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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-29 · 145 added, 162 removed, 298 unchanged (51% of the section changed)

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A discussion of our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 is presented below.

A discussion of our financial condition and results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021 is included under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within our Form 10-K filed with the SEC on March 23, 2023.

A discussion of our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 is included under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within our Form 10-K filed with the SEC on February 29, 2024.

Life360 is a leading technology platform used to locate the people, pets and things that matter most to families.

Life360 is creating 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 that range from communications to driving safety and location sharing.

The Life360 mobile application operates under a “freemium” model where its core offering is available to users at no charge, with three membership subscription options that are available but not required.

Our platform recently entered a new era of location tracking services with the successful acquisitions of Jiobit and Tile.

Our core offering, the Life360 mobile application, includes features that range from communications to driving safety and location sharing.

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.

We also generate revenue through hardware subscription services and the sale of hardware tracking devices.

By offering devices and integrated software to members, we have expanded our addressable market to provide members of all ages with a vertically integrated, cross-platform solution of scale.

For the years ended December 31, 2023 and 2022, Life360 generated:

For the years ended December 31, 2024 and 2023, we generated:

• Total revenues of $371.5 million and $304.5 million, respectively, representing year-over-year growth of 22%;

• Subscription revenues of $277.8 million and $220.8 million, respectively, representing year-over-year growth of 26%;

• Hardware revenues of $58.2 million and $47.9 million, respectively, representing year-over-year growth of 21%;

• Other revenues of $25.5 million and $27.1 million, respectively, representing year-over-year decline of 6%;

• Hardware revenues of $57.6 million and $58.2 million, respectively, representing year-over-year decline of 1%;

• Other revenues of $36.0 million and $25.5 million, respectively, representing year-over-year growth of 41%;

• Gross profit of $279.2 million and $222.6 million, respectively, representing year-over-year growth of 25%;

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Our business model and future success are dependent on the value and reputation of the Life360, Jiobit and Tile brands.

Our brand is trusted by approximately 61 million members as of December 31, 2023, and because we know the value of trust is immeasurable, we will continue to work tirelessly to ensure that we provide useful, reliable, trustworthy and innovative products and services.

Our brand is trusted by approximately 80 million members as of December 31, 2024, and because we know the value of trust is immeasurable, we will continue to work tirelessly to provide useful, reliable, trustworthy and innovative products and services.

Attract, Retain and Convert Members .

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We are continually evaluating new product offerings that are aligned with our core competencies and the needs of families across the life stage continuum.

For example, our acquisition of Tile gives our members the ability to seamlessly leverage Bluetooth-enabled smart trackers, which can equip nearly any item—such as wallets, keys or remotes—with location-based finding technology.

Likewise, our acquisition of Jiobit allows subscribers to track family members and pets wearing Jiobit devices via GPS-enabled trackers on the Jiobit app.

For example, our acquisition of Tile gave our members the ability to seamlessly leverage Bluetooth wireless technology enabled smart trackers, which can equip nearly any item—such as wallets, keys or remotes—with location-based finding technology.

Likewise, our acquisition of Jiobit enabled subscribers to track family members and pets wearing Jiobit devices via GPS-enabled trackers on the Jiobit app.

We will continue to invest in and launch products where we see opportunities to grow our platform.

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Our business relies on the ability to attract and retain talent, including engineers, data scientists, designers and software developers.

As of December 31, 2023, we had approximately 508 employees and contractors.

As of December 31, 2024, we had approximately 455 full-time employees and approximately 114 contractors.

Our core values are aimed at simplifying safety for families and we believe there are people who want to work at a values-driven company like Life360.

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Seasonality .

We experience seasonality in our user growth, engagement, Paying Circles growth and monetization on our platform.

Life360 has historically experienced member and subscription growth seasonality in the third quarter of each calendar year, which includes the return to school for many of our members.

We experience seasonality in our member growth, engagement, Paying Circles growth and monetization on our platform.

Life360 has historically experienced member and subscription growth in the United States in the third quarter of each calendar year, driven by the back to school period for many of our members.

Hardware sales have historically experienced comparatively higher seasonal growth in the fourth quarter of each calendar year, which includes the important selling periods in November (Black Friday and Cyber Monday) and December (Christmas and Hanukkah) in large part due to seasonal holiday demand.

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International Expansion .

We believe our global opportunity is significant, and to address this opportunity, we intend to continue to invest in sales and marketing efforts and infrastructure and personnel to support our international expansion, including undertaking initiatives such as the international launch of our subscription offerings in United Kingdom for the year ended December 31, 2023.

Our growth will depend in part on the adoption and sales of our products and services in international markets.

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The Company has no segment managers who are held accountable by the CODM for operations, operating results, and planning for levels of components below the consolidated unit level.

The Company generates revenue from direct and indirect streams.

Direct revenue includes subscription and hardware revenue, while indirect revenue consists of all other revenue sources, such as data and partnership, which includes advertising.

Subscription Revenue

We generate revenue from sales of subscriptions on our platforms.

We generate revenue primarily from sales of subscriptions on our platform, including Life360, Jiobit and Tile.

Revenue is recognized ratably over the related contractual term generally beginning on the date that our platform is made available to a customer.

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Hardware Revenue

We generate our hardware revenue from the sale of hardware tracking devices and related accessories.

We generate our hardware revenue from the sale of the Jiobit and Tile hardware tracking devices and related accessories.

For hardware and accessories, revenue is recognized at the time products are delivered.

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Other Revenue

We also generate revenue through data monetization arrangements with certain third parties through data acquisition and license agreements for data collected from our member base for purposes of targeted advertising, research, analytics, attribution, and other commercial purposes.

