Life360 - Earnings Call - Q3 2025

Executive Summary

• Q3 2025 delivered record results: revenue $124.5M (+34% YoY), Adjusted EBITDA $24.5M (+174% YoY), MAUs ~91.6M (+19% YoY), Paying Circles 2.7M (+23% YoY).
• Strong beat vs S&P Global consensus: revenue $124.5M vs $119.7M estimate; Primary EPS $0.284 vs $0.059 estimate; company-reported diluted EPS $0.11 (YoY +$0.02). Estimates marked with * (S&P Global)*.
• Raised FY25 guidance across revenue and Adjusted EBITDA; announced definitive agreement to acquire Nativo (~$120M), accelerating ads roadmap and offsite reach.
• Hardware revenue fell 4% YoY and hardware margin was pressured by tariffs; ASP down 6% YoY, though unit shipments rose 15% YoY and promotional Pet GPS launch supports subscription conversion.
• Catalyst set-up: guidance raise, accelerating ads with Nativo, record net subscriber adds (170k), and back-to-school engagement; near-term watch items include tariff mitigation and ads execution ramp.

What Went Well and What Went Wrong

What Went Well

• Record subscriber growth: 170k net Paying Circle adds (all-time record) and Paying Circles up 23% YoY to 2.7M; MAUs ~91.6M (+19% YoY).
• Revenue mix lift: other revenue up 82% YoY to $16.9M (ads and partnerships), driving gross margin to 78% (vs 75% prior year).
• Operating leverage and profitability: Adjusted EBITDA $24.5M (+174% YoY) and margin 20% (vs 10% prior year) as opex as % revenue fell to 73%.
• Management quote: “Revenue grew 34% YoY to $124.5 million and Adjusted EBITDA rose 174% YoY to $24.5 million… we’re raising full-year guidance” — CFO Russell Burke.
• Strategic expansion: announced acquisition of Nativo to build end-to-end ads stack and expand offsite reach (premium publishers, SSP/DSP integrations).

What Went Wrong

• Hardware headwinds: standalone hardware gross profit/margin impacted by tariffs; hardware revenue down 4% YoY; ASP down 6% YoY due to mix/discounts.
• MAU growth moderated vs unusually strong comps; focus shifted to higher-intent cohorts for conversion (still strong net adds, but lower overall MAU growth pace vs last year’s exceptional burst).
• Elevated sales & marketing for seasonal campaigns and Pet GPS launch, muting near-term opex leverage trajectory (still improved vs revenue).

Transcript

Raymond Jones (VP of Investor Relations)

Our third quarter 2025 earnings conference call. This call is being conducted as a Zoom audio webinar. All participants will be in a listen-only mode until the question-and-answer session. When we come to the 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 factors section in our Form 10-K filing with the SEC dated February 27, 2025, and our Form 10-Qs filed with the SEC dated May 12, 2025, August 11, 2025, and November 10, 2025. These forward-looking statements are based on assumptions that we believe to be reasonable as of today's date, November 10, 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 and a business update from our Chief Executive Officer, Lauren Antonoff, with a comment from our co-founder and executive chairman, Chris Hulls. Our Chief Financial Officer, Russell Burke, will walk through the Q3 2025 financials.

Lauren 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 Lauren.

Lauren Antonoff (Executive Director and CEO)

Good afternoon to everyone joining from the U.S., and good morning to those of you tuning in from Australia. Thank you for joining our third quarter results call. Q3 2025 was another record quarter for Life360. We reached all-time highs in paying circles and global net subscription ads while continuing to advance our vision of becoming the go-to platform for everyday family life. These results reflect our outstanding product-market fit, the strength of our premium model, and most importantly, the trust we built with millions of families who depend on Life360 every day to keep their family safe and manage the day-to-day chaos of family life. Our growth engine is fueled by the peace of mind that Life360 provides families who use our platform to stay connected to the people, pets, and things they love.

Our premium model continues to drive delight and encourage upgrades to premium features such as unlimited place alerts that give families a heads-up when mom leaves work or dad stops by their favorite sandwich shop. Our free offering is now even more valuable to families with the introduction of our new Pet Finder Network, which I'll come back to in a moment. Because of our outstanding value, the majority of our growth remains organic, driven by word of mouth and increasing brand awareness. This quarter, we continued to deliver innovative experiences like no-show alerts. We spotted a pattern where nervous parents continually checked to see if their kid arrived, and we decided to create a feature to reduce anxiety by flipping this experience on its head. Now we can alert parents when a loved one doesn't arrive on time at a designated location. No need to keep checking.

It's one more way we're giving families peace of mind and making everyday family life better. We delivered no-show alerts just as kids were heading back to school, and we've seen outstanding engagement with over 1 million alerts configured to make sure that people arrive safely as expected. We also deepened our partnership with AccuWeather, the world's most accurate and widely used source of weather forecasts and warnings. Last quarter, this partnership delivered severe weather alerts to our members. In Q3, we took it a step further by extending these alerts to the entire circle so every family member is notified when weather threatens someone they care about. This integration, as with our work with Uber, highlights how major brands are recognizing Life360 as a true platform, not just another location-sharing app.

