Life360, Inc. 10-Q

Item 1. Financial Statements (unaudited) 1 Table of Contents Life360, Inc. Condensed Consolidated Balance Sheets (Dollars in U.S. $, in thousands, except share and per share data) (unaudited) September 30, 2024 December 31, 2023 Assets Current Assets: Cash and cash equivalents $ 158,980 $ 68,964 Accounts receivable, net 48,850 42,180 Inventory 13,788 4,099 Costs capitalized to obtain contracts, net 1,037 1,010 Prepaid expenses and other current assets 12,706 15,174 Total current assets 235,361 131,427 Restricted cash, noncurrent 1,205 1,749 Property and equipment, net 1,782 730 Costs capitalized to obtain contracts, noncurrent 1,120 834 Prepaid expenses and other assets, noncurrent 11,199 6,848 Operating lease right-of-use asset 767 1,014 Intangible assets, net 42,279 45,441 Goodwill 133,674 133,674 Total Assets $ 427,387 $ 321,717 Liabilities and Stockholders’ Equity Current Liabilities: Accounts payable $ 19,088 $ 5,896 Accrued expenses and other current liabilities 28,239 27,538 Convertible notes, current ($ 0 and $ 3,449 measured at fair value, respectively) — 3,449 Deferred revenue, current 37,947 33,932 Total current liabilities 85,274 70,815 Convertible notes, noncurrent — 1,056 Derivative liability, noncurrent — 217 Deferred revenue, noncurrent 1,969 1,842 Other liabilities, noncurrent 453 723 Total Liabilities $ 87,696 $ 74,653 Commitments and Contingencies (Note 10) Stockholders’ Equity Common Stock, $ 0.001 par value; 500,000,000 and 100,000,000 shares authorized as of September 30, 2024 and December 31, 2023, respectively; 74,664,748 and 68,155,830 issued and outstanding as of September 30, 2024 and December 31, 2023, respectively 74 70 Additional paid-in capital 637,806 532,128 Accumulated deficit ( 298,195 ) ( 285,143 ) Accumulated other comprehensive income 6 9 Total stockholders’ equity 339,691 247,064 Total Liabilities and Stockholders’ Equity $ 427,387 $ 321,717 See accompanying notes to the condensed consolidated financial statements (unaudited). 2 Table of Contents Life360, Inc. Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Dollars in U.S. $, in thousands, except share and per share data) (unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Subscription revenue $ 71,833 $ 56,607 $ 199,090 $ 160,998 Hardware revenue 11,744 15,541 33,833 37,110 Other revenue 9,288 6,476 23,032 19,447 Total revenue 92,865 78,624 255,955 217,555 Cost of subscription revenue 10,659 8,267 30,367 22,700 Cost of hardware revenue 11,213 11,570 29,147 29,732 Cost of other revenue 981 902 2,790 2,625 Total cost of revenue 22,853 20,739 62,304 55,057 Gross profit 70,012 57,885 193,651 162,498 Operating expenses: Research and development 29,012 24,569 83,283 74,948 Sales and marketing 30,722 25,741 79,818 73,404 General and administrative 15,229 14,082 44,243 39,788 Total operating expenses 74,963 64,392 207,344 188,140 Loss from operations ( 4,951 ) ( 6,507 ) ( 13,693 ) ( 25,642 ) Other income (expense): Convertible notes fair value adjustment — ( 604 ) ( 608 ) ( 798 ) Derivative liability fair value adjustment — 63 ( 1,707 ) ( 177 ) Loss on settlement of convertible notes — — ( 440 ) — Gain on settlement of derivative liability — — 1,924 — Gain on change in fair value of investment 5,389 — 5,389 — Other income (expense), net 2,524 337 ( 1,772 ) 1,797 Total other income (expense), net 7,913 ( 204 ) 2,786 822 Income (loss) before income taxes 2,962 ( 6,711 ) ( 10,907 ) ( 24,820 ) Provision for (benefit from) income taxes ( 4,727 ) ( 170 ) 2,146 205 Net income (loss) $ 7,689 $ ( 6,541 ) $ ( 13,053 ) $ ( 25,025 ) Net income (loss) per share, basic (Note 17) $ 0.10 $ ( 0.10 ) $ ( 0.18 ) $ ( 0.38 ) Net income (loss) per share, diluted (Note 17) $ 0.09 $ ( 0.10 ) $ ( 0.18 ) $ ( 0.38 ) Weighted-average shares used in computing net income (loss) per share, basic (Note 17) 74,232,140 67,091,993 71,187,103 66,389,483 Weighted-average shares used in computing net income (loss) per share, diluted (Note 17) 82,083,976 67,091,993 71,187,103 66,389,483 Comprehensive income (loss) Net income (loss) $ 7,689 $ ( 6,541 ) $ ( 13,053 ) $ ( 25,025 ) Change in foreign currency translation adjustment — ( 17 ) ( 3 ) 9 Total comprehensive income (loss) $ 7,689 $ ( 6,558 ) $ ( 13,056 ) $ ( 25,016 ) See accompanying notes to the condensed consolidated financial statements (unaudited). 3 Table of Contents Life360, Inc. Condensed Consolidated Statements of Stockholders’ Equity (Dollars in U.S. $, in thousands, except share and per share data) (unaudited) Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Shares Amount Balance at December 31, 2023 68,155,830 $ 70 $ 532,128 $ ( 285,143 ) $ 9 $ 247,064 Exercise of stock options 277,309 — 2,307 — — 2,307 Exercise of warrants 41,685 — 94 — — 94 Vesting of restricted stock units 965,238 1 ( 1 ) — — — Taxes paid related to net settlement of equity awards — — ( 8,110 ) — — ( 8,110 ) Stock-based compensation expense — — 8,261 — — 8,261 Change in foreign currency translation adjustment — — — — 1 1 Net loss — — — ( 9,777 ) — ( 9,777 ) Balance at March 31, 2024 69,440,062 $ 71 $ 534,679 $ ( 294,920 ) $ 10 $ 239,840 Exercise of stock options 129,968 — 1,006 — — 1,006 Exercise of warrants 88,212 — 1,055 — — 1,055 Vesting of restricted stock units 428,378 — — — — — Taxes paid related to net settlement of equity awards — — ( 7,834 ) — — ( 7,834 ) Stock-based compensation expense — — 11,159 — — 11,159 Settlement of convertible notes 341,877 — 5,751 — — 5,751 Issuance of common stock net of underwriting discounts, commissions and issuance costs of $ 13,293 3,703,704 3 86,704 — — 86,707 Change in foreign currency translation adjustment — — — — ( 4 ) ( 4 ) Net loss — — — ( 10,964 ) — ( 10,964 ) Balance at June 30, 2024 74,132,201 $ 74 $ 632,520 $ ( 305,884 ) $ 6 $ 326,716 Exercise of stock options 128,727 — 1,103 — — 1,103 Vesting of restricted stock units 403,820 — — — — — Taxes paid related to net settlement of equity awards — — ( 7,427 ) — — ( 7,427 ) Stock-based compensation expense — — 11,610 — — 11,610 Net income — — — 7,689 — 7,689 Balance at September 30, 2024 74,664,748 $ 74 $ 637,806 $ ( 298,195 ) $ 6 $ 339,691 4 Table of Contents Life360, Inc. Common Stock Additional Paid-In Capital Notes Due from Affiliates Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Shares Amount Balance at December 31, 2022 65,239,843 $ 67 $ 501,763 $ ( 314 ) $ ( 256,972 ) $ ( 6 ) $ 244,538 Exercise of stock options 185,073 — 714 — — — 714 Vesting of restricted stock units 870,915 1 ( 1 ) — — — — Taxes paid related to net settlement of equity awards — — ( 5,731 ) — — — ( 5,731 ) Repayment of notes due from affiliate — — 77 314 — — 391 Stock-based compensation expense — — 8,955 — — — 8,955 Change in foreign currency translation adjustment — — — — — 24 24 Net loss — — — — ( 14,071 ) — ( 14,071 ) Balance at March 31, 2023 66,295,831 $ 68 $ 505,777 $ — $ ( 271,043 ) $ 18 $ 234,820 Exercise of stock options 146,056 — 855 — — — 855 Vesting of restricted stock units 389,550 — — — — — — Taxes paid related to net settlement of equity awards — — ( 2,820 ) — — — ( 2,820 ) Stock-based compensation expense — — 9,269 — — — 9,269 Change in foreign currency translation adjustment — — — — — 2 2 Net loss — — — — ( 4,413 ) — ( 4,413 ) Balance at June 30, 2023 66,831,437 $ 68 $ 513,081 $ — $ ( 275,456 ) $ 20 $ 237,713 Exercise of stock options 378,907 — 2,540 — — — 2,540 Vesting of restricted stock units 345,748 — — — — — — Taxes paid related to net settlement of equity awards — — ( 2,841 ) — — — ( 2,841 ) Stock-based compensation expense — — 9,454 — — — 9,454 Change in foreign currency translation adjustment — — — — — ( 17 ) ( 17 ) Net loss — — — — ( 6,541 ) — ( 6,541 ) Balance at September 30, 2023 67,556,092 $ 68 $ 522,234 $ — $ ( 281,997 ) $ 3 $ 240,308 See accompanying notes to the condensed consolidated financial statements (unaudited). 