In January 2022, we executed a new partnership agreement with a key data partner, a prominent provider of aggregated analytics for the retail ecosystem.

The agreement includes fixed monthly revenue amounts for access to aggregated data for the duration of the three-year agreement.

Other revenue also includes partnership revenue.

Other revenue consists of data and partnership revenue, which includes advertising revenue.

We generate data revenue primarily through an arrangement with a key data partner that provides location-based analytics to customers in the retail and real estate sectors, municipalities, and other private and public organizations.

The agreement permits commercialization of certain aggregated and de-identified data and provides for fixed and variable monthly revenue amounts.

We generate partnership revenue through agreements with third parties which grant them access to anonymized data insights or advertising on the Company’s mobile platform.

Cost of Revenue and Gross Margin

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Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel.

We plan to continue increasing the capacity and enhancing the capability and reliability of our infrastructure to support user growth and increased use of our platform.

We plan to continue increasing the capacity and enhancing the capability and reliability of our infrastructure to support member growth and increased use of our platform.

We expect that cost of revenue will increase in absolute dollars in future periods.

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Cost of Other Revenue

Cost of other revenue includes cloud-based hosting costs, as well as costs of product operations functions and personnel-related costs associated with our data platform.

Cost of other revenue includes cloud-based hosting costs, as well as costs of product operations functions and personnel-related costs associated with our data and advertising platforms.

Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel.

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Sales and Marketing

Our sales and marketing expenses consist primarily of personnel-related costs, brand marketing costs, lead generation costs, sales incentives, sponsorships and amortization of acquired intangibles.

Revenue-share payments to third parties in connection with annual subscription sales of the Company’s mobile application on third-party store platforms are considered to be incremental and recoverable costs of obtaining a contract with a customer and are deferred and typically amortized over an estimated period of benefit of two to three years depending on the subscription type.

Our sales and marketing expenses consist primarily of commissions to the Company’s third-party platforms (each a “Channel Partner”), personnel-related costs, brand marketing costs, lead generation costs, sales incentives, sponsorships and amortization of acquired intangibles, and bad debt expense.

Commission payments to Channel Partners in connection with annual subscription sales of the Company’s mobile application on third-party store platforms are considered to be incremental and recoverable costs of obtaining a contract with a customer and are deferred and typically amortized over an estimated period of benefit of two to three years depending on the subscription type.

We plan to continue to invest in sales and marketing to grow our member base and increase our brand awareness, including marketing efforts to continue to drive our business model.

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General and Administrative

Our general and administrative expenses consist primarily of employee-related costs for our legal, finance, human resources, and other administrative teams, as well as certain executives.

Our general and administrative expenses consist primarily of employee-related costs for our legal, finance, human resources, and other administrative teams, as well as certain executive officers.

In addition, general and administrative expenses include allocated overhead, outside legal, accounting and other professional fees, change in fair value of contingent consideration for business combinations, and non-income-based taxes.

We expect our general and administrative expenses will increase in absolute dollars as our business grows.

Other Income (Expense)

Convertible Notes Fair Value Adjustment

The Company issued convertible notes to investors in July 2021 (the “July 2021 Convertible Notes”), and as part of the purchase consideration related to the Company’s acquisition of Jiobit (the “Jiobit Acquisition”) in September 2021 (the “September 2021 Convertible Notes” and together with the July 2021 Convertible Notes, the “Convertible Notes”).

The September 2021 Convertible Notes are recorded at fair value and are revalued at each reporting period.

The Company issued convertible notes to investors in July 2021 (the “July 2021 Convertible Notes”), and as part of the purchase consideration related to the acquisition of Jiobit in September 2021 (the “September 2021 Convertible Notes” and together with the July 2021 Convertible Notes, the “Convertible Notes”).

The September 2021 Convertible Notes were recorded at fair value and revalued at each reporting period prior to their conversion to common stock in April 2024.

Derivative Liability Fair Value Adjustment

Derivative liability fair value adjustment relates to the change in the fair value of the embedded conversion and redemption features associated with the July 2021 Convertible Notes.

Derivative liability fair value adjustment relates to the change in the fair value of the embedded conversion and redemption features associated with the July 2021 Convertible Notes prior to their conversion to common stock in June 2024.

Gain on Change in Fair Value of Investment

Gain on change in fair value of investment relates to the revaluation of a warrant held to purchase shares of preferred stock of a data revenue partner in connection with an observable price change.

Gain on Settlement of Derivative Liability

Gain on settlement of the derivative liability relates to the conversion by the holders of the July 2021 Convertible Notes, which settled the embedded share-settled redemption features bifurcated from the Company’s July 2021 Convertible Notes.

Loss on Settlement of Convertible Notes

Loss on settlement of convertible notes relates to the conversion of the July 2021 Convertible Notes into common stock, which resulted in a loss recognized upon settlement.

Other Income (Expense), net

Other income (expense), net consists of interest income earned on our cash and cash equivalents balances, foreign currency exchange (losses)/gains related to the remeasurement of certain assets and liabilities of our foreign subsidiaries that are denominated in currencies other than the functional currency of the subsidiary and foreign exchange transactions gains/(losses) and interest expense primarily related to the Convertible Notes.

IPO transaction costs.

Provision for (Benefit from) Income Taxes

Provision for (benefit from) income taxes consists of U.S.

federal and state income taxes in jurisdictions in which we conduct business.

federal and state income taxes and foreign income taxes in jurisdictions in which we conduct business.

We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized.