We're creating monetizable experiences that drive far higher engagement than traditional ads and genuinely add value to our members' daily lives. Unlike banner ads that users simply tolerate, our AccuWeather experience shows why people choose Life360. It makes the platform more useful, relevant, and uniquely positioned at the center of family life. We're also engaging members in creative ways, like our Life360 Pays For campaign, which was designed to reinforce our mission of making everyday family life better and build brand affinity by helping families manage real-life costs, from rent to gas to data plans. Our combination of product innovation and creative marketing with millions of views across the media spectrum continues to strengthen engagement across our platform. As a result, we added 3.7 million monthly active users in the third quarter, growing 19% year over year, bringing our total active users to nearly 92 million.

Our total paying circles grew 23% year over year to 2.7 million, achieving a record 170,000 net new additions, boosted by focus on our marketing efforts and optimization in our funnel, resulting in better conversion from free to paid in the US and international markets, especially within that first critical 30 days of use. While MAU growth is lower than the same period last year, it was led by our highest value user segments, reflecting an intentional shift in our marketing to focus paid media on users who are more likely to retain and convert. The strategy is working. Our 35- to 50-year-olds, which drive the majority of our monetization, reached record highs this quarter. The results speak for themselves with record growth in paying circles and strong brand awareness. At the same time, we continue to benefit from Life360's cultural relevance, which extends well beyond our core target audience.

In recent weeks, we've been trending on TikTok because we created a product experience that hopped on the 6-7 meme. If you don't have teens, you might not know what that means, but millions of our younger members do. While we don't rely on Gen Z as primary converters, their enthusiasm fuels a powerful halo effect that keeps Life360 part of the broader cultural conversation. Just this week, one of our TikTok posts went viral with an astounding 2.2 million views. This visibility strengthens our brands with parents and families alike, proving that our position at the center of the digital zeitgeist is a real competitive advantage. Internationally, momentum remains strong. Paying circles outside the U.S. grew 29% year over year, with an 8% year-over-year ARPPC uplift driven by local pricing strategies and the continued success of premium tiers across the U.K., Canada, Australia, and New Zealand.

If these markets continue on the same trajectory as the US, and current trends suggest they will, there remains significant headroom for accelerated growth ahead. While we continue to experiment with our marketing levers, the results we've seen give us confidence that edgy, creative, disciplined marketing investment, and most importantly, a product that delights customers, will continue to drive durable growth for many years to come. On top of growing our membership base, we're deeply committed to increasing the value we deliver to our members, including extending Life360's impact beyond the phone. Our connected devices play a critical role in expanding our reach and deepening engagement, giving families more ways to stay connected.

We took a big step forward on this front as we launched Life360 Pet GPS, which brings to life our vision to connect families with the people, pets, and things they love on one map and extends the peace of mind we're known for to furry family members. This is our first product designed specifically for pets, and it's now available in the United States, Canada, the U.K., Australia, and New Zealand. We took a measured approach to our initial launch, and while it's too soon to provide forecasts, early demand exceeded our initial expectations, selling out in most regions within days. One in three pets becomes lost at some point during their lifetime, and family with pets represents a significant opportunity covering nearly 70% of U.S. households.

Young families tend to get their first pet before they have kids, and certainly before the age that kids get their own phone. Pets do not head off to college, meaning that our Pet GPS makes subscriptions more valuable to families through all life stages. Our goal with pets goes far beyond selling devices. We have an opportunity to raise the bar for what it means to be a responsible pet parent. We are committed to driving awareness and education about how to keep pets safe. Pet owners have been led to believe that a microchip or Bluetooth tracker will help with their pet escapes, and I know from personal experiences that these solutions are outdated and woefully unsuited to the job. To make use of a microchip, someone needs to capture your pet and take it to a vet or a shelter.

Not only does that count on extraordinary effort, but trying to catch a lost dog can put both the dog and the person in danger. Bluetooth trackers work great when your dog is at home on the couch, but they're ill-suited for a dog on the run. The best way to get a dog home safely is to equip them with a GPS tracker that tracks your pet in real time so you can close the distance quickly and bring them home safely. While Pet GPS is the best way to keep a pet safe, at Life360, we want to keep every pet safe, even those without a tracker. Our community-powered Pet Finder Network draws on our nearly 92 million members to help reunite lost pets with their family by sending a lost pet alert to members nearby.

Pet GPS and our Pet Finder Network expand our relevance to even more households and reinforce our position as the go-to platform for everyday family safety. Families already trust Life360 to keep their loved ones connected and safe, and that trust gives us a strong foundation to lead in this growing category. Beyond subscriptions and hardware, we continue to advance our strategy to build high-margin complementary revenue streams. Q3 other revenue grew 82% year-over-year to $16.9 million, with strong performance in advertising. We're still early in our advertising roadmap, but we're making progress building the full operating stack that will power long-term growth. Our place ads and uplift products are live and gaining traction, enabling brands to reach families in relevant real-world moments and measure the impact of their ad campaigns. At the same time, we're enhancing our programmatic partnerships and data integrations to improve targeting, delivery, and performance.

This phase is about building the right foundation, bringing together the people, technology, and relationships that will allow us to efficiently and effectively scale. The momentum we're seeing fuels our confidence that advertising is on track to become a durable, high-margin growth engine for Life360. To accelerate our vision, we've entered into an agreement to acquire Nativo, a best-in-class advertising technology company. Nativo brings full-stack ad technology, a seasoned team, and hundreds of advertiser and publisher relationships that will allow us to scale our ads business faster and more efficiently while maintaining the high editorial and privacy standards that define the Life360 promise. We expect this combination to accelerate our advertising roadmap, expand our offsite reach, and position Life360 to deliver a unified ad platform that seamlessly connects our audience with broader publisher networks.