5 Table of Contents Life360, Inc. Condensed Consolidated Statements of Cash Flows (Dollars in U.S. $, in thousands) (unaudited) Nine Months Ended September 30, 2024 2023 Cash Flows from Operating Activities: Net loss $ ( 13,053 ) $ ( 25,025 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 7,058 6,844 Amortization of costs capitalized to obtain contracts 974 1,782 Amortization of operating lease right-of-use asset 247 690 Stock-based compensation expense, net of amounts capitalized 30,507 27,678 Compensation expense in connection with revesting notes — 73 Non-cash interest expense, net 59 331 Convertible notes fair value adjustment 608 798 Derivative liability fair value adjustment 1,707 177 Loss on settlement of convertible notes 440 — Gain on settlement of derivative liability ( 1,924 ) — Gain on change in fair value of investment ( 5,389 ) — Non-cash revenue from investment ( 965 ) ( 1,489 ) Inventory write-off — 916 Adjustment in connection with membership benefit — ( 2,172 ) Changes in operating assets and liabilities, net of acquisitions: Accounts receivable, net ( 6,670 ) ( 6,606 ) Prepaid expenses and other assets 3,506 ( 2,036 ) Inventory ( 9,689 ) ( 1,026 ) Costs capitalized to obtain contracts, net ( 1,287 ) ( 1,567 ) Accounts payable 12,058 ( 889 ) Accrued expenses and other current liabilities ( 2,736 ) ( 3,163 ) Deferred revenue 5,108 3,748 Other liabilities, noncurrent ( 270 ) ( 498 ) Net cash provided by (used in) operating activities 20,289 ( 1,434 ) Cash Flows from Investing Activities: Internal use software ( 3,228 ) ( 1,232 ) Purchase of property and equipment ( 63 ) ( 26 ) Net cash used in investing activities ( 3,291 ) ( 1,258 ) Cash Flows from Financing Activities: Indemnity escrow payment in connection with an acquisition — ( 13,128 ) Proceeds from the exercise of stock options and warrants 5,564 4,109 Taxes paid related to net settlement of equity awards ( 23,371 ) ( 11,392 ) Proceeds from issuance of common stock in U.S. initial public offering, net of underwriting discounts and commissions 93,000 — Payments of U.S. initial public offering issuance costs ( 2,719 ) — Proceeds from repayment of notes due from affiliates — 314 Repayment of convertible notes — ( 3,919 ) Net cash provided by (used in) financing activities 72,474 ( 24,016 ) Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash 89,472 ( 26,708 ) Cash, Cash Equivalents and Restricted Cash at the Beginning of the Period 70,713 90,365 Cash, Cash Equivalents, and Restricted Cash at the End of the Period $ 160,185 $ 63,657 6 Table of Contents Life360, Inc. Supplemental disclosure: Cash paid during the period for taxes $ 2,318 $ 538 Cash paid during the period for interest 46 640 Non-cash investing and financing activities: Right of use asset recognized in connection with lease modification — 1,054 Operating lease liability recognized in connection with lease modification — 1,054 Conversion of September 2021 Convertible Notes to common stock 3,548 — Conversion of July 2021 Convertible Notes and accrued interest to common stock 2,203 — Property and equipment included within accounts payable 1,134 — Stock-based compensation included in internal use software 523 — IPO-related transaction costs included in accrued expenses and other current liabilities 3,573 — The following table presents the cash, cash equivalents, and restricted cash reported within the balance sheets totaling the same such amounts shown above: September 30, 2024 September 30, 2023 Cash and cash equivalents $ 158,980 $ 61,848 Restricted cash, noncurrent 1,205 1,809 Total cash and cash equivalents, and restricted cash $ 160,185 $ 63,657 See accompanying notes to the condensed consolidated financial statements (unaudited). 7 Table of Contents Life360, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Nature of Business Life360, Inc. (the “Company”) is a leading technology platform connecting millions of people throughout the world to the people, pets and things they care about most. The Company has created a new category at the intersection of family, technology, and safety to help keep families connected and safe. The Company’s core offering, the Life360 mobile application, includes features like communications, driving safety, digital safety and location sharing. Beyond the everyday, Life360 also provides much-needed protection and saves lives, which is crucial for families in emergency situations such as natural disasters, vehicle collisions, physical property theft, and digital identity theft. The Life360 mobile application operates under a “freemium” model where its core offering is available to members at no charge, with three membership subscription options that are available but not required. The Company acquired Jio, Inc. (“Jiobit”) and Tile, Inc, (“Tile”) in September 2021 and January 2022, respectively, to create a comprehensive platform-agnostic location tracking solution for people, pets and things. Jiobit is a leading wearable location device for young children, pets and seniors and Tile is a leading product suite of location trackers for finding objects. The Company’s suite of product and service offerings, including the Life360 and Tile mobile applications, and related third-party services, is system and platform-agnostic, allowing its products and services to work seamlessly for its members, regardless of the devices they use. U.S. Initial Public Offering (“U.S. IPO”) On June 6, 2024, the Company completed its U.S. IPO and began trading on the Nasdaq Global Select Market under the trading symbol “LIF”. The Company issued and sold 3,703,704 shares of common stock and certain selling securityholders sold 2,908,796 shares of common stock (including 862,500 shares sold pursuant to the underwriters’ full exercise of their option to purchase additional shares) in each case at an offering price of $ 27.00 per share. The Company received net proceeds of $ 93.0 million after deducting underwriting discounts and commissions of $ 7.0 million. An additional $ 5.5 million of expenses were paid on behalf of selling securityholders. Refer to Note 15, "Related-Party Transactions" for further details. The Company did not receive any proceeds from the sale of shares of common stock by the selling securityholders. In connection with the U.S. IPO, the Company restated its certificate of incorporation to increase the authorized number of shares of its common stock from 100,000,000 shares to 500,000,000 shares. 