Results of Operations

The following tables set forth our consolidated statement of operations and comprehensive loss for the years ended December 31, 2023, 2022, and 2021.

The following tables set forth our consolidated statement of operations and comprehensive loss for the years ended December 31, 2024, 2023, and 2022 (in thousands, except percentages).

We have derived this data from our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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2024 2023 2022

(in thousands)

Subscription revenue $ 277,845 $ 220,794 $ 153,287

Hardware revenue 58,178 47,884 952

Hardware revenue (including related party revenue of $55, $0, and $0, respectively)

57,589 58,178 47,884

Other revenue 36,050 25,546 27,134

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Derivative liability fair value adjustment (1,707) (116) 1,295

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 — —

Other income (expense), net (1,208) 3,228 13

3,228 13 (178)

Total other income (expense), net 3,350 2,428 3,094

2,428 3,094 (1,422)

Loss before income taxes (4,626) (27,555) (91,317)

Provision for (benefit from) income taxes (71) 616 312

616 312 (127)

Net loss (4,555) (28,171) (91,629)

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2024 2023 % Change

(in thousands)

Cost of revenue

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General and administrative 11,936 11,648 2 %

Total stock-based compensation expense $ 38,512 $ 34,680 11 %

Total stock-based compensation expense, net of amounts capitalized

$ 42,269 $ 38,512 10 %

The following table sets forth our results of operations as a percentage of revenue:

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Total cost of revenue 25 % 27 % 35 %

27 % 35 % 20 %

Gross profit 75 % 73 % 65 %

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Derivative liability fair value adjustment — % — % 1 %

Other income, net

Total other income, net

1 % 1 % (1) %

Loss on settlement of convertible notes — % — % — %

Gain on settlement of derivative liability 1 % — % — %

Gain on change in fair value of investment 1 % — % — %

Other income (expense), net — % 1 % — %

Total other income (expense), net 1 % 1 % 1 %

Loss before income taxes (1) % (9) % (40) %

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Total comprehensive loss (1) % (9) % (40) %

___________________

(1) Includes stock-based compensation expense as follows:

Comparison of the years ended December 31, 2024 and 2023:

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2024 2023 $ %

(in thousands)

Subscription revenue $ 277,845 $ 220,794 $ 57,051 26 %

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Total revenue $ 371,484 $ 304,518 $ 66,966 22 %

Total revenue increased $76.2 million, or 33%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

Subscription revenue increased $67.5 million, or 44%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to an increase in the number of paid subscriptions.

Additionally, subscription revenue in the current period benefited from the impact of the monthly subscription price increases (over 50%) for U.S.

Life360 subscriptions, which were implemented beginning in August 2022.

Hardware revenue increased $10.3 million, or 21%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, due to an increased number of net hardware units shipped, lower returns, and benefits of bundled Life360 subscription and hardware offerings.

Other revenue decreased $1.6 million, or 6%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, due to the short-term impacts of our strategic shift to focus on a single aggregated data partner and the terms associated with the arrangement.

Subscription revenue increased $57.1 million, or 26%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to a 19% growth in total subscriptions and a 25% growth in Paying Circles.

Additionally, subscription revenue in the current period benefited from the impact of price increases for existing U.S.

Android Life360 subscriptions, which were fully implemented during the three months ended June 30, 2023.

Hardware revenue decreased $0.6 million, or 1%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to a $4.6 million decrease in retail sales driven by a delay in a new product launch, which led to lower sales volume.

This decline was partially offset by a $4.0 million decrease in discounts and returns.

Other revenue increased $10.5 million, or 41%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, due to a $5.5 million increase in partnership revenue, which includes advertising revenue, and a $5.0 million increase in data revenue, which was primarily attributable to the Amended and Restated Data Services and License Agreement with Placer.ai we entered into in July 2024 (the “A&R Placer Agreement”).

Cost of Revenue, Gross Profit, and Gross Margin

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2024 2023 $ %

(in thousands)

Subscription costs $ 41,014 $ 30,975 $ 10,039 32 %

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Other 89 % 86 %

Cost of subscription revenue increased $0.3 million, or 1%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily related to increases of $1.2 million in technology expenses, $1.0 million in contractor expenses, and $0.1 million in depreciation and amortization associated with our growth.

The increases were partially offset by a decrease of $1.5 million in personnel-related and stock-based compensation costs attributable to our integration with Tile and the restructuring of the combined workforce.

We also saw a decrease of $1.8 million in membership offering costs as a result of the discontinuation of certain battery replacement related membership benefits, partially offset by a $1.3 million increase in other membership offering costs in line with the increase in revenue.

Subscription gross margin increased to 86% during the year ended December 31, 2023 from 80% during the year ended December 31, 2022, primarily due to the subscription price increases for U.S.

Life360 subscriptions, which were implemented beginning in August 2022, and a decrease in membership offering costs related to the discontinuation of certain battery related membership benefits.

Cost of hardware revenue increased by $1.9 million, or 4%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to an increase of $4.4 million in product, freight and battery expenses in line with the increased number of units sold.

We also saw an increase of $0.8 million in personnel-related and stock-based compensation costs attributable to the increased volume of stock-based awards granted throughout the year ended December 31, 2023, and an increase of $0.3 million in professional and outside services and contractor spend to support our growth.

The increases were offset by a $2.3 million decrease in fulfillment, logistics, and other expenses largely reflecting the efficiencies achieved post Tile Acquisition, a $1.1 million decrease in technology expenses related to improved efficiencies post-acquisition with Tile, and a $0.4 million decrease in membership offering costs related to the discontinuation of certain battery related membership benefits.