It's a major step forward in creating a differentiated, full-funnel solution for brands and agencies, and importantly, it advances our mission to grow advertising in a way that's consistent with our commitment to families. We look forward to welcoming the Nativo team to Life360 once that transaction closes. Before I conclude, I've asked Chris to share a few thoughts from his new role.

So Chris, over to you.

Chris Hulls (Executive Chairman)

Thanks, Lauren. I'll keep it brief. The transition has gone incredibly smoothly, and it's great to see how well the company is executed while continuing to advance our long-term vision. If I had to sum up this quarter in one theme, it's that we're proving Life360 is not just an app, it's a platform that's always been at the heart of the 360 in our name.

With the launch of our new device, people, pets, and things are now fully integrated into the Life360 map, and we're the only player in the space with a complete family-focused hardware and software ecosystem, and it shows how far ahead we are of any direct competitor. The Nativo acquisition is another major milestone. We've long said that indirect revenue could one day rival subscriptions, and this deal accelerates that vision. Nativo isn't just about adding more ads, it's about enabling third parties to use our location intelligence in privacy-safe ways that improve their performance while preserving the experience of our free users who remain the foundation of our platform.

Finally, it's great to see Life360 jumping on the 6-7 trend and going viral on TikTok again, this time organically from the team, which means in a very genuine way, I'm very happy I do not have to reprise my role as an influencer. I'm excited to continue supporting the team as Executive Chairman, and back to you, Lauren.

Lauren Antonoff (Executive Director and CEO)

Thanks, Chris. I'm incredibly proud of the team for delivering another outstanding quarter of balanced growth and disciplined execution. We continue to scale our core subscription business, expand our high-margin revenue streams, and invest in new innovations that make everyday family life better. With momentum in our core business, the successful launch of Pet GPS, and continued expansion in advertising with the addition of Nativo, we're confident in our trajectory as we enter the holiday season and head into 2026.

With that, I'll hand it over to Russell to walk through the financials and our continued progress and profitability.

Russell Burke (CFO)

Thanks, Lauren, and thank you all for joining the call today. As a reminder, the Q3 financials I'll be referencing are unaudited and denominated in US dollars. We are very pleased to report another record quarter reflecting continued strength in our core subscription business, accelerating momentum in advertising and data revenue, and disciplined expense management. Q3 total revenue grew 34% year-on-year to $124.5 million, with continued strong momentum. Subscription revenue increased 34% to $96.3 million, while core Life360 subscription revenue, which excludes standalone hardware subscriptions, rose 37%. The increase was driven by sustained global paying circle growth and ongoing improvements in conversion across both US and international markets. Other revenue grew 82% year-on-year to $16.9 million, fueled by strong performance from our expanding advertising platform and partnerships.

We continue to see advertiser demand scaling as expected, supported by new formats and higher engagement. Standalone hardware decreased 4% year-on-year to 11.3 million. Unit sales increased 15% year-on-year, driven by strength in online channels. Standalone hardware gross profit and margin were impacted by tariff-related costs. Absent those tariffs, both would have been positive. We view the tariff impact as manageable long-term, and we took steps earlier in the year to largely mitigate it. Our focus remains on driving adoption, not short-term standalone hardware margin, as devices continue to be an important funnel into our subscription ecosystem. Looking ahead, our Q4 outlook includes the impact of promotional launch pricing for Life360 Pet GPS across all markets. This pricing was strategic and time-limited, focused on driving adoption and engagement within paying circles.

Pets GPS operates exclusively with a paid Gold or Platinum membership, which delivers the near-real-time GPS visibility and integrated safety experience families expect from Life360. We've structured device pricing to minimize friction and expand the pool of paying members, which aligns with our long-term strategy. This approach is fully reflected in our Q4 guidance and supports our goal of growing high-value subscribers rather than focusing on near-term device margins. We are still in the early stage of the Pets GPS launch and will share more detail at year-end. Turning back to Q3 results, annualized monthly revenue reached $446.7 million, up 33% year-on-year, underscoring the durability of our high-quality recurring revenue model. Gross profit increased 39% year-on-year to $97.1 million. Gross margin was 78% compared with 75% a year ago, reflecting mix shifts in the quarter.

Operating expenses, excluding commissions, grew 20%, well below our revenue growth rate, demonstrating continued operating leverage. Year-over-year, you'll see a visible shift in marketing spend as we ramp campaigns ahead of our Pet GPS launch and key holiday promotions. These were planned investments that support long-term subscriber growth and product adoption. Breaking it down by expense line, R&D rose 12%, reflecting ongoing product innovation and scaling of our data and ad tech capabilities. Sales and marketing increased 27%, primarily driven by seasonal campaigns and commissions in line with subscription growth. G&A grew 31%, consistent with the overall pace of company expansion. We also continue to test purchase path variations to enhance conversion efficiency across platforms. Profitability continues to strengthen. Net income for the quarter was $9.8 million compared to $7 million in Q2 and $7.7 million in Q3 last year.

Adjusted EBITDA rose 174% year-on-year to $24.5 million, representing a 20% margin, our 12th consecutive quarter of positive adjusted EBITDA and further progress towards our target of 35% plus. Turning to the balance sheet, we ended the quarter with $457.2 million in cash, cash equivalents, and restricted cash. We remain in a strong position with strategic flexibility to pursue investment opportunities. Operating cash flow was positive for the 10th consecutive quarter at $26.4 million, up 319% year-over-year. In summary, Q3 demonstrated that Life360's growth engine remains strong and efficient, with record revenue, expanding high-margin businesses, disciplined cost control, and clear line of sight to increasing profitability. Before we move to guidance, I'd like to share some additional context on the exciting step forward for our advertising business.