2. Summary of Significant Accounting Policies Included below are select significant accounting policies. Refer to Note 2, "Summary of Significant Accounting Policies" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024 (“Annual Report”) for a full list of the Company’s significant accounting policies. Basis of Presentation and Consolidation The accompanying unaudited condensed consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries, have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim periods and following the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. All intercompany balances and transactions have been eliminated in consolidation. The condensed consolidated balance sheet as of December 31, 2023, included herein, was derived from the audited financial statements as of that date. In the opinion of the Company’s management, the condensed consolidated financial statements reflect all normal recurring adjustments necessary to provide a fair presentation of the Company’s financial position, results of operations, stockholders’ equity, and cash flows for the interim periods presented. Operating results for these interim periods are not necessarily indicative of the Company’s future results of operations. 8 Table of Contents Life360, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report. Use of Estimates The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, net revenue, and expenses. Significant items subject to such estimates, judgments, and assumptions include: • revenue recognition, including the determination of selling prices for distinct performance obligations sold in multiple performance obligation arrangements, the period over which revenue is recognized for certain arrangements, and estimated delivery dates for orders with title transfer upon delivery; • allowances for credit losses and product returns; • promotional and marketing allowances; • inventory valuation; • average useful customer life; • valuation of stock-based awards; • achievement of performance-based restricted stock units (“PRSUs”); • legal contingencies; • impairment of long-lived assets and goodwill; • valuation of convertible notes and embedded derivatives; • useful lives of long-lived assets; and • income taxes including valuation allowances on deferred tax assets. The Company bases its estimates and judgments on historical experience and on various assumptions that it believes are reasonable under the circumstances. Actual results could differ significantly from those estimates. Accounting pronouncements not yet adopted In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07 – Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in Accounting Standards Codification (“ASC”) 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company does not expect adoption of this ASU will have a material impact on its financial position or results of operations. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The updates in this ASU are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company does not expect adoption of this ASU will have a material impact on its financial position or results of operations. 9 Table of Contents Life360, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) Concentrations of Risk and Significant Customers Major Customers The Company derives its accounts receivable from revenue earned from customers located in the United States and internationally. Channel and retail partners account for the majority of the Company’s revenue and accounts receivable for all periods presented. The following tables set forth the information about the Company’s third-party platforms and distribution channels (each a “Channel Partner”) that processed the Company’s overall revenue transactions and retail partners who represented greater than 10% of the Company’s revenue or accounts receivable, respectively: Percentage of Revenue Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Channel Partner (Apple) 55 % 51 % 55 % 54 % Channel Partner (Google) 18 % 17 % 18 % 16 % Percentage of Gross Accounts Receivable As of September 30, As of December 31, 2024 2023 Channel Partner (Apple) 56 % 50 % Channel Partner (Google) 11 % * Data Partner A 12 % * Retail Partner A * 17 % * Represents less than 10% Supplier Concentration The Company currently relies on a single technology partner for its cloud platform and outsources the manufacturing of the Jiobit and Tile hardware devices to a single contract manufacturer. Although there are a limited number of suppliers, management believes that other suppliers could provide similar services on comparable terms. Cash and Cash Equivalents The Company considers all highly liquid investment securities with remaining maturities at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include deposit and money market funds. Money market mutual funds are valued using quoted market prices and therefore are classified within Level 1 of the fair value hierarchy. Restricted Cash The restricted cash, noncurrent balance of $ 1.2 million and $ 1.7 million as of September 30, 2024 and December 31, 2023, respectively, relates to cash deposits restricted under letters of credit issued on behalf of the Company in support of indebtedness to trade creditors incurred in the ordinary course of business. 3. Segment and Geographic Revenue The Company operates as a single operating segment. The Company’s chief operating decision maker is its chief executive officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance, and allocating resources. All material long-lived assets are based in the United States. 10 Table of Contents Life360, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) Revenue by geographic region is generally based on the address of the customer as defined in the contract with the customer. The following table sets forth revenue by geographic region for the periods presented (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 North America $ 80,968 $ 69,624 $ 226,213 $ 193,966 Europe, Middle East and Africa 6,756 5,379 17,675 13,834 Other international regions 5,141 3,621 12,067 9,755 Total revenue $ 92,865 $ 78,624 $ 255,955 $ 217,555 The Company’s revenues in the United States were $ 79.1 million, or 85 %, of total revenue for the three months ended September 30, 2024 and $ 67.4 million, or 86 %, of total revenue for the three months ended September 30, 2023. The Company’s revenues in the United States were $ 221.4 million, or 86 %, of total revenue for the nine months ended September 30, 2024 and $ 188.5 million, or 87 %, of total revenue for the nine months ended September 30, 2023. 4. Deferred Revenue Deferred revenue consists primarily of payments received and accounts receivable recorded in advance of revenue recognition under the Company’s subscription service arrangements and is recognized as the revenue recognition criteria is met. The Company primarily invoices its customers for its subscription services arrangements in advance. Amounts anticipated to be recognized within one year of the balance sheet date are recorded as deferred revenue, current and the remaining portion is recorded as deferred revenue, noncurrent on the condensed consolidated balance sheets. During the three and nine months ended September 30, 2024, the Company recognized revenue of $ 5.0 million and $ 31.2 million, respectively, that was included in the deferred revenue balance at December 31, 2023. During the three and nine months ended September 30, 2023, the Company recognized revenue of $ 3.5 million and $ 23.4 million, respectively, that was included in the deferred revenue balance at December 31, 2022 Remaining performance obligations represent the amount of contracted future revenue not yet recognized as the amounts relate to undelivered performance obligations, including both deferred revenue and non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods. Revenue expected to be recognized in connection with remaining performance obligations was $ 218.9 million as of September 30, 2024, of which the Company expects 34 % to be recognized over the next twelve months . 