The remaining increase of $0.2 million is attributable to other cost of hardware revenue associated with our growth.

Hardware gross margin increased to 19% during the year ended December 31, 2023 from 5% during the year ended December 31, 2022, primarily due to efficiencies achieved within the Company as decreased fulfillment and logistics costs were incurred as a percentage of revenue during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

The improvement in hardware gross margin was also due to a release of reserve for hardware returns recorded in the three months ended June 30, 2023.

Cost of other revenue decreased by $0.1 million, or 2%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to a decrease of $0.3 million in personnel-related expenses and stock-based compensation costs associated with the reduction in workforce which took place during the three months ended March 31, 2023.

The decrease was partially offset by an increase of $0.2 million in technology expenses, to support the existing customer base.

Other gross margin decreased slightly to 86% during the year ended December 31, 2023 from 87% during the year ended December 31, 2022, primarily due to costs outpacing the decreased other revenue.

Cost of subscription revenue increased $10.0 million, or 32%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily related to increases of $4.0 million in technology expenses, $1.9 million in costs related to premium membership offerings, and $1.8 million benefit related to the discontinuation of certain battery related membership benefits recognized in 2023.

The Company also saw increases of $1.8 million in personnel-related and stock-based compensation costs and $0.5 million in other cost of subscription revenue expenses, attributable to Company growth.

Subscription gross margin decreased to 85% during the year ended December 31, 2024 from 86% during the year ended December 31, 2023, primarily due to the discontinuation of certain battery-related membership benefits that positively impacted 2023.

Cost of hardware revenue decreased by $0.2 million, remaining relatively flat during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to a decrease of $1.2 million in hardware product costs related to the reduced number of units sold and $0.7 million in costs related to the discontinuation of certain battery related membership benefits which took place in 2023.

These decreases were partially offset by an increase of $1.1 million in hardware freight costs related to a shift in channel mix and $0.6 million in other fixed costs attributable to Company growth.

Hardware gross margin decreased to 18% during the year ended December 31, 2024 from 19% during the year ended December 31, 2023, primarily due to an increase in freight costs associated with the shift in channel mix, a decrease in units sold, and an increase in fixed hardware costs in line with Company growth.

Cost of other revenue increased by $0.6 million, or 16%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, due to an increase of $0.3 million in technology related expenses to support the existing customer base and $0.3 million in other costs associated with the growth in partnership revenue, which includes advertising revenue.

Other gross margin increased to 89% during the year ended December 31, 2024 from 86% during the year ended December 31, 2023, primarily due to revenue outpacing the increase in costs.

Research and Development

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2024 2023 $ %

(in thousands)

Research and development $ 113,071 $ 100,965 $ 12,106 12 %

Research and development expenses decreased $1.5 million, or 1%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

The decrease was primarily due to decreases of $2.6 million in technology expenses, $1.8 million in professional and outside services spend, and $1.1 million in contractor spend, due to our decreased need as a result of the Tile and Jiobit businesses being fully integrated.

These decreases were offset by an increase of $2.8 million in personnel-related and stock-based compensation, primarily related to an increased volume of stock grants awarded to employees and an increase of $0.9 million related to a raw materials inventory write-off.

The remaining increase of $0.3 million is attributable to other research and development expenses.

Research and development expenses increased $12.1 million, or 12%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

This was primarily due to increases of $11.5 million in personnel-related and stock-based compensation costs, $4.1 million in technology and other expenses, $2.3 million in contractor spend, and $0.3 million in professional and outside services, attributable to Company growth.

The increases were partially offset by a $4.3 million increase in capitalized costs related to internal use software, a $0.9 million increase related to a raw material inventory write-off which negatively impacted the year ended December 31, 2023, and a $0.9 million increase in capitalized construction in progress costs.

Sales and Marketing

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2024 2023 $ %

(in thousands)

Sales and marketing $ 113,350 $ 99,072 $ 14,278 14 %

Sales and marketing expenses increased $14.3 million, or 14%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The increase was primarily due to a $10.1 million increase in marketing expenses consisting of increases of $11.3 million in Channel Partner commission charges due to increased subscription sales and $2.1 million in paid user acquisition spend, partially offset by a $3.3 million decrease in other marketing spend.

The increases were partially offset by a decrease of $2.4 million in professional and outside services and contractor spend due to our decreased need as a result of the Tile and Jiobit businesses being fully integrated.

We also saw a decrease of $0.7 million in personnel and related costs and stock-based compensation primarily due to the reduction in workforce which took place during the three months ended March 31, 2023.

The remaining decrease of $0.3 million is attributable to other sales and marketing expenses.

This was primarily due to increases of $10.2 million in commissions to Channel Partners, which was inline with the 19% growth in subscriptions, $6.6 million in other marketing spend, $1.6 million in personnel-related and stock-based compensation costs, $0.7 million in technology and other expenses, and $0.4 million in professional and outside services, attributable to Company growth.

The increases were partially offset by a $4.2 million decrease in paid user acquisition costs due to planned shifts in the allocation of spend to other marketing and a $1.0 million decrease in contractor spend.

General and Administrative

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2024 2023 $ %

(in thousands)

General and administrative $ 60,712 $ 52,583 $ 8,129 15 %

General and administrative expense increased $8.1 million, or 15%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The increase was primarily due to a $5.3 million gain on revaluation of contingent consideration related to the Jiobit Acquisition recorded during the year ended December 31, 2022 and a $0.1 million increase in technology costs.