As Lauren mentioned, we entered into an agreement to acquire Nativo, a leading native advertising technology company, for approximately $120 million in a combination of cash and stock and subject to customary closing conditions. This acquisition positions Life360 to compete at scale with a unified end-to-end advertising platform that expands our reach and will unlock meaningful revenue potential. The acquisition will be accretive to adjusted EBITDA from day one and reinforces our commitment to growing adjusted EBITDA margins through high-quality complementary revenue streams that deliver long-term shareholder value. Because the transaction is expected to close in early 2026, we do not anticipate any financial impact in 2025.

Nativo currently generates roughly twice the level of advertising revenue that we expect to deliver this year, with a different margin profile that reflects its position across the full ad tech value chain, spanning the demand side, customer data, measurement, and supply side platforms, all of which typically carry lower gross margins than pure digital advertising. The company has approximately 125 employees, or about one quarter of Life360's current headcount, and brings full-stack technology, sales, and operations capabilities that will accelerate our advertising roadmap significantly. We expect both revenue and cost synergies to begin ramping in 2026, with full realization by year-end. Importantly, the acquisition further supports our longer-term goal of achieving 35% adjusted EBITDA margins.

With that, I'll hand it back to Lauren to review our updated outlook for the remainder of 2025.

Lauren Antonoff (Executive Director and CEO)

Thanks, Russell. As we look ahead, we remain confident in our ability to deliver consistent results through disciplined execution and our continued commitment to making everyday family life better for millions of families worldwide. With the launch of our new Pet GPS across key markets and continued momentum in our advertising business, we're extending our reach and deepening our engagement across the platform. With that foundation and the strength of our subscription model, we're focusing on finishing the year strong, and we're raising full-year 2025 guidance as follows. We're increasing our consolidated revenue guidance from the previous range of $462 million-$482 million to a new range of $474 million-$485 million. We're raising subscription revenue guidance from the previous range of $363 million-$367 million to the new range of $366 million-$368 million.

We're also raising the range of hardware revenue guidance from $42 million-$50 million to the new range of $46 million-$50 million. We expect full-year gross margin on hardware to be negative single digits due to the impact of tariffs and the launch of Pet GPS. We're also raising the range of our other revenue guidance, which includes advertising and partnerships, from the previous range of $57 million-$65 million to a new range of $62 million-$67 million. Finally, we're raising our guidance for adjusted EBITDA from the previous range of $72 million-$82 million to a new range of $82 million-$88 million. This concludes our prepared remarks, and now I'll turn the call over to RJ, who will manage the question and answer portion of our call.

Raymond Jones (VP of Investor Relations)

Thanks, Lauren. 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 your question. As a reminder, please limit your initial query to one question so that we may get to as many participants as possible. With that, we'd like to open it up to Maria Ritz from Canaccord. Could you please unmute your line?

Maria Ripps (Senior Equity Research Analyst)

Yes, Greg, thanks so much for taking my question and appreciate all the call on the Nativo acquisition. I guess, did you expect the platform to maintain its existing advertiser base? And sort of how do you see the upgrading model evolving here sort of over time once you integrate the acquisition? Thank you very much.

Lauren Antonoff (Executive Director and CEO)

We definitely see the Nativo acquisition as additive. We continue to work on the base of both features and momentum that we have in Life360, and we expect that to accelerate with the technology that Nativo is bringing in, in addition to bringing the momentum in their business.

Maria Ripps (Senior Equity Research Analyst)

Great, thank you.

Raymond Jones (VP of Investor Relations)

Thanks, Maria. Next, we'd like to open it up to Efitani Sotryou from MST.

Lafitani Sotiriou (Senior Equity Research Analyst)

Thank you. And two quick questions or clarifications for me. I know it's only one question, but can I just clarify within the Nativo acquisition, Russell, you're sort of talking in code a little bit around the revenue run rate. Could you just tell us roughly what the revenue run rate is of Nativo and roughly the cost base, you know, broadly for FY25? So we've got a base to sort of include it going forward. With the Pet GPS, can you talk to, I know it's only early days, but can you talk to the conversion or the engagement of free users adopting the Pet GPS versus existing subscribers?

Russell Burke (CFO)

Taking those one at a time, we're not going to give a huge amount more detail, but I think we clearly said you've got a good sense of our advertising revenue for 2025. Nativo's on a roughly twice that run rate. At the same time, they would have expected without this acquisition to be in a small adjusted EBITDA positive situation next year, which, yeah, once we add in the combination with Life360, we absolutely expect that to be, as I said, positive adjusted EBITDA accretive from day one. That would give you enough to come back to both the revenue run rate and the cost base. In terms of Pet GPS, the early phase was really focused on our existing members. From the initial launch, it largely went to existing members and then has moved really targeted towards free members. It is very early stages in terms of adoption at this point, and I think we will be able to give you a lot more color at year-end.

Lafitani Sotiriou (Senior Equity Research Analyst)

Now, thanks, Russell. Can I clarify? Are you talking about advertising including all buckets in other revenue, or are you calling out advertising as a component excluding data income and all that?