5. Costs Capitalized to Obtain Contracts The Company recognizes as an asset the costs of obtaining a contract with a customer if it expects to recover those costs and they are both direct and incremental. These costs are attributable to the Company’s largest Channel Partners. Costs of obtaining new revenue contracts are deferred and then amortized on a straight-line basis over the related period of benefit, which is estimated to be two to three years depending on the subscription type. The following table represents a roll forward of the Company’s costs capitalized to obtain contracts, net (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Costs capitalized to obtain contracts, net, beginning of period $ 1,966 $ 2,194 $ 1,844 $ 2,064 Additions to costs capitalized to obtain contracts, net 502 573 1,287 1,567 Amortization of costs capitalized to obtain contracts, net ( 311 ) ( 918 ) ( 974 ) ( 1,782 ) Costs capitalized to obtain contracts, net, end of period $ 2,157 $ 1,849 $ 2,157 $ 1,849 11 Table of Contents Life360, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) 6. Fair Value Measurements The Company measures its financial assets at fair value each reporting period using a fair value hierarchy that prioritizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs which may be used to measure fair value are as follows: Level 1 - Observable inputs, such as quoted prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Valuations based on unobservable inputs to the valuation methodology and including data about assumptions market participants would use in pricing the asset or liability based on the best information available under the circumstances. The carrying amounts of certain financial instruments, including cash and cash equivalents, prepaid expenses, accounts receivable, and accounts payable approximate fair value due to their short-term maturities. The Company measures and reports certain assets and liabilities at fair value on a recurring basis. The fair value of these assets and liabilities as of September 30, 2024 and December 31, 2023 are classified as follows (in thousands): As of September 30, 2024 Level 1 Level 2 Level 3 Total Assets: Money market funds $ 132,408 $ — $ — $ 132,408 Total assets $ 132,408 $ — $ — $ 132,408 As of December 31, 2023 Level 1 Level 2 Level 3 Total Assets: Money market funds $ 41,981 $ — $ — $ 41,981 Total assets $ 41,981 $ — $ — $ 41,981 Liabilities: Derivative liability (Note 9) $ — $ — $ 217 $ 217 Convertible notes (Note 8) — — 3,449 3,449 Total liabilities $ — $ — $ 3,666 $ 3,666 12 Table of Contents Life360, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) The change in fair value of the Level 3 instruments were as follows (in thousands): As of September 30, 2024 Derivative liability (Note 9) Convertible notes (Note 8) (unaudited) Fair value, beginning of the year $ 217 $ 3,449 Changes in fair value 1,707 608 Settlement of September 2021 Convertible Notes upon conversion (Note 8) — ( 3,548 ) Gain on settlement of September 2021 Convertible Notes (Note 8) — ( 509 ) Gain on settlement of derivative liability (Note 9) ( 1,924 ) — Fair value, end of period $ — $ — As of December 31, 2023 Derivative liability (Note 9) Convertible notes (Note 8) Fair value, beginning of the year $ 101 $ 6,938 Vesting of revesting notes — 72 Forfeiture of revesting notes — ( 326 ) Repayment of convertible notes (Note 8) — ( 3,919 ) Changes in fair value 116 684 Fair value, end of period $ 217 $ 3,449 For the three and nine months ended September 30, 2024, the Company recorded a loss associated with the change in fair value of the derivative liability of zero and $ 1.7 million, respectively. For the three and nine months ended September 30, 2024, the Company recorded a gain of zero and $ 1.9 million, respectively, related to the settlement of the derivative liability upon conversion of the July 2021 Convertible Notes. Refer to Note 8, "Convertible Notes" for further details. For the three and nine months ended September 30, 2024, the Company recorded a loss associated with the change in fair value of the September 2021 Convertible Notes of zero and $ 0.6 million, respectively. For the three and nine months ended September 30, 2024, the Company recorded a gain of zero and $ 0.5 million, respectively, related to the settlement of the September 2021 Convertible Notes upon conversion. For the year ended December 31, 2023, the Company recorded a loss associated with the change in fair value of the derivative liability and the convertible notes of $ 0.1 million and $ 0.7 million, respectively. These amounts have been recorded in other income (expense), net in the condensed consolidated statements of operations and comprehensive income (loss). For the three and nine months ended September 30, 2023, the Company recorded a gain associated with the change in fair value of the derivative liability of $ 0.1 million and a loss of $ 0.2 million, respectively. For the three and nine months ended September 30, 2023, the Company recorded a loss associated with the change in fair value of the September 2021 Convertible Notes of $ 0.6 million and $ 0.8 million, respectively. The amounts have been recorded in other income (expense), net in the condensed consolidated statements of operations and comprehensive loss. 13 Table of Contents Life360, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) 7. Balance Sheet Components Accounts receivable, net Accounts receivable, net consists of the following (in thousands): As of September 30, As of December 31, 2024 2023 Accounts receivable $ 48,944 $ 42,274 Allowance for credit losses ( 94 ) ( 94 ) Total accounts receivable, net $ 48,850 $ 42,180 Inventory Inventory consists of the following (in thousands): As of September 30, As of December 31, 2024 2023 Raw materials $ 40 $ 298 Finished goods 13,748 3,801 Total inventory $ 13,788 $ 4,099 Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following (in thousands): As of September 30, As of December 31, 2024 2023 Prepaid expenses $ 11,725 $ 14,520 Other receivables 981 654 Total prepaid expenses and other current assets $ 12,706 $ 15,174 Prepaid expenses primarily consist of certain cloud platforms, customer service program costs, prepaid insurance and inventory. Other receivables primarily consist of freight and refunds owed to the Company and other amounts which the Company is expected to receive in less than twelve months. Property and Equipment, net Property and equipment, net consists of the following (in thousands): As of September 30, As of December 31, 2024 2023 Computer equipment $ 297 $ 297 Leasehold improvements 101 100 Production manufacturing equipment 2,026 839 Construction in progress 259 249 Furniture and fixtures 