Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Life360 Inc (ASX:360, Financial) achieved a 31% year-on-year increase in monthly active users, reaching 70.6 million.
- The company saw a significant increase in net paying circles, with a record addition of 132,000 in Q2.
- International growth was strong, with international MAUs up 48% and international paying circles up 42% year over year.
- Revenue from the UK and New Zealand increased by 76% and 69% year over year, respectively.
- Life360 Inc (ASX:360) reported positive adjusted EBITDA for the seventh consecutive quarter, increasing to $11 million from $5.7 million in the prior year.
Negative Points
- Q2 gross margin decreased slightly to 75% from 77% in the prior year.
- The company reported a net loss of $11 million, up from $4.4 million in the prior year, due to IPO-related costs and higher income tax expenses.
- Operating expenses increased by 12%, with R&D costs up 17% and general and administrative expenses up 17% year on year.
- Life360 Inc (ASX:360) anticipates a seasonal increase in expenses in Q3, impacting EBITDA and adjusted EBITDA.
- The company faces potential risks from recessionary pressures at retail for hardware and managing seasonal hardware inventory.
Q & A Highlights
Q: Chris, the number of the net adds in terms of the paying circles, it accelerated versus last quarter, I think you made accelerated versus last year. Talk about the sustainability of that? Is it something either through greater awareness, more marketing, better product, more functionality?
A: Sure. So I'll answer it in a few ways. By start looking at our long arc, quarter-to-quarter things change and we're trying not to get too excited by great quarter or sad by an average or mediocre one. But if you think about the overall trends, millennials age into our category, people becoming more aware of the product, international in particular. We do think there are long term overall winds that our back. We have been also investing -- we've been adding more optimizations this year improving our funnel. We hired a VP of growth, has been launching a bunch of experiments, have driven increased conversion. And then of course, in a longer term horizon, we have different product features for different life stages. Right now, the premium product is very much tied to families with teens, whereas the overall user base is much broader. So we're certainly excited by the forward march, we're feeling good about trends, and we feel very, very good about the long term, but quarter to quarter can be noisier. There's not a signal that is chopping out and we're off to a good start even in recent days.
Q: Curious if you could let us know how much ad revenue is in that indirect revenue line in the second quarter and whether we should still think about the second half is around $5 million to $10 million from advertising?
A: Sure, it's a relatively small amount in Q2 as we projected. And I think we're still looking at the full year in that sort of range of $5 million to $10 million. I would say that we've put a lot of things in place and made a lot of progress in terms of the infrastructure for advertising. As Chris mentioned, we've just also employed a VP for ad sales. We've got a lot of the pieces in place as well as just signing the Arity extension. So I think we have a lot more confidence as we go into second half.
Q: So as we look at the second half core subscription growth sort of implied in your full year outlook, how should we be thinking about sort of key contributors to accelerating growth here?
A: Sure. So we have our seasonality and we normally get a nice wave on back-to-school, which is obviously happening right now. We have more product optimizations, that's more of a steady drumbeat. We have some new features that we'll be launching in the second half. We have a few. We have our new tile product launch, which is a little less on net sub adds, but could tie to that a little bit because we think we can use that to drive upsell. And the big one is international, just as I said, that's going to be less adds, but more revenue, because we are going to continue to expand there. And as you can see, we are in the early days there where our year-over-year growth has been extremely strong.
Q: Can you give us a little bit of color, in the past, Chris you said that you're still growing in the most penetrated states. Is that still the case, and at what rate?
A: Sure. So I don't have exactly precise numbers for you. And I have not looked at the latest numbers since the US listing. So everything I comment on here will be about two months out of date. But when we ran those numbers for the US IPO deck, those trends were continuing. I don't have the exact numbers, but we still continue to see that once we hit that 3% tipping point ish, things seem to accelerate. There are some signs that's happening internationally as well. But the meta trends, at least as of two months ago, there were holding quite nicely.
Q: I want to go back to just the advertising business. I know it's super early, you're adding new partners and you're hiring a lot of folks to manage that business. I guess, Chris, you talked about at some point, maybe that business would be could approach the subscription business. I guess what needs to happen over time in order for that to become a reality.
A: Sure. So that is a very long arc. And to do that, we need to move beyond just giving banners, but really become a destination where people are coming to be matched with offers that are uniquely tied to the data we know about them. So the key example we have and we're very excited about the long term is car insurance. If you think about what we can do, hey, Mark, you're better than 80% of drivers, safer than 80% of drivers. We got you to a point where we give you your real time quote without you having to go through any process, and if you have confidence that what we show you is real, why would you not be checking Life360 for how you get a better insurance rate. And it would be the also will build trust by saying the inverse like, hey, did you know you're in the bottom 10% of drivers, you better be careful never to give your information to an insurance company. And I hope, as we build that trust, and we build these offers in a way that is contextually relevant with our customers, that will start driving the success we want, and the company we look to most is Credit Karma. They did a very similar thing with your credit scores where they took your most private information far more sensitive than driving data, giving your Social Security number then they would match you with credit cards. It was just advertising, users knew they are being advertised to, but they liked it because they're getting match for their credit card for them and with a meaningfully smaller user base than us, they were able to generate over $1 billion of lead gen revenue. And they actually now are trying to replicate that in the car front, not in a competitive way, but they just bought a company called Zendrive to do exactly what we would like to do in the long run with insurers. So I think people are realizing if you have a captive audience with proprietary first-party data and high engagement, there's a lot you can do. So that's one of many examples, that the one I'm most excited about. You can also imagine like you moved to new home, we can sell your home security to homeowners insurance. You get a new pet, you'll buy our tracker, then we'll sell you a pet insurance policy there. There are many of these things that we'll feel like they're extensions of our product, and that's when I think we hit the true gold mine.
Q: Going back to just strengthen net paid additions, especially on the international side, like what do you think the strength is attributed to? Is it just more effective marketing, its feature improvement, is it sort of downstream of hitting that or approaching that 3% MAU tipping
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