Russell Burke (CFO)

For the comparison piece, it is the advertising excluding data. I think, as you know, that is approaching sort of 50% of other revenue at this point.

Lafitani Sotiriou (Senior Equity Research Analyst)

Got it. Thank you.

Raymond Jones (VP of Investor Relations)

Thanks, Laff. Next, we would like to open up the line to Mark Mahaney from Evercore. Mark, are you on by chance?

Mark Mahaney (Senior Equity Research Analyst)

Okay, now I am. Thank you, RJay. Let's see. Russell, you talked about margins long-term moving from that 20% level to the 35% plus. What would be the biggest factors that would cause that margin to go more quickly or more slowly? Is it the rate, or let me ask it this way, the rate of margin expansion that we've seen over the last year or two? Is that the way loosely to think about margin expansion going forward? Lauren, could I ask you, when you think about the product development roadmap from here, what are your top priorities just in terms of new products that you want to offer to existing customers? Thank you.

Russell Burke (CFO)

Mark, on the first part, I think there's two major factors in terms of margin expansion. One is purely scale, as we've demonstrated over the last couple of years in particular. As we increase scale, we're really able to leverage operating costs quite effectively. Even just with that, we see a sort of a clear path to those adjusted EBITDA margins. On top of that, we are increasing the mix of higher margin revenue within our total revenue base. That contributes to that as well.

Mark Mahaney (Senior Equity Research Analyst)

That's advertising as the higher margin businesses?

Russell Burke (CFO)

That's the biggest factor, yes.

Lauren Antonoff (Executive Director and CEO)

Okay. Speaking a little bit about our roadmap, the thing that we want to make sure that we do is not to dilute our focus too much. We've introduced a lot of new experiences with things like our advertising business and now Pet GPS, and we want to make sure that we're taking the time to really nurture those ad capabilities, incorporate customer feedback, and we think there's a lot of opportunity on a lot of the new things we've started already. In addition, the thing that powers this business is our core app experience.

As we've pointed out with our new map experience, we're continually investing in enriching and uplifting that core experience. While we have a lot of extensions to the business that we plan to do over time, our focus isn't primarily adding new products right now. It's making the things we have better. I'll say the one thing that we are starting to work on is specifically making our app a much better place to attract aging parents. We are starting to work on that. That is something we have planned for a long time, and in 2026, it will get a lot of our focus.

Mark Mahaney (Senior Equity Research Analyst)

Lauren, would you expect the pet customers to be what percentage of those do you think would be your existing customers over the next couple of years versus those that are just completely new to the platform that just have different needs, like people who have pets and do not have kids?

Lauren Antonoff (Executive Director and CEO)

Yeah, our focus certainly is on our members. I think that is where we have the most differentiated offering, and that is where our focus is initially. My hope is that as we convince the world that every pet needs this kind of protection, that that starts to balance out over, I think, a much longer time horizon, we'll start to get more people from the outside, but it's not our focus right now.

Mark Mahaney (Senior Equity Research Analyst)

Okay, thank you, Lauren.

Raymond Jones (VP of Investor Relations)

Thanks, Mark. I'd like to open up the line next to Eric Crowe from Baron Joey. Eric, could you unmute your line?

Eric Choi (Equity Research Analyst)

Oh, hey, thanks, team. Just one quick follow-up on pets. You guys mentioned it's outperforming, and I just wanted to drill into that a little bit. Notice you've taken off the discounts for some trackers, so I was just wondering, does that mean the average profitability per sub could be better than what you're expecting? We've also been kind of signing up various members of the team to pet trackers at different times and just comparing order numbers, and we've noticed that the rate of sales hasn't really slowed as well.

I just wonder, has the continued momentum been better than what you expected, and it's not just a short-term sugar hit? And then just as part of the outperformance question, you've answered to everyone else. It seems like the majority of new pet tracker sales has been existing customers. Is that right, or has that new—I appreciate that new component might be small, but how has that performed versus your expectations as well? Thank you.

Russell Burke (CFO)

Okay, there's a few questions in there, Eric, so we'll try and cover all of those. I think generally, as we've said, the Pet GPS launch performed much better than we expected at launch point. And the embrace by our existing members was very, very strong. As we move forward, that sort of balancing between paid and existing members, and then we, as Lauren said, we look to bring completely new people into the ecosystem as well. I think we're also experimenting a little bit with pricing in a couple of territories, but we've largely taken the promotional price point away.

The pricing now in most territories is largely as we had planned it to be. It is still, as we've said in the past, a subsidization effectively on the actual hardware cost because the strategy here is to drive people into subscription. That we trust will work effectively. We'll have a lot more color on that at year-end.

Raymond Jones (VP of Investor Relations)

Thanks, Eric. Next, we'd like to open the call to Mark Kelly from Steeple. Please unmute your line.

Mark Kelley (Senior Equity Research Analyst)

Hey, great. Thanks, guys. I just wanted to go back to Nativo. I just want to understand, I guess, since it's a full-stack offering, that business is already serving publishers on the SSP side, and then it looks like there's a self-serve platform kind of DSP business. I guess, should we expect that advertising revenue for other publishers and also ads that the current buyer base is buying off of Life360, will that become part of your revenue? I'm just trying to understand. I know you obviously probably bought it for the technology, but just trying to understand better the mechanics of the revenue that it generates today. Maybe kind of a quick follow-up. Is that revenue booked gross or net of the value of the ads? Thank you.