29 29 Total property and equipment, gross 2,712 1,514 Less: accumulated depreciation ( 930 ) ( 784 ) Total property and equipment, net $ 1,782 $ 730 14 Table of Contents Life360, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) Construction in progress relates to certain costs incurred with production manufacturing equipment. For the three and nine months ended September 30, 2024, depreciation expense was $ 51 thousand and $ 146 thousand, respectively, and for the three and nine months ended September 30, 2023, depreciation expense was $ 46 thousand and $ 123 thousand, respectively. There was no impairment of property and equipment or long-lived assets recognized during the three and nine months ended September 30, 2024 or 2023. Prepaid Expenses and Other Assets, noncurrent Prepaid expenses and other assets, noncurrent consist of the following (in thousands): As of September 30, As of December 31, 2024 2023 Prepaid expenses, noncurrent $ 336 $ 1,374 Investment 10,863 5,474 Total prepaid expenses and other assets, noncurrent $ 11,199 $ 6,848 Prepaid expenses, noncurrent primarily consist of cloud platform costs as of December 31, 2023. Investment relates to non-marketable equity securities in a privately held company without a readily determinable market value. Non-marketable equity securities consist of warrants to purchase shares of preferred stock of a data revenue partner. Investments in non-public businesses that do not have readily determinable pricing, and for which the Company does not have control or does not exert significant influence, are carried at cost less impairments, if any, plus or minus changes in observable prices for those investments. During the three months ended September 30, 2024, an observable price change related to our investment in warrants held to purchase shares of preferred stock of a data revenue partner took place. This resulted in a $ 5.4 million increase in the investment asset value and a corresponding gain on fair value adjustment recorded in other income (expense), net in the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2024. Leases The Company leases office space under a non-cancelable operating lease with a remaining lease term of 2.2 years, which includes the option to extend the lease. The Company did not have any finance leases as of September 30, 2024 or December 31, 2023. The components of lease expense are as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Operating lease cost (1) $ 114 $ 253 $ 338 $ 748 (1) Amounts include short-term leases, which are immaterial. For the three and nine months ended September 30, 2024, payments for operating leases included in cash from operating activities were $ 0.1 million and $ 0.3 million, respectively. For the three and nine months ended September 30, 2023, payments for operating leases included in cash from operating activities were $ 0.2 million and $ 0.7 million, respectively. 15 Table of Contents Life360, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) Supplemental balance sheet information related to leases is as follows (in thousands, except lease term): As of September 30, As of December 31, 2024 2023 Operating lease right-of-use asset $ 767 $ 1,014 Operating lease liability, current (included in accrued expenses and other current liabilities) 356 335 Operating lease liability, noncurrent (included in other liabilities, noncurrent) 453 723 Weighted-average remaining term for operating lease (in years) 2.2 2.9 The weighted-average discount rate used to measure the present value of the operating lease liabilities was 5.0 % for each period presented. Maturities of the Company’s operating lease liability, which does not include short-term leases, as of September 30, 2024 were as follows (in thousands): Operating leases Remainder of 2024 $ 95 2025 390 2026 367 Total future minimum lease payments 852 Less imputed interest ( 43 ) Total operating lease liability $ 809 Goodwill and Intangible Assets, net Intangible assets, net consists of the following (in thousands): As of September 30, 2024 Gross Accumulated Amortization Net Trade name $ 23,380 $ ( 6,515 ) $ 16,865 Technology 22,430 ( 12,556 ) 9,874 Customer relationships 15,290 ( 5,197 ) 10,093 Internal use software 6,167 ( 720 ) 5,447 Total $ 67,267 $ ( 24,988 ) $ 42,279 As of December 31, 2023 Gross Accumulated Amortization Net Trade name $ 23,380 $ ( 4,762 ) $ 18,618 Technology 22,430 ( 9,191 ) 13,239 Customer relationships 15,290 ( 3,782 ) 11,508 Internal use software 2,416 ( 340 ) 2,076 Total $ 63,516 $ ( 18,075 ) $ 45,441 For the three and nine months ended September 30, 2024, the Company capitalized $ 1.2 million and $ 3.8 million, respectively, in internal use software. For the three and nine months ended September 30, 2023, the Company capitalized $ 0.4 million and $ 1.2 million, respectively, in internal use software. 16 Table of Contents Life360, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) For the three and nine months ended September 30, 2024, amortization expense was $ 2.3 million and $ 6.9 million, respectively. For the three and nine months ended September 30, 2023, amortization expense was $ 2.2 million and $ 6.7 million, respectively. During the three and nine months ended September 30, 2024 and 2023, there was no impairment of intangible assets recorded. As of September 30, 2024, the estimated remaining amortization expense for intangible assets by fiscal year is as follows (in thousands): Amount Remainder of 2024 $ 2,353 2025 9,327 2026 8,883 2027 4,431 2028 4,225 Thereafter 9,003 Total future amortization expense 38,222 Internal use software not yet in service 4,057 Total $ 42,279 The weighted-average remaining useful lives of the Company’s acquired intangible assets are as follows: Weighted-Average Remaining Useful Life As of September 30, As of December 31, 2024 2023 Trade name 7.2 years 8.0 years Technology 2.2 years 2.9 years Customer relationships 5.4 years 6.1 years Internal use software 2.3 years 3.6 years As of September 30, 2024, the Company had $ 4.1 million of capitalized internal use software projects that were not yet in service. The internal use software projects that were not yet in service have been excluded from the weighted-average remaining useful life calculation for internal use software in the table above. As of September 30, 2024 and December 31, 2023, goodwill was $ 133.7 million. No goodwill impairment was recorded during the three and nine months ended September 30, 2024 or 2023. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following (in thousands): As of September 30, As of December 31, 2024 2023 Accrued vendor expenses $ 15,711 $ 10,020 Accrued compensation 3,260 3,349 Customer related promotions and discounts 3,737 9,049 Operating lease liability 356 335 Sales return reserves 3,405 3,285 Other current liabilities 1,770 1,500 Total accrued expenses and other current liabilities $ 28,239 $ 27,538 17 Table of Contents Life360, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) Other current liabilities primarily relate to sales taxes payable and inventory received not yet billed, as of September 30, 2024, and warranty liabilities related to the Company’s hardware tracking devices, inventory received not yet billed, and sales taxes payable as of December 31, 2023. 