the platform? Are you seeing people kind of saying, "Hey, let's wait until things kind of get sorted out on the tariff front"? How are those conversations going, bigger picture? I know the long-term view is intact to what Lauren said earlier. Just near term, would love to know how those conversations are going.

Speaker 3

Lauren, do you want to take that one?

Speaker 0

Sure. I think this is where we may benefit by our early and small scale. We have very few salespeople to start. We can only have so many conversations. We are always picking and choosing what conversations we want to have. In that sense, we are able to sort of focus on those partnerships that are ready. There are a lot of brands that continue to do well and want to talk with us. It has not hit us yet. There is some risk. We have not really experienced a big change yet.

Okay, thank you. Maybe one more just on the app refresh. Can you just remind us the main benefit of that is just making the sign-up flow to subscriptions a little bit easier? Is that kind of the gist of it? Or maybe I'm chewing on it. Yeah.

Sure. I'll take this. If you think about why Life360 has been successful in the way it has, it's because we earn this enthusiastic membership. People try us. They hear about us from someone. They try us out. Once they try us, we have a very high stick rate in our free member base. People enthusiastically tell other people. That is based on the value they get in that free member experience. We think of it as the engine that powers everything else. The problem is if that experience stays the same, the rest of the world moves on. Other apps add features and capabilities. The bar, the expectations that customers have, rise. If we're going to keep that effect that's powered our business working well, we have to continually add value and create delight in that free experience.

That's one of the main focuses of investing in our free member experience, just to make sure that we're nurturing this sort of fuel source that powers the business. The other is that we're doing more and more sort of expanding the scenarios, adding things like pets or eventually aging parents, working with more and more partners. That can put pressure against the user experience. Where do you put the next feature? How does it fit in? When we designed the app, originally, we had a smaller set of use cases. Now that we're adding so much more value, it's hard sometimes to figure out how do you show that in a way that customers can really find it, in a way that you're unlocking that value.

As we're thinking about this refresh, as we're thinking about this redesign, we really think about creating space, creating an interface that allows for customers to be more engaged in different parts of the app experience, to hopefully have more dwell time with actual benefit advertising, and create space for more and more features that we create, as well as integrations with third parties.

Perfect, Lauren. Thank you very much.

Speaker 1

Thank you. Next, we'd like to invite James from Morgan Stanley to ask a question. James, are you there?

I am. Thanks for the opportunity. I guess I wanted to ask about pets. Could you maybe help us understand the difference between the product that's live on the GeoBit site and what you plan to launch in 2024? Maybe also some of the differentiating features versus competition. Then help us understand how to think about the pricing strategy here, whether this is completely bundled, minimum terms, hardware purchases, etc.

Lauren, probably another good one for you.

Speaker 0

Okay. I'm a big fan of the pups. So the guts of GeoBit, a lot of the same similar technology is used in the pet tracker. There's a lot of overlap in the tech and the platform that we're using. But we built, basically from the ground up, a new device that is designed from a Life360 sort of family point of view. It's designed to work seamlessly as part of the Life360 ecosystem. We've been using the reason that we're sort of pushing GeoBit right now is that we're sort of using it to, again, test some of those pipes, to test the underlying connection to Life360 is the same. We started with GeoBit to build those connections between the pet tracking capabilities and Life360. The new device is, I think one of the biggest changes is it's really built to work for pet scenarios.

It is more durable. It is longer lasting, has a longer battery life. The most important thing, I think, is how it works to show up as part of your family.

Speaker 2

Because of that, James, it obviously will be a bundled product. We think there is a lot of opportunity, particularly with the free user base, to help that sort of conversion. Therefore, it will be a bundled product. It will also be available separately, but with a subscription. All of this is really geared towards continuing to boost subscription revenue.

Perfect. Thanks, guys.

Speaker 1

Thanks, James. Next, I'd like to open it up to Chris from UBS. Chris, are you available? Chris, hopefully, you're there.

Speaker 3

We're still not hearing him. How about we move on and come back, RJ?

Speaker 1

Yep. Okay, we'll open it up to Rob from Loop. Rob, are you available?

Speaker 0

I am here. Thanks, RJ. Thanks for taking my questions, everyone. I wanted to go back to the changes on the App Store fees, if we could. I mean, it's such a significant cost driver. Your commission is 53% of, sorry, $53 million in revenue last year. Is there anything you can give us to just help calibrate sort of the expectations on sort of the potential outcomes? Is this something that could potentially shave like a couple hundred basis points from that 20-plus percent? Could it be meaningfully more? Is it just too many moving pieces and too early to even have to say too much more than just that's clearly directionally positive? I had a follow-up on advertising, if I could ask. Maybe we can answer that first, and I'll come back on advertising.

Speaker 3

Yeah, I'll take that one. I'll let Lauren answer your ads question. Let me first explain why it's a little bit more complicated than it sounds. It's not just the cost. There's the conversion impact and the retention impact. The thing that's really good about in-app purchase is click, click, click. You've converted. The downside of that is you pay the big fees. It's also very easy to cancel because I know many consumers, including myself, I just go into the App Store, iTunes settings, I cancel all my subscriptions, even as a pretty well-off person. It's just so easy to cancel everything. People do that on Apple. We don't keep that relationship with the consumer. If you move to credit card, the only thing you know is that the payment processing is going down.

The other thing we essentially know is conversion will also go down unless you can use Apple Pay, which has credit card pricing, but with the same click, click, click conversion. If we knew we could use Apple Pay, I would put my reputation on the line to say it's saving more than a few hundred basis points. It's a lot. It would be a massive, massive savings. That still remains unknown, which is why I'm being a little bit more cautious around our optimism. If you take what we know we can do, which is do our own credit card collections, and there are ways to reduce the friction, what does that do to retention? We know we're going to take a conversion impact. Are we going to make that up because we can have our own dunning strategies?

We can have our own process of not that we're going to trick users to stay, but Apple just does not even let you talk to them. That takes a long time for the data to come through. The team already has experiments out, which are going to test all of these things, with the only exception being the big one. We just do not know if we are allowed to use Apple Pay. There could be a very good benefit today from what has already happened. Probably not. It still could be a couple hundred basis points, but still a little bit unknown. We will report back. If we get word about being able to use Apple Pay, then that is a huge game changer.

Speaker 2

Just to add to that, Rob, as Chris said before, in the long term, we absolutely see a benefit from this. This will only flow in one direction. It will benefit our costs in the longer term. Because of these complexities and the fact that we've seen before that Apple will make different moves, we're certainly not jumping to include that in any forecast or guidance for the time being. We will pursue it and let you know when that starts to become meaningful.

Speaker 0

All right. Thanks, Russell. Thanks, Chris. So Lauren, advertising, just thinking about maybe a two or three or longer year time frame, do you see bigger opportunity from retail and local commerce? Or do you think the more near term, that sort of two or three year time frame is a little more focused on insurance and acquisition channel for other services and other sort of maybe vertical type opportunities?

I think we're still exploring what the best opportunities are. I would say we're in exploration mode and really looking at all sorts of different partnerships as brands come to us. Anybody who wants to reach consumers, I think we're an attractive way to do that. We'll use the learnings from early partners to decide where to double down.

Great. Thanks, Lauren.

Speaker 1

Great. Thanks, Rob. Okay, we'll turn it back over to Chris from UBS if he's available. Chris, are you there? Chris, last call. Okay. That is the end of our questions that are in the queue. I'll turn it back over to Chris to close us out.

Speaker 3

I don't have any closing remarks. Very excited to meet with you all over coming days. Have a great day.