Russell Burke (CFO)

Right. Mark, you're absolutely right. The exciting part of the acquisition for us is the fact that this is a full-stack, broad-spectrum advertising platform that we'll be able to use to really accelerate our advertising roadmap. That is the strategy behind the acquisition. You're absolutely correct. They have a solid existing business with a good range of publishers and a good range of advertising contexts and sales staff, all of which will help us really move our advertising business forward. Yes, we expect to continue that business. We expect to use that to enhance the Life360 business and enlarge it and accelerate it as we move forward.

Mark Kelley (Senior Equity Research Analyst)

Okay, great. Thanks, Russell.

Raymond Jones (VP of Investor Relations)

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

James Bales (Equity Research Analyst)

Hi, guys. I had a question on MAU growth. In the past, I think Chris has described it as sort of North Star. Third quarter is typically the seasonally strongest part of the year. This year, you had an ad campaign that you guys were really excited about. I guess I'd like to understand why it slowed so significantly year on year and explain maybe those comments earlier about targeting consumers that are more likely to convert.

Russell Burke (CFO)

I'll start with that, James, and Lauren might want to add a bit more color. I think there's a few pieces to that. In the past, we've also said that MAU growth can vary significantly from period to period, and we see that often. In that respect, the comps from last year to this year are unusually difficult, if you like, because we had an exceptionally high MAU growth across international, in particular, last year across multiple territories. This year, it's still very strong, but we wouldn't expect that sort of exceptional growth to occur again. As well as that, you referred to the advertising campaign. We were and are very excited about the moves that we're making in marketing. There are two aspects to that.

One is the fact that the creative is exciting, but also directed towards demand generation. That means, as you mentioned, we're really targeting users at the top of the funnel that are more likely to convert. The quality of people coming through the funnel and our conversion rates are very strong, as you can see with the record net paying circle ads. The other minor aspect for advertising is that we did launch a major campaign in Q2, which really accelerated things for Q2 and possibly had a little bit of pull-forward impact from Q3.

James Bales (Equity Research Analyst)

All right.

Raymond Jones (VP of Investor Relations)

Thanks, James. Next question we'd like to hear from is from Chris Guntaric from UBS. Please unmute your line. Chris from UBS, hopefully you're there.

Russell Burke (CFO)

You there, Chris?

Raymond Jones (VP of Investor Relations)

Okay, we'll come back to Chris. Next, we'd like to open it up to Siraj Ahmed from Citi. Siraj, are you on the line? Please unmute.

Siraj Ahmed (Equity Research Analyst)

Hi, can you hear me okay?

Russell Burke (CFO)

We can.

Siraj Ahmed (Equity Research Analyst)

Thanks. Just following up on the question from James on that MAUs, right? Lauren, you sort of mentioned you're focusing on higher intent members, but if we look at the stats that you've given in slide 15, I think with circles with families with teens has actually decreased a bit, and it looks like members but paying circles also come down from 3.3 to 3.2. It's just keen to understand what dynamics playing there if you're actually saying you're getting some of the higher intent MAUs in. Maybe just a quick one for Russell, just in terms of the other revenue strength this quarter, can you just confirm that's actually been driven by ads and not your Placer.ai partnership? Within ads, I think you had a partnership with Aura. Has that kicked in as well in this quarter? Thanks.

Russell Burke (CFO)

I'll start with the end piece of your question, and then Lauren can come back to the earlier piece. In terms of—sorry. What was the last part of your question again, Siraj?

Siraj Ahmed (Equity Research Analyst)

Two things. On the other revenue, was that really driven by advertisements or the partnerships? Within ads, you had that Aura partnership that was meant to kick in from an ad perspective, right? Has that kicked in? Yep.

Russell Burke (CFO)

Yes, it has, although the major part of the Aura advertising revenue will flow through in Q4. To the other part of your question, yes, the major growth in Q3 relates to advertising. There is a small element related to data and other revenue and partnerships, but it is primarily driven by advertising.

Lauren Antonoff (Executive Director and CEO)

Stepping back to this question of how we are focusing our advertisement, a lot of the focus this quarter was on that optimization, targeting those people who convert. That is where we have seen this really great uplift in those people who convert in the first 30 days. That is what is helping to drive our outstanding conversions. We are always playing around with those optimizations.

Siraj Ahmed (Equity Research Analyst)

Lauren, just clarifying, so that member is going down to 3.2. Is that just a function of you getting younger couples, younger families, or something like that?

Russell Burke (CFO)

I mean, it is a relatively small variance from 3.3 to 3.2. I think there's a number of factors that drive that, but it's more just the growth in the base that can drive those sort of minor variations.

Lauren Antonoff (Executive Director and CEO)

Yeah. A lot of our circles start smaller and grow over time. And so when we have more new circles, those are smaller circles than bigger circles. So don't read too much into that, I would say.

Siraj Ahmed (Equity Research Analyst)

Thanks.

Raymond Jones (VP of Investor Relations)

All right. Thanks, Russ. Next, we'd like to open it up to Rob Sanderson. Are you available? Please unmute your line.

Rob Sanderson (Equity Research Analyst)

Yes. Thank you. Good evening. Good morning, wherever you might be. I guess a couple of questions. First, just subscription guidance that you had a very strong Q3, notable upside to consensus, but your midpoint for Q4 a little bit below. So just anything unusual about seasonality, Pet GPS, other factors, like maybe trees just sort of mismodeling? I'm not sure, but anything you could say about the subscription guidance? I had a follow-up on Nativo as well.

Just talk about the importance of the differentiation of just in-feed native content compared to other display networks. I understand it's more of a technology buy, but also want to understand how you can leverage the existing business and the reach. You said hundreds of publishing partners. Lauren also mentioned connecting to publisher networks. Are these direct deals or publisher networks? Is it relatively easy to scale up the supply side here if you can generate?

Lauren Antonoff (Executive Director and CEO)

We're not going to remember all these questions.

Russell Burke (CFO)

Let me take the first part of your question, and then Lauren can provide a bit more color on the Nativo platform. There's nothing unusual in subscription. I think Q3 is typically our sort of metric-wise our strongest seasonal period. Coming into Q4, we're seeing the same levels of strength. There's nothing particularly unusual in terms of subscription in Q4. I suspect it's probably just a modeling aspect of the mix of revenue.

Rob Sanderson (Equity Research Analyst)

Okay. I'll repeat that, Lauren, on Nativo. Differentiation of in-feed versus display, why that's important to understand in terms of its positioning. How can you leverage the existing business? You said hundreds of publisher partners, but also mentioned networks. I'm curious whether it's direct deals or publishing networks. Finally, is it relatively easy to scale the supply side of this if you can bring the demand?

Lauren Antonoff (Executive Director and CEO)

One of the things that was really exciting to us about Nativo is they focus on making ads that are relevant to consumers, and that helps brands, and that also is good for the people who are seeing the ads. In particular, we're interested in families and what the impact is on Life360 families. That was a real differentiator for us. Their business is pretty multifaceted. They have both direct and programmatic deals. We're interested in both sides of those and plan to continue to invest in those. The scale of their publisher relationships is quite extensive and allows us to take a lot of the good information and information about our members and use that to deliver experiences across a wide range of publishers.

Rob Sanderson (Equity Research Analyst)

Okay. Thank you both.

Raymond Jones (VP of Investor Relations)

Thanks, Rob. As a reminder to everyone, please limit yourself to one question so that we can get through the entire queue. Next, we'd like to open it up to Bob Chen from JP Morgan. Please unmute your line.

Bob Chen (Senior Equity Research Analyst)

Hey, morning, guys. Quick one for me, and I think you touched on it earlier, Lauren. You mentioned one of the key product areas of focus for next year is making the app more user-friendly for elderly. Any comments on sort of timeline on when we might see an elderly product come to market as well?

Lauren Antonoff (Executive Director and CEO)

Yeah. It depends what you mean by product. I think the first thing that we think about is today, many aging parents are using Life360, but not nearly as many as could be if all the families in Life360 brought in their parents. What we're looking at is what are those inhibitors? Why do people not come as often as they might? How do people come to think of Life360 as a way to keep their parents safe, just like it's a way to keep their kids safe? What do we need to do differently to make this a great solution for those people?

The work in that will continue, I think, on an ongoing basis throughout the year. I would expect that you would be seeing some of that stuff by midyear and continuing to see that, potentially even sooner, and continuing to see that throughout the year. In terms of bringing sort of a standalone product offering with something like hardware, we do not yet have a timeline on that, but we are continuing to use all the resources that we have to solve family problems in a multifaceted way.

Bob Chen (Senior Equity Research Analyst)

Fantastic. Thanks.

Raymond Jones (VP of Investor Relations)

Thanks, Bob. Next, we'd like to open up the line to Chris Guntaric from UBS. Please unmute your line. One more time for Chris at UBS. Okay. We'll come back to Chris again. Next, we'd like to open up to Andrew Boone from Citizens. Andrew, please unmute your line.

Andrew Boone (Senior Equity Research Analyst)

Thanks so much for taking the question. I wanted to go back and just hit on Nativo again, just like everyone else. We talked about the opportunity of the subscription business being as big as kind of other at large. Lauren, can you just paint the five-year picture for us of what does that kind of look like? What are you guys building on the advertising side? What's the opportunity in a multi-year context of what you guys can put together here and what that looks like? Thank you.

Lauren Antonoff (Executive Director and CEO)

Yeah. So what we envision for our advertising business is one where we can take all of the value and insights that we have about our members and use that to connect brands with a wide range of publishers on many platforms. Not just within the Life360 app, but in a multitude of apps in ways that are really relevant. With that, be able to deliver better performance on those ads that we also can measure through our measurement products like Uplift. That way we have sort of this end-to-end solution where we have those insights, we help people target the right audiences, we deliver app experiences both inside our app and outside our app that are more compelling and more relevant. Then we can measure the results of those for brands. I hope that's helpful.

Andrew Boone (Senior Equity Research Analyst)

Thank you.

Raymond Jones (VP of Investor Relations)

Thanks, Andrew. Next, we'd like to open up the line to Weiwing Chen from RBC. Please unmute your line.

Wei-Weng Chen (Equity Research Analyst)

Hey, guys. Yeah, more Nativo questions for me as well. I guess, can you help quantify how much faster this acquisition allows you to move? How many years of development and how much cost has Life360 avoided by making this acquisition? I guess you mentioned Nativo is about 2x your revenue, but Life360 has kind of built this revenue base over 12 months, but Nativo has been around since 2010. Can you maybe speak to the growth rate of Nativo and how we should think about a forward-blended growth rate for the advertising business?

Russell Burke (CFO)

Taking the last part of your question first, Wayne, the 2x revenue is just to give you a sort of a concept of scale so that as we look at the combined businesses going forward. You're right, Nativo has been around since 2010. They built this business from scratch, basically. They were very much a pure startup. They've created the business that they're doing and created that quite successfully over a period of time.

Again, the attraction for us here is the platform that they've built, the ad tech, the publisher relationships, the sales staff, the infrastructure that they've put together on creating this sort of full-stack ad tech platform. That's the piece that's exciting for us. We could debate in terms of how long it would have taken us to build and what that would have cost. Clearly, from our point of view, this accelerates our roadmap, probably in the range of 12-18 months.

Wei-Weng Chen (Equity Research Analyst)

Cool. Thank you.

Raymond Jones (VP of Investor Relations)

Thanks, Weiwing. I'd like to open up the line to Lindsay Betchell from Goldman Sachs. Lindsay, please unmute your line.

Lindsay Bettiol (Equity Research Analyst)

Yeah. Hi, guys. Hopefully, you can hear me. Yep. Yeah. Brilliant. Okay. I'm going to have a crack at a question that's been asked a couple of ways just on the other revenue front. It looks like advertising accelerated pretty meaningfully Q1Q. So I've got something like 60% growth. You've called out existing arrangements and an increased number of partners. Could you maybe just delineate those two and talk to us a bit about whether it's an existing partner paying a lot more, or it's like you've seen kind of meaningful growth in the new number of partners using advertising? Thanks.

Russell Burke (CFO)

I mean, in terms of advertising, it's largely a ramp-up of the various things that we're doing. We've talked about the various products that we've launched in the last couple of quarters. There's probably no one significant piece that would accelerate that. That's going to be sort of somewhat uneven. We also talked about the Aura partnership. As I said earlier, the larger part of that advertising piece, at least, will flow through in Q4. There's those pieces. Again, just to give you a sense of where that's at, as I said before, as we look at the full year, we expect advertising revenue to be coming up towards half of other revenue in total.

Lindsay Bettiol (Equity Research Analyst)

Brilliant. All right. Thanks, guys.

Lauren Antonoff (Executive Director and CEO)

Thanks, Lindsay. Next, we'd like you to open up the line to Jennifer Chu from Jefferies. Jennifer, please unmute your line.

Jennifer Xu (Equity Research Analyst)

Thank you. Thank you, everyone. I just have one question related to PAD. For PAD, when you comment that it is currently focusing on existing members, can I understand that PAD product is now expected to bring more conversion from free users to paid users rather than increasing MAU? How long does the conversion usually take and will that period of change be shorter due to the launch of the PAD?

Lauren Antonoff (Executive Director and CEO)

Yeah. Our focus is certainly giving our existing free member base a reason to convert. One of the blessings and challenges of Life360 is that customers love us a lot and do not always feel like they need to pay for it. This is a great reason for people who love the product to have a real concrete visible reason to pay. It is really too early for us to extrapolate the timing and when in someone's life cycle are they going to discover that. We certainly think it will apply to more members more often and earlier in their journey than in the past.

Jennifer Xu (Equity Research Analyst)

Yeah.

Raymond Jones (VP of Investor Relations)

Thanks, Jennifer. Next, we would like to open up the line to Chris Smith from Osbill. Chris, can you unmute your line?

Christopher Smith (Head of Equity Research)

Good morning. Thank you. I hope you can hear me. Look, really pleasing to see that the 20% growth in paying circles and even more so to see the Pet trackers obviously sell out across your key regions. Obviously, not trying to get a timing question here, but can you please talk to how you're going to use it as a conversion tool? Obviously, you've got 26 million non-paying circles on the platform. You could 10x the business just from the current levels if you actually just turn them into paying circles.

Within that, if you can maybe help us just understand, obviously, from a discount perspective, if you give away the hardware, you're losing the App Store commission. It's gross margin dilutive, but it's even dilutive at the bottom line. How are you thinking about from that conversion perspective, the gating of that product release to then target those 26 million circles that aren't currently paying circles, of which, what, 13 million must have pets?

Lauren Antonoff (Executive Director and CEO)

Yeah. This is exactly the point, providing value to members that is inherently linked to subscriptions. The Pet GPS requires that LTE connection in order to be able to give your pets real-time location. People understand that reason and understand that as a reason to pay. As we learn more about the price sensitivity and as we have more volume of units in stock, we're certainly willing to lean in and deliver units at a lower cost if we find that that helps us convert people faster. I think we're doing a lot of experiments to understand the price sensitivity and what allows us to scale the business and convince members to buy.

Russell Burke (CFO)

And Chris, as I think we've said before, there's a timing aspect to that. While it might be dilutive to standalone hardware margins, obviously, the intent here is to get people into high-margin subscription. And our intent and our expectation is that we'll be able to do that. It's just a matter of the timing of when that occurs and what that payback period becomes.

Christopher Smith (Head of Equity Research)

Great. Thank you. And personal anecdote, the Pet tracker life looks like it's probably three or four weeks, and I couldn't be more pleased with mine. So thanks for answering my question.

So happy to hear that.

Raymond Jones (VP of Investor Relations)

Thanks, Chris. We'll open up the line to laugh one more time for our final question.

Lafitani Sotiriou (Senior Equity Research Analyst)

Hey, guys. It's been answered. Thank you. All good. Thank you.

Raymond Jones (VP of Investor Relations)

All right. Thanks. Bye. All right. Let's conclude our call.

Lauren Antonoff (Executive Director and CEO)

Okay. Thank you, everybody, for joining us today. We appreciate it.