8. Convertible Notes July 2021 Convertible Notes In July 2021, the Company issued convertible notes (the “July 2021 Convertible Notes”) to investors with an underlying principal amount of $ 2.1 million. In June 2024, the July 2021 Convertible Notes were converted to common stock based on a fixed conversion price of $ 11.96 per share. At the time of conversion, the July 2021 Convertible Notes had an outstanding principal and accrued interest balance of $ 2.2 million. As a result of the conversion, 184,192 shares of common stock were issued to the holders in redemption of the outstanding July 2021 Convertible Notes. In June 2024, the fair value of the issued common stock was recorded within additional paid-in capital on the Company’s condensed consolidated balance sheet and a $ 0.9 million loss on the settlement of the July 2021 Convertible Notes was recorded in other income (expense), net on the condensed consolidated statements of operations and comprehensive loss. As of September 30, 2024, the balance of the July 2021 Convertible Notes is zero on the Company’s condensed consolidated balance sheet. September 2021 Convertible Notes In September 2021, the Company, in connection with the acquisition of Jiobit, issued $ 11.6 million representing the fair value of convertible notes (the “September 2021 Convertible Notes”) and $ 1.6 million of revesting convertible notes that vested over time. In April 2024, the holders of the September 2021 Convertible Notes elected to convert their notes and accrued interest to common stock based on a fixed conversion price of $ 22.50 per share. At the time of conversion, the September 2021 Convertible Notes had an outstanding principal and accrued interest balance of $ 3.5 million. As a result of the conversion, 157,685 shares of common stock with a fair value of $ 3.5 million were issued to the holders in redemption of the outstanding September 2021 Convertible Notes. In April 2024, the fair value of the issued common stock was recorded within additional paid-in capital on the Company’s condensed consolidated balance sheet and a $ 0.5 million gain on settlement of the September 2021 Convertible Notes was recorded in other income (expense), net on the condensed consolidated statements of operations and comprehensive loss. As of September 30, 2024, the balance of the September 2021 Convertible Notes is zero on the Company’s condensed consolidated balance sheet. Convertible notes, current and noncurrent consist of the following (in thousands): As of September 30, As of December 31, 2024 2023 Convertible notes, current: September 2021 Convertible Notes $ — $ 3,449 Convertible notes, noncurrent: July 2021 Convertible Notes — 1,056 Total convertible notes $ — $ 4,505 9. Derivative Liability The Company’s derivative liability, which represented embedded share-settled redemption features bifurcated from its July 2021 Convertible Notes, was settled in June 2024 upon the conversion of the July 2021 Convertible Notes to common stock based on a fixed conversion price of $ 11.96 per share. A $ 1.9 million gain was recorded at the time of conversion within other income (expense), net on the condensed consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2024. As of September 30, 2024, the fair value of the derivative liability was zero on the Company’s condensed consolidated balance sheet. As of December 31, 2023, the fair value of the derivative liability was $ 0.2 million. Refer to Note 6, "Fair Value Measurements" and Note 8, "Convertible Notes" for further details. 18 Table of Contents Life360, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) 10. Commitments and Contingencies Purchase Commitments The Company has certain commitments with its cloud platform provider and sole contract manufacturer that are non-cancellable. As of September 30, 2024, future non-cancellable commitments under these agreements were as follows in thousands): Amount Remainder of 2024 $ 8,649 2025 25,000 2026 25,500 2027 26,000 Total purchase commitments $ 85,149 Contingencies From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business activities. The Company accrues a liability for such matters when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated. The Company is not subject to any current pending legal matters or claims that the Company believes could have a material adverse effect on its financial position, results of operations or cash flows. Warranties and Indemnification To date, the Company has not incurred significant costs and has not accrued any material liabilities in the accompanying condensed consolidated financial statements as a result of its warranty and indemnification obligations. Litigation Occasionally, the Company is involved in various legal proceedings, claims and government investigations in the ordinary course of business. The outcome of litigation and other legal matters is inherently uncertain, though the Company intends to vigorously defend the matters. In making a determination regarding accruals, using available information, the Company evaluates the likelihood of an unfavorable outcome in legal or regulatory proceedings to which the Company is a party and records a loss contingency when it is probable a liability has been incurred and the amount of the loss can be reasonably estimated. When the Company determines an unfavorable outcome is not probable or reasonably estimable the Company does not accrue for any potential litigation loss. Actual outcomes of these legal and regulatory proceedings may materially differ from the Company’s estimates. On March 12, 2019, a former alleged competitor of Tile, Cellwitch, Inc, filed a patent infringement claim against Tile in the U.S. District Court, Northern District of California, seeking permanent injunction and damages. On December 18, 2019, Tile filed an inter partes review petition with the Patent Trial and Appeal Board (“PTAB”) challenging the validity of the patent. On May 13, 2021, the PTAB issued a Final Written Decision on Tile’s inter partes review petition (the “Final Written Decision”), finding a majority of the claims invalid. The Final Written Decision was affirmed by the U.S. Court of Appeals for the Federal Circuit on May 13, 2022. The case is currently in trial court. The claim construction hearing took place on January 18, 2024, and on April 23, 2024, the court released its order which found 10 of the claims invalid, leaving only 2 active claims remaining. At this time, a loss is reasonably possible but not estimable, and as a result, no litigation reserve has been recorded on our condensed consolidated balance sheet as of September 30, 2024. No material litigation reserve was recorded on our condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023, respectively. 