Life360, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2022. Figures are unaudited and in U.S. dollars; financial statement amounts below are in millions unless otherwise noted. Life360 operates a family safety and location-sharing platform under a freemium model, with subscriptions and data and partnership revenue. Results include Tile from its January 2022 acquisition and Jiobit, acquired in September 2021.
Key financial results
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $48.8 | $25.0 | $99.8 | $48.0 |
| Gross profit | $29.3 | $20.2 | $64.4 | $38.8 |
| Gross margin | 60% | 81% | 65% | 81% |
| Operating loss | $(33.5) | $(6.8) | $(60.6) | $(10.7) |
| Net loss | $(33.0) | $(6.8) | $(58.2) | $(10.7) |
| Adjusted EBITDA loss | $(18.7) | $(3.3) | $(32.3) | $(4.8) |
Q2 revenue increased 95% year over year; six-month revenue increased 108%. Subscription revenue was $36.0 million in Q2 and $69.1 million for the six months, up 87% and 90%, respectively. Hardware revenue, newly reported following the Tile and Jiobit acquisitions, was $6.8 million in Q2 and $16.5 million for the six months. Other revenue was $6.0 million in Q2 and $14.3 million for the six months.
Hardware revenue carried negative gross margins: (58)% in Q2 and (13)% for the six months. Management attributed the pressure in part to acquired-technology amortization and added personnel costs. Subscription margin was 78% in both the quarter and six-month period, versus 80% and 79% a year earlier. Operating expenses rose substantially, including research and development, sales and marketing, and general and administrative costs; stock-based compensation was $10.4 million in Q2 and $16.5 million for the six months.
Cash, debt and liquidity
- At June 30, cash and cash equivalents were $64.3 million; restricted cash was $15.1 million, for combined cash and restricted cash of $79.3 million. Restricted cash included $13.1 million in Tile acquisition indemnity escrow.
- Six-month operating cash use was $38.5 million, investing cash use was $113.8 million—primarily $113.4 million paid for Tile, net of cash acquired—and financing cash provided was $0.3 million. Combined cash and restricted cash declined $152.0 million from year-end 2021.
- Convertible notes had a $10.5 million carrying amount at June 30, comprising current and noncurrent amounts. Current liabilities were $82.2 million and total liabilities were $94.1 million. The filing describes convertible-note and derivative fair-value changes that can affect reported earnings.
- Deferred revenue was $28.3 million, of which the company expected $24.8 million to be recognized within 12 months, subject to revenue-recognition criteria. Purchase commitments totaled $24.6 million and were generally cancellable subject to costs incurred through cancellation.
Management stated that cash and cash equivalents and cash generated from subscriptions and hardware sales should be sufficient for working capital and capital expenditures for at least the next 12 months, while noting future capital needs depend on multiple factors and additional capital may be required.
Material changes, outlook and risks
- Tile acquisition consideration was $173.6 million, including $158.0 million cash and $15.6 million equity. Tile added hardware sales and subscription revenue, along with substantial acquired goodwill and intangible assets.
- Operating expenses increased as the company expanded headcount, marketing, infrastructure and product development and incurred acquisition and U.S. reporting-company costs. Management expects expenses to rise in absolute dollars as it invests in growth; the filing provides no specific revenue, earnings or cash-flow guidance.
- Reported growth also reflects acquisitions, so it is not solely organic. At June 30, Life360 reported 42.0 million members, 1.42 million Paying Circles and annualized monthly revenue of $174.4 million; these were up 29%, 41% and 65%, respectively, from the comparable prior-year measures. ARPPC was $89.34, compared with $79.95.
- The company was transitioning away from legacy individual-level data sales toward aggregated data commercialization through Placer, while retaining an opt-out for members from aggregated data sales. It said it was exploring future partner uses requiring explicit member opt-in. Data privacy, consumer protection and cybersecurity inquiries and claims are identified as risks.
- Revenue and receivables are concentrated among a small number of channel and retail partners: two channel partners together accounted for 64% of Q2 revenue. The company also relies on a primary cloud platform partner and a limited number of contract manufacturers.
- Management cited seasonality, competition, international expansion, supply-chain and macroeconomic uncertainty, and risks relating to COVID-19 and the Russia-Ukraine conflict. It reported no material financial-statement impact from the latter two factors for the six months ended June 30, 2022.
- Tile-related patent litigation remains unresolved; the company said it cannot predict outcomes or estimate a possible loss range. A separate patent case had been dismissed, with related patent review proceedings pending. A July 2022 reseller matter was resolved after quarter-end, producing a reported $0.8 million gain.
Investor verification priorities
- Separate acquisition-driven revenue and member growth from organic performance, and assess post-acquisition integration and Tile hardware economics.
- Track hardware gross margin, inventory, returns and warranty accruals, and determine whether hardware can reach sustainable profitability.
- Monitor operating cash burn, unrestricted cash, acquisition-related obligations and management’s stated 12-month liquidity outlook.
- Review the scale and future recognition of stock-based compensation, acquired-intangible amortization and other excluded items in Adjusted EBITDA.
- Assess customer and platform concentration, the economics and execution of the aggregated-data transition, member consent and privacy risks, and the outcomes of pending litigation or regulatory inquiries.