The increase was partially offset by a $0.3 million decrease in personnel and related costs and stock-based compensation primarily due to the reduction in workforce which took place during the three months ended March 31, 2023, and a decrease of $1.6 million in professional and outside services due to continued operational efficiencies.

The remaining increase of $1.0 million is attributable to other general and administrative expenses.

This was primarily due to increases of $3.6 million in personnel-related and stock-based compensation costs and $1.0 million in technology expenses, attributable to Company growth.

In addition, the Company saw a $3.5 million increase in professional and outside service costs driven by public company compliance costs in connection with the U.S.

IPO, ongoing public company compliance costs, and corporate and strategic matters.

Convertible Notes Fair Value Adjustment

For the years ended December 31, 2023 and 2022, the Company recorded a loss associated with the convertible notes fair value adjustment of $0.7 million and a gain of $1.8 million, respectively.

The changes in fair value are primarily driven by the share price volatility and reduction in time to convert.

For the years ended December 31, 2024 and 2023, the Company recorded losses associated with the convertible notes fair value adjustment of $0.6 million and $0.7 million, respectively.

The changes in fair value were primarily driven by the share price volatility and reduction in time to convert.

Derivative Liability Fair Value Adjustment

For the years ended December 31, 2023 and 2022, the Company recorded a loss associated with the derivative liability fair value adjustment of $0.1 million and a gain of $1.3 million, respectively.

The changes are due to the revaluation of the derivative liability at each reporting period and are related to embedded redemption features bifurcated from the July 2021 Convertible Notes issued to investors.

For the years ended December 31, 2024 and 2023, the Company recorded losses associated with the derivative liability fair value adjustment of $1.7 million and $0.1 million, respectively.

The changes were due to the revaluation of the derivative liability at each reporting period and are related to embedded redemption features bifurcated from the July 2021 Convertible Notes issued to investors.

Loss on Settlement of Convertible Notes

In April and June 2024, the September 2021 Convertible Notes and the July 2021 Convertible Notes, respectively, were converted to common stock.

A loss of $0.4 million associated with the settlement of the Convertible Notes was recorded for the year ended December 31, 2024.

There were no such transactions during the year ended December 31, 2023.

Gain on Settlement of Derivative Liability

In June 2024, the holders of the July 2021 Convertible Notes converted their notes and accrued interest to common stock and the derivative liability was settled as a result of the conversion.

A gain of $1.9 million associated with the settlement of the derivative liability was recorded for the year ended December 31, 2024.

There were no such transactions during the year ended December 31, 2023.

Gain on Change in Fair Value of Investments

In July 2024, an observable price change related to our investment in a warrant held to purchase shares of preferred stock of a data revenue partner took place.

The observable price change resulted in a fair value adjustment and gain of $5.4 million recorded for the year ended December 31, 2024.

No such gains were recorded for the year ended December 31, 2023.

Other Income (Expense), Net

Other income (expense), net increased $3.2 million, or 24,731%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

The increase was driven by an increase in dividend income earned due to a higher average gross yield and favorable currency revaluation impacts in the current periods compared to the same periods in the prior year.

Other income (expense) includes interest income, dividend income, foreign exchange losses, and interest expense associated with the July 2021 Convertible Notes.

Other income (expense), net includes transaction costs, interest income, dividend income, foreign exchange losses, and interest expense associated with the July 2021 Convertible Notes.

Other income (expense), net decreased $4.4 million, or 137%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The decrease was primarily driven by a $5.6 million increase in transaction costs incurred in connection with our U.S.

IPO and $2.1 million increase due to unfavorable changes in the impact of currency revaluation.

The increase in expenses were partially offset by a $3.0 million increase in dividend and interest income resulting from higher average gross yields primarily due to an increased cash and cash equivalents balance.

Provision for (Benefit from) Income Taxes

The provision for (benefit from) income taxes increased $0.3 million, or 97%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

An income tax benefit of $0.1 million and an income tax provision of $0.6 million was recorded for the years ended December 31, 2024 and 2023, respectively.

We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized.

Key Performance Indicators

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Key Operating Metrics

As of and for the years ended December 31,

As of and for the year ended December 31,

2024 2023 % Change

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$ 13.72 $ 13.48 2 %

1 Metrics presented as of and for the periods ended December 31, 2022 have been recast to reflect the calculations under a revised metric definition.

We previously calculated Subscriptions and Paying Circles by including subscribers who had been billed as well as whose billing status was pending as of the end of the period.

We have since revised our definition of these metrics to exclude subscribers whose billing status was pending as of the end of the period.

Although the difference between the two methodologies does not result in any material changes, we have changed the definition of the metric because we believe it provides a better reflection of our results during a given period.

2 Metrics presented for the year ended December 31, 2022 are adjusted to include pre-acquisition data for Tile related to periods before the acquisition of Tile on January 5, 2022.

Excludes revenue related to bundled Life360 subscription and hardware offerings of $(4.6) million for the year ended December 31, 2024, and $(3.1) million for the year ended December 31, 2023.

Excludes revenue related to bundled Life360 subscription and hardware offerings of $4.3 million for the year ended December 31, 2024, and $3.7 million for the year ended December 31, 2023.

Annualized Monthly Revenue

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We have a large and growing global member base as of December 31, 2024.

A Life360 monthly active user (“MAU”) is defined as a unique user who engages with our Life360 branded services each month, which includes both paying and non-paying members.

A Life360 monthly active user (“MAU”) is defined as a unique member who engages with our Life360 branded services each month, which includes both paying and non-paying members, and excludes certain members who have a delayed account setup.