19 Table of Contents Life360, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) 11. Common Stock The Company has the following potentially outstanding common stock reserved for issuance: As of September 30, As of December 31, 2024 2023 Issuances under stock incentive plan, stock options 5,896,659 6,625,812 Issuances upon exercise of common stock warrants 7,761 137,658 Issuances upon vesting of restricted stock units 5,546,127 6,182,543 Issuances upon conversion of convertible notes — 325,981 Shares reserved for shares available to be granted but not granted yet 12,878,039 16,882,215 24,328,586 30,154,209 12. Warrants As of September 30, 2024, the Company had outstanding warrants entitling the holder thereof to purchase 7,761 shares of Company common stock with an exercise price of $ 6.44 and expiry date of 2025. As of December 31, 2023, the Company had outstanding warrants to purchase 137,658 shares of Company common stock with exercise prices ranging from $ 2.28 to $ 11.96 and expiry dates ranging from 2024 to 2026. Refer to Note 8, "Convertible Notes" for further details. 13. Equity Incentive Plan 2011 Equity Incentive Plan The Company’s equity incentive plan allows the Company to grant restricted stock units (“RSUs”), PRSUs, restricted stock, and stock options to employees and consultants of the Company and any of the Company’s parent, subsidiaries, or affiliates, and to the members of the Board of Directors. The following summary of stock option activity for the periods presented is as follows (in thousands, except share and per share data): Number of Shares Underlying Outstanding Options Weighted Average Exercise Price per Share Weighted Average Remaining Contractual Life (in Years) Aggregate Intrinsic Value Balance as of December 31, 2023 6,625,812 $ 6.57 4.7 $ 59,957 Options granted — — Options exercised ( 536,004 ) 8.24 Options cancelled/forfeited ( 193,149 ) 14.56 Balance as of September 30, 2024 5,896,659 6.15 4.2 195,741 Exercisable as of September 30, 2024 5,415,694 $ 5.62 4.1 $ 182,668 As of September 30, 2024, there was total unrecognized compensation cost for outstanding stock options of $ 2.6 million to be recognized over a period of approximately 1.3 years. 20 Table of Contents Life360, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) Performance-based Restricted Stock Units The Company granted 115,403 PRSUs (“the Target Grant”) to certain executive officers during the nine months ended September 30, 2024. No PRSUs were granted to executive officers during the three months ended September 30, 2024, or during the three and nine months ended September 30, 2023. The number of PRSUs that may vest depends on the extent to which the performance goals for the award are achieved over a one-year performance period, as determined by the Compensation Committee of the Board, up to a maximum of 200 % of the Target Grant. The performance goals for the PRSUs consist of the following two metrics, each with a weighting of 50 %: (1) a revenue metric for the year ended December 31, 2024; and (2) an Adjusted EBITDA metric for the year ended December 31, 2024. Each of the metrics are within the Company’s published revenue and Adjusted EBITDA guidance described in the Company’s press release furnished within Exhibit 99.1 of the Company’s Current Report on Form 8-K filed with the SEC on February 29, 2024. The PRSU awards vest over a four-year period with 1/4th of the shares vesting after the first year and 1/16th of the shares vesting each quarter thereafter, subject to continuous service with the Company. The Company uses the grant date fair value of the common stock to measure compensation expense for PRSU awards. Compensation expense is recognized over the vesting period of the PRSU award using the graded-vesting attribution method and shares attained over target upon vesting will be recognized as awards granted in the period. No PRSU awards vested as of September 30, 2024. RSU, including PRSU, activity for the periods presented is as follows: Number of Shares Weighted average grant date fair value Balance as of December 31, 2023 6,182,543 $ 12.67 RSUs & PRSUs granted 2,374,478 25.90 RSUs vested and settled ( 2,615,400 ) 27.74 RSUs cancelled/forfeited ( 395,494 ) 14.16 Balance as of September 30, 2024 5,546,127 $ 17.92 As of September 30, 2024, there was unrecognized compensation cost for outstanding restricted stock units, including PRSUs, of $ 90.2 million to be recognized over a period of approximately 2.9 years. The number of RSUs vested and settled includes shares of common stock that the Company withheld on behalf of employees to satisfy the minimum statutory tax withholding requirements. Stock-based Compensation Stock-based compensation expense was allocated as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Cost of revenue Subscription costs $ 193 $ 151 $ 555 $ 429 Hardware costs 204 266 612 715 Other costs — 10 4 32 Total cost of revenue 397 427 1,171 1,176 Research and development 6,619 5,477 18,412 15,563 Sales and marketing 865 725 2,271 2,212 General and administrative 3,579 2,825 8,653 8,727 Total stock-based compensation, net of amounts capitalized $ 11,460 $ 9,454 $ 30,507 $ 27,678 21 Table of Contents Life360, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) There was $ 0.1 million and $ 0.5 million of capitalized stock-based compensation costs recognized during the three and nine months ended September 30, 2024, respectively. There was an immaterial amount of capitalized stock-based compensation costs recognized during the three and nine months ended September 30, 2023 . Equity Awards Issued in Connection with Business Combinations Jio, Inc. In connection with the acquisition of Jiobit in September 2021, the Company granted 43,083 service-based stock options under the Plan to certain Jiobit employees with an aggregate fair value of $ 0.5 million which vests ratably over the requisite service period. As of September 30, 2024, there was $ 12 thousand of unrecognized compensation expense related to unvested assumed stock options, which is expected to be recognized over the remaining weighted average life of 0.4 years. As of December 31, 2023, there was $ 0.1 million of unrecognized compensation expense related to unvested assumed stock options, which is expected to be recognized over the remaining weighted average life of 1 year. Tile, Inc. In connection with the Tile acquisition in January 2022, the Company issued 1,499,349 shares of retention restricted stock units with an aggregate fair value of $ 29.6 million. Of the 1,499,349 shares of retention restricted stock units, 787,446 shares valued at $ 15.6 million contained performance vesting criteria based on the achievement of certain company milestones during the three months ended March 31, 2022, and vest over a two-year period. As of March 31, 2022, the vesting criteria had not been met and all 787,446 restricted stock units were forfeited. The remaining 711,903 retention restricted stock units vest over a two -to- four-year period. As of September 30, 2024, there was $ 0.4 million of unrecognized compensation expense related to the retention restricted stock units which is expected to be recognized over the remaining weighted average life of 1.3 years. As of December 31, 2023, there was $ 0.7 million of unrecognized compensation expense related to the retention restricted stock units which is expected to be recognized over the remaining weighted average life of 1.9 years. 