As of December 31, 2024 and 2023, we had approximately 79.6 million and 61.4 million MAUs on the Life360 Platform, respectively, representing an increase of 30% year-over-year.

We believe this has been driven by continued strong new user growth and retention.

We believe this has been driven by continued strong new member growth and retention.

Paying Circles

We define a Paying Circle as a group of Life360 users with a paying subscription who has been billed as of the end of period.

We define a Paying Circle as a group of Life360 members with a paying subscription who have been billed as of the end of period.

Each subscription covers all members in the payor’s Circle so everyone in the Circle can utilize the benefits of a Life360 Membership, including access to premium location, driving, digital and emergency safety insights and services.

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We grow the number of Paying Circles by increasing our free member base, converting free members to subscribers, and retaining them over time with the provision of high-quality family and safety services.

Below is a comparison of Paying Circles as of December 31, 2022 using the current and prior definitions (in millions).

As of December 31, 2022

Paying Circles (current definition) 1.49

Paying Circles (prior definition) 1.52

% Change (1.8) %

Average Revenue per Paying Circle

We define Average Revenue per Paying Circle (“ARPPC”) as subscription revenue derived from the Life360 mobile application, excluding certain revenue adjustments related to bundled Life360 subscription and hardware offerings, for the reported period divided by the Average Paying Circles during the same period.

Average Paying Circles are calculated based on adding the number of Paying Circles as of the beginning of the period to the number of Paying Circles as of the end of the period, and then dividing by two.

We define Average Revenue per Paying Circle (“ARPPC”) as annualized subscription revenue recognized and derived from the Life360 mobile application, excluding revenue related to bundled Life360 subscription and hardware offerings, for the reported period, divided by the Average Paying Circles during the same period.

Average Paying Circles are calculated by adding the number of Paying Circles as of the beginning of the period to the number of Paying Circles as of the end of the period, and then dividing by two.

For the years ended December 31, 2024 and 2023, our ARPPC was $128.00 and $121.09, respectively, representing a 6% increase year-over-year.

The year-over-year increase in ARPPC is a result of subscription price increases for U.S.

Life360 subscriptions, which were implemented beginning in August 2022.

ARPPC is a key indicator utilized by Life360 to determine the effective penetration of our tiered product offering for Paying Circles.

The increase in pricing for new Paying Circles beginning in August 2022 has led to subscribers signing up for higher price products over time, increasing ARPPC.

Below is a comparison of ARPPC for the year ended December 31, 2022 using the current definitions.

As of December 31, 2022

ARPPC (current definition)

ARPPC (prior definition)

% Change 1.2 %

ARPPC is a key indicator utilized by Life360 to determine our effectiveness at monetizing Paying Circles through tiered product offerings.

ARPPC has benefited from price increases for existing U.S.

Android Life360 subscriptions that took effect during the three months ended June 30, 2023 as well as a shift in product mix towards higher priced products.

International ARPPC has benefited from price increases for existing subscribers in August 2024 followed by the launch of dual tier memberships in September 2024 across all non-triple tier countries.

In addition, price increases for existing subscribers began in January 2024 in the United Kingdom (“UK”) and March 2024 in ANZ, while the triple tier memberships launched in October 2023 and April 2024, respectively.

The positive impacts seen from the price increases were partially offset by an increase in international subscribers, which overall, have lower priced subscriptions.

Subscriptions

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We grow the number of Subscriptions by selling hardware units and increasing our free member base, converting free members to subscribers, and retaining them over time with the provision of location tracking and high-quality family and safety services.

Below is a comparison of Subscriptions as of December 31, 2022 using the current and prior definitions (in millions).

As of December 31, 2022

Subscriptions (current definition)

Subscriptions (prior definition)

% Change (1.3) %

Average Revenue per Paying Subscription

We define ARPPS as total subscription revenue recognized, excluding certain revenue adjustments related to bundled Life360 subscription and hardware offerings, for the reported period divided by the average number of paying subscribers during the same period.

We define ARPPS as annualized total subscription revenue recognized and derived from Life360, Tile and Jiobit subscriptions, excluding revenue related to bundled Life360 subscription and hardware offerings, for the reported period divided by the average number of paying subscribers during the same period.

The average number of paying subscribers is calculated by adding the number of paying subscribers as of the beginning of the period to the number of paying subscribers as of the end of the period, and then dividing by two.

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ARPPS for the years ended December 31, 2024 and 2023 was $106.16 and $99.53, respectively, representing an increase of 7% year-over-year.

ARPPS has increased year-over-year as a result of the U.S.

Life360 subscription price increases, which were implemented beginning in August 2022.

Below is a comparison of ARPPS as of December 31, 2022 using the current and prior definitions.

As of December 31, 2022

ARPPS (current definition)

ARPPS (prior definition)

% Change 1.1 %

ARPPS has increased year over year as a result of the growth in subscriptions following price increases for existing U.S.

Android Life360 subscriptions that took effect during the three months ended June 30, 2023 and a shift in product mix towards higher priced products in the U.S.

Price increases in non-triple tier countries for existing subscribers were implemented in August 2024 and dual tier memberships launched in September 2024.

In addition, price increases for existing subscribers began in January 2024 in the UK and March 2024 in ANZ, while the triple tier memberships launched in October 2023 and April 2024, respectively.

The positive impacts seen from the price increases were partially offset by an increase in international subscribers, which overall, have subscriptions priced at lower prices.

Net Hardware Units Shipped

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Selling units contributes to hardware revenue and ultimately increases the number of users eligible for a Tile or Jiobit subscription.

For the year ended December 31, 2023, Life360 sold approximately 4.0 million units, up approximately 12% as compared to the 3.6 million units sold during the year ended December 31, 2022, reflecting higher sales and lower returns compared to the prior period.

For the years ended December 31, 2024 and 2023, Life360 sold approximately 3.9 million and 4.0 million, respectively, representing a 4% decrease year-over-year.

The decrease was primarily driven by a delay in our new product launch which took place during the third quarter of 2024.

Net Average Sales Price

To determine the net average sales price (“ASP”) of a unit, we divide hardware revenue recognized, excluding certain revenue adjustments related to bundled Life360 subscriptions and hardware offerings, for the reported period by the number of net hardware units shipped during the same period.

To determine the net ASP of a unit, we divide hardware revenue recognized, excluding revenue related to bundled Life360 subscription and hardware offerings, for the reported period by the number of net hardware units shipped during the same period.

ASP is largely driven by the price we charge customers, including the price we charge our retail partners, net of customer allowances, and directly to consumers.

For the year ended December 31, 2023, the net ASP of a unit was $13.48, which is largely flat compared to $13.47 during the year ended December 31, 2022.

For the years ended December 31, 2024 and 2023, the net ASP of a unit was $13.72 and $13.48, respectively, representing a 2% increase year-over-year.

The increase was primarily driven by fewer returns and discounts offered.

Liquidity and Capital Resources

On June 6, 2024, we completed our U.S.

IPO, selling a total of 3,703,704 shares of common stock and raising net proceeds of $93.0 million after deducting underwriting discounts and commissions.

An additional $5.5 million of expenses were paid on behalf of selling securityholders.

As of December 31, 2024, we had cash and cash equivalents of $159.2 million and restricted cash of $1.2 million.

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We believe our existing cash and cash equivalents and cash provided by sales of our subscriptions and hardware devices will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months.

Our future capital requirements will depend on many factors and as a result, we may be required to seek additional capital.

We may from time to time seek to raise additional capital based on a variety of factors, including our capital requirements and the relative favorability of conditions in the capital markets.

If we are unable to raise additional capital on terms acceptable to us or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, financial condition and results of operations.

On March 10, 2023, we had a banking relationship with SVB.

As of the closure of SVB on March 10, 2023, we held $6.1 million in direct deposits with SVB, which represented approximately 6.4% of our total cash and cash equivalents as of that date.

We also held $75.4 million in shares of money market mutual funds managed by Morgan Stanley, Blackrock and Western Asset, for which SVB acted as custodian.

SVB was closed on March 10, 2023 by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver.

On March 12, 2023, the U.S.

Treasury, Federal Reserve, and FDIC announced that SVB depositors will have access to all of their money starting March 13, 2023.

On March 13, 2023, we regained access to our funds held in SVB accounts.

On May 1, 2023 JPMorgan Chase acquired the substantial majority of assets and assumed certain liabilities of SVB from the FDIC.

While we did not experience any losses in such accounts, the recent failure of SVB exposed us to credit risk as it relates to our direct deposits in excess of the FDIC insured limits, prior to the completion by the FDIC of the resolution of SVB in a manner that fully protected all depositors.

We have transferred more than 80% of our accounts to one or more alternate depository institutions, the financial position of which management believes does not expose our company to credit risk or jeopardize our liquidity.

Additionally, we may be impacted by adverse developments which affect financial institutions, transactional counterparties, other companies in the financial services industry, or the financial services industry generally, which have in the past and may in the future threaten our ability to access our existing cash and cash equivalents and could have a material adverse effect on our business and financial condition.

Our cash flow activities were as follows for the periods presented:

Our cash flow activities were as follows for the periods presented (in thousands):

Year Ended December 31,

2024 2023 2022

(in thousands)

Net cash provided by (used in) operating activities $ 32,612 $ 7,524 $ (57,055)

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Operating Activities

Our largest source of operating cash is cash collections from our paying users for subscriptions to our platform and hardware device sales.

Our primary uses of cash from operating activities are for employee-related expenditures, inventory, infrastructure-related costs, commissions and other marketing expenses.

Net cash provided by (used in) operating activities is impacted by our net loss adjusted for certain non-cash items, including depreciation and amortization expenses, amortization of costs capitalized to obtain contracts, change in fair value of convertible notes, derivative liability, and contingent consideration, and stock-based compensation, as well as the effect of changes in operating assets and liabilities.

A number of our users pay in advance for annual subscriptions, while a majority pay in advance for monthly subscriptions.

Our largest source of operating cash is cash collection from our paying members for subscriptions to our platform and hardware device sales.

Our primary uses of cash from operating activities are for employee-related expenditures, costs to acquire inventory, infrastructure-related costs, commissions paid to Channel Partners and other marketing expenses.

A number of our members pay in advance for annual subscriptions, while a majority pay in advance for monthly subscriptions.

Deferred revenue consists of the unearned portion of customer billings, which is recognized as revenue in accordance with our revenue recognition policy.

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The primary factors affecting our operating cash flows during this period were our net loss of $4.6 million, impacted by $48.4 million of non-cash adjustments, and $11.2 million of cash used by changes in our operating assets and liabilities.

The non-cash adjustments primarily consisted of $38.5 million of stock-based compensation expense and $9.1 million of depreciation and amortization.

The non-cash adjustments primarily consisted of $42.3 million of stock-based compensation expense, $9.8 million of depreciation and amortization, and $5.4 million of gain on change in fair value of investment.

The cash used by changes in our operating assets and liabilities was primarily due to an increase in accounts receivable, net, an increase in costs capitalized to obtain contracts with customers, and an increase in inventory.