14. Income Taxes The provision for income taxes for interim quarterly reporting periods is based on the Company's estimates of the effective tax rates for the full fiscal year, in accordance with ASC 740-270, Income Taxes, Interim Reporting. ASC 740-270-25-2 requires that an annual effective tax rate be determined and such annual effective rate be applied to year to date income/loss in interim periods. The effective tax rate in any quarter may be subject to fluctuations during the year as new information is obtained, which may positively or negatively affect the assumptions used to estimate the annual effective tax rate, including factors such as valuation allowances against deferred tax assets, the recognition or de-recognition of tax benefits related to uncertain tax position, if any, and changes in or the interpretation of tax laws in jurisdictions where the Company conducts business. In accordance with the Tax Cuts and Jobs Act of 2017, research and experimental (“R&E”) expenses under Internal Revenue Code Section 174 are required to be capitalized beginning in 2022. R&E expenses are required to be amortized over a period of five years for domestic expenses and fifteen years for foreign expenses. The Company has capitalized R&E expenditures in its income tax provision. This is a driver for the annual estimated income tax rate used to calculate the provision for income taxes. For the three and nine months ended September 30, 2024, the Company recorded a benefit from income taxes of $ 4.7 million and a provision for income taxes of $ 2.1 million, respectively. For the three and nine months ended September 30, 2023, the Company recorded a benefit from income taxes of $ 0.2 million and a provision for income taxes of $ 0.2 million, respectively. 22 Table of Contents Life360, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) 15. Related-Party Transactions On June 6, 2024, in connection with its U.S. IPO, the Company issued and sold 3,703,704 shares of common stock and certain selling securityholders including members of the Company’s board of directors, executive officers, non-executive employees, and other stockholders of the Company, sold 2,908,796 shares of common stock (including 862,500 shares sold pursuant to the underwriters’ full exercise of their option to purchase additional shares) in each case at an offering price of $ 27.00 per share. The Company received net proceeds of $ 93.0 million after deducting underwriting discounts and commissions of $ 7.0 million. The Company did not receive any proceeds from the sale of shares of common stock by the selling securityholders. The Company paid the underwriting discounts and commissions in connection with the sale of shares of common stock by the selling securityholders. A summary of the expenses paid on behalf of the selling securityholders is detailed below (in millions): Nine Months Ended September 30, 2024 Executive Officers (1) $ 0.9 Board of Directors 3.9 Non-Executive Employees 0.1 Other 0.6 Total $ 5.5 (1) Includes $ 0.7 million in expenses paid on behalf of a securityholder who is both an executive officer and member of the board of directors. No additional expenses were paid on behalf of the selling securityholders during the three months ended September 30, 2024. The $ 5.5 million in total fees paid have been recorded within Other income (expense), net on the condensed consolidated statements of operations for the nine months ended September 30, 2024. For additional details regarding this transaction, refer to the prospectus supplement filed with the SEC on June 6, 2024 as well as the registration statement on Form S-3 (File No. 333-279271) filed with the SEC on May 9, 2024, of which the prospectus supplement forms a part. 16. Defined Contribution Plan The Company sponsors a defined contribution plan under Section 401(k) of the Internal Revenue Code covering substantially all employees over the age of 21 years. Contributions made by the Company are voluntary and are determined annually by the Board of Directors on an individual basis subject to the maximum allowable amount under federal tax regulations. Employer contributions to the plan were $ 0.1 million and $ 1.1 million for the three and nine months ended September 30, 2024, respectively, and immaterial for the three and nine months ended September 30, 2023, respectively . 23 Table of Contents Life360, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) 17. Net Income (Loss) Per Share Basic net income (loss) per share is calculated by dividing net income (loss) available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net income (loss) per share reflects the potential dilution that could occur if options, RSUs, PRSUs, warrants, or other securities with features that could result in the issuance of common stock were exercised or converted to common stock using the treasury-stock method. The following table presents the calculation of basic and diluted net income (loss) per share (in thousands except share and per share information): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net income (loss) $ 7,689 $ ( 6,541 ) $ ( 13,053 ) $ ( 25,025 ) Weighted-average shares outstanding: Basic 74,232,140 67,091,993 71,187,103 66,389,483 Dilutive effect of outstanding options, RSUs and warrants 7,851,836 — — — Diluted 82,083,976 67,091,993 71,187,103 66,389,483 Net income (loss) per share: Basic $ 0.10 $ ( 0.10 ) $ ( 0.18 ) $ ( 0.38 ) Diluted $ 0.09 $ ( 0.10 ) $ ( 0.18 ) $ ( 0.38 ) Certain potential shares of common stock were excluded from the diluted net loss per share calculation as their inclusion would have been antidilutive. Excluded shares are as follows: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Issuances under stock incentive plan, stock options — 6,971,398 5,896,659 6,971,398 Issuances upon exercise of common stock warrants — 137,658 7,761 137,658 Issuances upon vesting of restricted stock units 269,715 5,518,647 5,546,127 5,518,647 Issuances upon conversion of convertible notes — 325,981 — 325,981 Total 269,715 12,953,684 11,450,547 12,953,684 Outstanding PRSUs are not considered to be potential shares of common stock until performance goals and service requirements have been met. As of September 30, 2024, no performance goals have been met and as a result no outstanding PRSUs are considered potential shares of common stock within the diluted net income (loss) per share calculation for any of the periods presented. 24 Table of Contents Life360, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) 18. Subsequent Events In October 2024, the Company entered into a Manufacturing Services Agreement (“MSA”) with Jabil, Inc. and Jabil Circuit (Singapore) Pte. Ltd (collectively, “Jabil”), under which Jabil will continue to manufacture the Company’s Tile and Jiobit products as the designated sole contract manufacturer for Tile products and the primary manufacturer for Jiobit products. The MSA has an initial term of three years and will automatically renew for one-year periods unless terminated by either party. On November 12, 2024 (the “Effective Date”), the Company entered into a series of transactions with Hubble Network, Inc. (“Hubble”), subject to Hubble shareholder approval, including (i) a technology exclusivity and revenue sharing agreement (the “Hubble Agreement”), (ii) a $ 5.0 million Simple Agreement for Future Equity (“SAFE”) investment by the Company into Hubble; and (iii) Hubble’s issuance of a warrant to the Company to purchase Hubble common stock. The Hubble Agreement has an initial term of 5 years beginning on the Effective Date. 25 Table of Contents