These amounts were partially offset by an increase in deferred revenue, and an increase in accrued expenses and other liabilities.

For the year ended December 31, 2023, net cash provided by operating activities was $7.5 million.

The primary factors affecting our operating cash flows during this period were our net loss of $28.2 million, impacted by $49.1 million of non-cash charges, and $13.4 million of cash used by changes in our operating assets and liabilities.

The non-cash charges primarily consisted of $38.5 million in stock-based compensation and $9.1 million of depreciation and amortization.

The cash used by changes in our operating assets and liabilities was primarily due to an increase of $9.1 million in accounts receivable, net, a decrease of $7.9 million in accounts payable, and an increase of $6.7 million in prepaid expenses and other assets.

These amounts were partially offset by a decrease of $5.8 million in inventory, an increase of $4.6 million in deferred revenue, and an increase of $2.2 million in accrued expenses and other liabilities due to increasing activity in line with the Company growth.

For the year ended December 31, 2022, net cash used in operating activities was $57.1 million.

The primary factors affecting our operating cash flows during this period were our net loss of $91.6 million, impacted by $37.3 million of non-cash charges, and $2.8 million of cash provided by changes in our operating assets and liabilities.

The non-cash charges primarily consisted of $34.7 million in stock-based compensation, $9.2 million of depreciation and amortization, $5.3 million gain on revaluation of contingent consideration, $2.9 million of amortization of costs capitalized to obtain contracts, $1.8 million gain in convertible notes fair value adjustment, $1.5 million non-cash revenue from affiliate, and $1.3 million gain in derivative liability fair value adjustment.

The cash provided by changes in our operating assets and liabilities was primarily due to a $10.6 million decrease in prepaid expenses and other assets, a $6.5 million decrease in accounts receivable, net, and a $4.7 million increase in deferred revenue.

These amounts were partially offset by a $12.7 million decrease in accounts payable, a $7.7 million decrease in accrued expenses and other liabilities, a $3.3 million increase in costs capitalized to obtain contracts, a $0.5 million increase in inventory, and a $0.3 million increase in other noncurrent liabilities.

Investing Activities

For the year ended December 31, 2023, net cash used in investing activities was $2.2 million, which primarily relates to $1.7 million of capitalization of internal use software costs in accordance with ASC 350-40, Intangibles - Goodwill and Other, Internal-Use Software and $0.5 million of purchases of property and equipment.

For the year ended December 31, 2022, net cash used in investing activities was $111.6 million, which relates to $110.9 million of cash paid for the Tile Acquisition, net of cash acquired and $0.7 million related to the capitalization of internal use software costs.

For the year ended December 31, 2024, net cash used in investing activities was $10.1 million, which primarily related to the Related Party SAFE of $5.0 million, the capitalization of internal use software costs of $3.9 million in accordance with ASC 350-40, Intangibles - Goodwill and Other, Internal-Use Software, and purchases of property and equipment of $1.2 million.

For the year ended December 31, 2023, net cash used in investing activities was $2.2 million, which related to $1.7 million of capitalization of internal use software costs in accordance with ASC 350-40, Intangibles - Goodwill and Other, Internal-Use Software and $0.5 million of purchases of property and equipment.

Financing Activities

For the year ended December 31, 2023, net cash used by financing activities was $25.0 million, which primarily relates to the $13.1 million of released funds placed in an indemnity escrow fund for general representations and warranties related to the Tile acquisition, $14.0 million of taxes paid related to net settlement of equity awards, and $3.9 million of repayment of notes due to affiliates;

offset by $5.8 million of proceeds from the exercise of options.

For the year ended December 31, 2022, net cash provided by financing activities was $27.7 million, which primarily relates to $32.2 million of proceeds from a capital raise, $2.4 million of proceeds from the exercise of options, and $0.6 million of proceeds from the repayment of notes due from affiliates, partially offset by $4.1 million of taxes paid related to net settlement of equity awards and $3.5 million of repayment of convertible notes.

For the year ended December 31, 2024, net cash provided by financing activities was $67.3 million, which primarily related to net proceeds of $93.0 million after deducting underwriting discounts and commissions from our U.S.

IPO, and $14.6 million of proceeds from the exercise of options and warrants and restricted stock settlements, offset by $34.0 million of taxes paid for the net settlement of equity awards, and $6.3 million in payments related to the U.S.

For the year ended December 31, 2023, net cash used in financing activities was $25.0 million, which primarily related to $13.1 million of released funds placed in an indemnity escrow fund for general representations and warranties related to the Tile acquisition, $14.0 million of taxes paid related to net settlement of equity awards, and $3.9 million of repayment of notes due to affiliates, offset by $5.8 million of proceeds from the exercise of options.

Obligations and Other Commitments

Our principal commitments consist of obligations under our convertible notes, operating leases for office space, and other purchase commitments.

Our obligations under our convertible notes are described in Note 6, "Fair Value Measurements" and Note 9, "Convertible Notes" to our consolidated financial statements.

Our principal commitments consist of operating leases for office space, and other purchase commitments.

Information regarding our non-cancellable lease and other purchase commitments as of December 31, 2024, can be found in Note 7, "Balance Sheet Components" and Note 10, "Commitments and Contingencies" to our consolidated financial statements.

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Revenue Recognition

We derive revenue from subscription fees (which include support fees), the sale of hardware tracking devices and accessories, and other revenue.

We derive revenue from subscription fees, the sale of hardware tracking devices and accessories, and other revenue.

We sell subscriptions to our platform through arrangements that are generally monthly to annual in length.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis