Life360 (NASDAQ:LIF) reported third-quarter financial results on Monday. The transcript from the company’s third-quarter earnings call has been provided below.
This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.
View the webcast at https://life360.zoom.us/webinar/register/WN_Ij8kdZa3Q7-4RSTsncVWpA#/registration
Summary
Life360 Inc reported a strong Q3 with a 40% year-over-year revenue growth, driven by a 29% increase in subscription revenue and significant advertising growth.
The company added 5.3 million monthly active users (MAU), reaching over 107 million globally, with significant growth in international markets.
Life360’s advertising revenue tripled year-over-year to $25.4 million, though it was on the lower end of expectations due to sales motion adjustments.
The company is expanding its product offerings to include pet-related services and AI-driven family intelligence, aiming to enhance user engagement and monetization.
Life360’s future outlook is optimistic with increased revenue guidance for the full year, though they expect a seasonal dip in Q4 MAU growth.
Management noted successful price increases in the US and highlighted ongoing international market expansion efforts.
The company is focused on localizing product capabilities in international markets such as Germany and Latin America to improve user retention before scaling marketing efforts.
Full Transcript
OPERATOR
Look, which will be followed by a Q&A session. We will make forward-looking statements during this call which are subject to risks and uncertainties. A summary of these risks can be found in the Risk Factors section of our Form 10-K filing with the SEC dated March 2, 2026. These statements are based on assumptions we believe reasonable as of today, November 9, 2026, and we have no obligation to update them except as required by law. We will also present both GAAP and non-GAAP financial measures.
Reconciliations are included in the media release on our investor relations website. This call is being conducted as a Zoom audio webinar with no slides. Our quarterly investor presentation is available as a reference on our website along with the quarterly shareholder letter from Lauren and Russell. All participants will be in a listen-only mode until the Q&A. When we come to the Q&A, please raise your hand using the Raise Hand icon on the bottom of your Zoom screen.
Once prompted, you may unmute your line to ask your question. Participants who have joined by telephone will be in a listen-only mode throughout. With that, I’ll turn the call over to Lauren.
Lauren Antonoff (Chief Executive Officer)
Good afternoon to everyone in the US and good morning to those in Australia. Thank you for joining us today to discuss our Q3 results and outlook. We’re pleased with how our third quarter landed. Total GAAP revenue grew 40% driven by subscription revenue growth of 29% and a boost from our advertising acquisition in Q1. Operating leverage in our core subscription business is helping to fund investments in future growth. You can find more detail on these strong third quarter results in our shareholder letter and investor presentation on our IR website.
Russell and I are going to touch on the highlights here, starting with monthly active users or MAU. Q3 continued to show healthy growth. We added 5.3 million MAU, reaching over 107 million globally, with international markets crossing the 50 million active user mark for the first time and the US rising to nearly 56 million. MAU is growing the fastest in our Anglo markets where our retention and conversion to paid is among our highest. We also drove strong momentum in paying circles with 188,000 net adds, bringing the total to 3.4 million.
This is an increase of 26% fueled by strong growth in both the US and international markets. Average revenue per paying circle rose 4% with growth primarily from members shifting toward our higher priced offerings and as a result of our AI-driven optimization, which I’ll come back to in a moment. This momentum is reassuring as we extend the price change to all members in Q4. That rollout’s going smoothly with churn in line with our expectations. Our work to optimize onboarding and engagement in international markets was an important driver. In the third quarter, we’re doing more marketing with key local influencers, establishing distribution partnerships, driving increased media interest and coverage, and tuning performance for local app stores and devices. One of our campaigns in Anglo markets in Q3 drove a brand moment worth highlighting both for its specific impact on our results and for the broader cultural conversation it sparked.
In the UK, we partnered with celebrity chef Jamie Oliver on a short-form miniseries that showcased the Life360 family connection in a fun and unexpected way. The campaign generated nearly 100 million social views, driving a lift in Life360-related searches and double-digit registration increases in the UK and Canada. The series drove conversations about the benefits of location sharing in major outlets including Forbes, the BBC, Ad Age and many more.
The US and our major international markets continue to grow nicely, and in Q3 we made strides in understanding our newer international markets. These learnings are informing our product and marketing strategy in Q4 and into 2027. For example, in Germany we had success in both acquisition and retention, and we’re putting more marketing to work there. As we’ve spent more time with customers in Latin America, we’ve made a strategic decision to focus our efforts on localizing our product capabilities ahead of scaling marketing further.
Our core value props around connection and safety resonate around the world, but what safety means to customers in different markets varies. Getting the local experience right first provides the foundation to scale marketing efficiently and build a healthier and more profitable business over time. Turning to advertising, Q3 GAAP revenue was over 25 million, making ads our second largest revenue line just two years after launch. That’s more than triple last year’s third quarter as a result of the acquisition. With technical integration behind us, we’ve been tailoring our sales efforts and extending our capabilities both on and off the Life360 app. Getting the sales motion and the ad experience right took a bit longer than we expected, so revenue is on the lower end of our range.
We’re encouraged that big brands in auto, finance, retail, consumer goods and more are investing with us and seeing good ROI. New high-value formats like video are showing promise as well, and while 2026 budgets are largely committed, early signals for 2027 look good. To set us up to scale advertising further, we’re thrilled to welcome Donna Sharp to lead Life360 Ads. Donna is widely recognized in the ad industry and knows Life360 well, having been an advisor to us as we built out the ads business.
She understands the deep value of the trust and connection that we built with families and has the industry track record and vision to land that message with advertisers. Before I turn the call over to Russell, I’d like to highlight two areas that will make increasingly meaningful contributions over time: pets and AI. Pets is our first market extension beyond our traditional core family audience. We estimate that more than 60% of our 107 million members have pets and we’re impressed that members have already created over 10 million pet profiles in Life360. Following on the heels of our first offerings in Pet GPS and Tags, we’re building experiences to help every pet owner keep their pets happy and healthy, even if they don’t have a Life360 device.
Building out new verticals like this one takes time and the progress we’re seeing reinforces our belief that pets will become a key element of our family ecosystem and a meaningful contributor to our business that helps extend our TAM and support long-term MAU growth and monetization. We’re already seeing early retention benefits from the Pet GPS bundle. Turning to AI, we’re seeing a fundamental shift in how work gets done and ultimately how consumers engage with technology. Our shareholder letter highlighted two examples where we see advertising delivering benefits both in the short term and the long term. First, there’s a lot of excitement in the market around emerging personal assistants. Last week we opened our Family Intelligence platform to third-party agents such as Muse that help our members manage daily life, giving families new insights for everyday decisions like who’s in the best position to pick up the kids when they have to go home early.
An agent ordering dinner can time the order based on when everyone will arrive home. Soon, an agent monitoring school emails will be able to surface an upcoming soccer game in the Life360 family map so everyone in the family can see where and when to show up and cheer. We’re excited about the connection we built for AI assistants to work with Life360, but it’s just the start of how AI will enhance our product experience. While the proliferation of agentic assistants promises to take over all sorts of tasks, what will continue to differentiate Life360 is that our unique real-world, real-time data lets us craft experiences that keep members coming back to the app not just because they’re useful, but because it feels good to stay connected. Consumer adoption of AI is a meaningful opportunity for Life360 to increase the value we deliver.
Separate from these product use cases, we’ve shared over many quarters that AI has been helping us lift productivity and focus our efforts on higher value opportunities. We also continue to see benefits to our financials. Our AI monetization engine, powered by Life360 Family Intelligence, is doing more for us all the time. Where it started optimizing conversion, it’s now also driving a shift to both web-based billing and higher-priced tiers, helping our top and bottom lines.
Overall, we had a strong Q3 and we’re excited about our revenue momentum going into Q4 and 2027. We’re seeing evidence that advertisers value what we offer. The pets business is promising and we see many more opportunities to extend our reach over time. The trust families place in us gives us a durable place in everyday family life and in an AI-driven world, the human connection we’re built around only becomes more valuable. Most importantly, the core of Life360 is strong, our subscription engine is humming, our global user base is growing and we still have a long runway ahead.
Behind all the numbers is something quite simple. Families want to stay connected and safe and more than 100 million people around the world are trusting us to help them do that. That trust compounds and it underpins our confidence in our objectives of crossing 150 million MAU and 1 billion in revenue on a path to 35% adjusted EBITDA margins. Thank you for your time and now I’ll turn the call over to Russell for more on our results and our full year outlook.
John Russell Burke (Chief Financial Officer)
Thanks, Lauren. During our Q2 call I outlined our expectations for a strong financial setup in the back half of the year and I’m pleased to report that this is reflected in our Q3 results. As Lauren highlighted, we delivered impressive operating metrics with momentum in MAU and paying circles and continuing strong growth in the core business. I will detail how this is translating into our financial performance with all financials referenced here unaudited and denominated in US dollars.
Total Q3 revenue was 174.1 million with growth accelerating to a 40% increase year over year. As Lauren noted, subscription revenue was up 29% year on year to 124.2 million and core subscription grew even faster, up 32% year on year. This was largely driven by volume with a 26% uplift in paying circles. ARPPC was 4% higher, which primarily reflected a shift in product mix to higher priced offerings and the early impact of recent U.S. price increases.
U.S. subscription revenue increased 27% year on year supported by paying circle growth which benefited from improved conversion metrics. International subscription revenue increased 40% year on year with an outstanding performance from the core territories of the UK, Australia, New Zealand and Canada. Hardware revenue decreased 20% year on year to $9 million, primarily driven by lower hardware units shipped with a larger than expected impact following our strategic exit from brick and mortar retail channels. Advertising revenue of 25.4 million more than tripled in size year over year reflecting the acquisition of Nativo and the continuing ramp of the business. While this was good momentum, it was lower than we anticipated as we made adjustments to the sales motion and the ad experience for members.
Our Other revenue increased 61% year on year to 15.5 million, including partnership revenue recognized during the quarter. Annualized monthly revenue reached 578 million, an increase of 29% year on year underpinned by continued subscriber growth and other recurring revenue. Third quarter gross margin was 77% driven by the distinct margin profiles of our four revenue streams. Subscription gross margin increased to 87% from 85% year on year, benefiting from the shift towards higher priced offerings. As expected, hardware gross margin declined to negative 19% from negative 3% year over year, reflecting the ramp in Pet GPS partially offset by lower tariff costs. As we’ve said before, we’re using hardware as an acquisition tool for paid subscriptions with further benefits from improved retention.
Advertising gross margin of 55% was lower than the same quarter last year as we scaled the business and delivered incremental revenue that has higher direct costs. These are mainly traffic acquisition and hosting costs associated with building a full stack digital advertising platform following the Nativo acquisition. Other gross margin of 89% increased from 88% year over year due to higher margin partnership revenue. Operating expenses as a percentage of revenue decreased to 72% in the current quarter from 80% in Q2 as we continue to drive operating leverage. Operating expenses increased 38% year over year, primarily reflecting higher personnel costs due to company growth, the acquisition of Nativo, higher App Store commissions and growth media spend. Lauren spoke earlier about the benefits of our emerging AI native operating model. We’re encouraged to see this beginning to translate into improved financial metrics with Q3 delivering an early revenue impact from increased conversion to our highest platinum tier.
We’re also starting to see our AI tools enable a managed flow of new subscribers into web based billing. In addition, we’re actively managing AI costs to support operating leverage through a combination of model selection, optimization of token usage and the benefit of ongoing market wide reductions in model pricing. We expect these efforts to deliver meaningful benefits from 2027 onwards. GAAP net income was $22.5 million which includes a $17.8 million gain from the increase in value of our investment in Hubble. Basic EPS was $0.28 and diluted EPS was $0.26. Adjusted EBITDA of 34.6 million increased 41% from 24.5 million in Q3.25 driven by continued strong higher margin revenue growth and the scaling of the business. The Q3 adjusted EBITDA margin of 20% outperformed our guide of 18% reflecting the earlier than expected contribution of high margin partnership revenue.
We ended Q3.26 with 465 million in cash and short term investments and we generated operating cash flows of 27.2 million up 3% year on year. Following the announcement of our share repurchase program in May 2026, we’ve repurchased shares of common stock for an aggregate purchase consideration of 44.4 million through the end of Q3. This leaves approximately 180.6 million available for further repurchases under the program. Our repurchase activity is in line with our commitment to return value to our shareholders and reflects the disciplined approach that we outlined when the Board authorised the program.
We plan to offset dilution measured by stock based compensation expense on a rolling 12 month basis from the launch of the program and we’ve exceeded that target through the end of Q3. We will remain opportunistic and retain the flexibility to adjust the pace and timing to market conditions. Our full year guidance reflects our long term commitment to balance investment to drive future growth with sustainable profitability underpinned by expanding margins. We’ve lifted our full year revenue outlook to a range of 665 to 681 million compared with 650 to 685 million previously. Within that overall guidance we’re raising subscription revenue to 483 to 488 million. We’ve lowered the high end of the range for both hardware and advertising revenue.
We now expect hardware revenue in the range of 35 to 40 million and advertising revenue in the range of 98 to 102 million versus 98 to 115 million previously. Our other revenue outlook has increased from 249 to 51 million. Our full year adjusted EBITDA outlook has narrowed to 132 to 138 million compared with 130 to 140 million previously. Our full year guidance implies a significant uplift in Q4 revenue and adjusted EBITDA consistent with the trends that we’re seeing in the business following our strong performance in Q3. Subscription revenue growth is expected to accelerate due to the momentum in paying circle additions through Q3, the shift to higher priced tiers, and the recent U.S. price increases across the existing subscriber base. We expect those price increases to soften the rate of U.S. paying circle additions in Q4.26 with churn to date in line with our estimates.
Advertising revenue is expected to reflect a seasonal uplift in Q4, although somewhat less than previously forecast. We expect Q4 adjusted EBITDA margin to lift as Q4 operating expenses as a percentage of revenue decline versus Q4.25. Consistent with our prior guidance, we expect this margin expansion to be underpinned by revenue scale, cost efficiencies and investment in new growth initiatives undertaken in the first half of the year. Looking forward, our operating leverage allows us to invest in future growth while continuing to expand our margins over time.
Thanks for your attention and I’ll hand over to Yolanta to manage the Q and A.
OPERATOR
Thanks, Russell. As a reminder, if you’d like to ask a question, please raise your hand using the Raise Hand icon on the bottom of your Zoom screen. Once prompted, you may unmute your line to ask your question. Please mute your line again once you have completed your questions and limit yourself to one question initially. We’ll provide another opportunity if we have time. So first up, Mark Mahaney from Evercore. Mark, please go ahead and unmute yourself.
Mark Mahaney (Analyst at Evercore ISI)
Okay, thank you. I’m sorry, two questions please. This MAU outlook, I think you just reiterated it for the year. You showed a little bit of acceleration. Do you feel like you fully resolved all the technical issues that kind of marred MAU growth earlier this year? And any thoughts on the sustainability of MAU growth, you know, beyond just the fourth quarter? And then just talk briefly about the U.S. price increase. Did that go largely as expected in terms of impact on churn, customer satisfaction, etc. Thank you very much.
Lauren Antonoff (Chief Executive Officer)
Great. Starting with MAU growth, we feel really good about the health of the funnel. It’s in good shape. We’re seeing that benefit us in Q3 and we expect that to continue. Q4 is always generally a little bit lower than Q3, so, you know, we won’t expect quite the same numbers, but the overall trajectory is really strong as we continue to expand into new markets. So all good there. On the price increase, it’s going according to our plans. We felt really good about the initial delivery that we did with new users and, as we expand into the existing base, we’re seeing everything in line with our expectations. So good to go there.
John Russell Burke (Chief Financial Officer)
And what I would add to that, Mark, is specifically on churn, as we think about Q4, it has gone very much to our expectations, but when you look at that, our U.S. net paying circle additions in Q4 are likely to be around about half of what we would have expected otherwise. And that’s largely the one-time churn event, with returning to sort of what we think of as normal growth in Q1 next year.
Mark Mahaney (Analyst at Evercore ISI)
Thank you, Lauren. Thank you, Russell.
OPERATOR
Thanks, Mark. Next up we have Lafitani Soteriu from MST. Please unmute yourself and go ahead.
Lafitani Soteriu (Analyst at MST Marquee)
Thank you for the opportunity to ask a question. I’ve just got three parts to it. So first, I wouldn’t mind better understanding what the monetization strategy is for opening up Life360 to personal agents. Are you looking to only allow it for certain tiers or is it every tier? Or how are you thinking about Life360 making money if it becomes more popular and prevalent? A follow up question on the U.S. repricing, can you just give us some idea or color around the quantum in new revenue you anticipate to flow through on an annualized basis, understanding really starting in the fourth quarter. But if we were to, Russell, best guess, like is it, is it an extra 10 million over the next year or what does that number look like?
And can you just clarify, finally, in Other revenue there’s a noticeable jump from second quarter to third quarter and I’m having trouble finding out what the reasoning is for it. In the shareholder letter there’s some discussion around new data contracts or the like. If you could also clarify that. Thank you.
Lauren Antonoff (Chief Executive Officer)
Okay, I’ll take the first one and then let Russell take the next two. So AI working with AI assistants is really new for the world and for us and we’re starting up by really understanding how customers use it. So the way that it will start at first is that people adopt agents like Meta’s Muse or other agents as they become more popular and those agents can connect to our platform and ask questions about your circle. So if you choose to connect it, you’ll be able to answer questions like, you know, where’s the best place for us all to meet up?
Or things like that. And in that case the agent is doing the work. So Meta’s Muse would be bearing those inference costs and doing the work in the beginning. We’re learning about this. We have control over that gateway. We can decide if we want to make it more limited over time. But while adoption is early, it’s wide open and it’s helpful for us to learn. Our expectation is that we’ll bring those kind of agentic experiences into the app proper so that it’s more discoverable and we can create more rich, bespoke experiences within the app. But we’ll learn about that behavior using the apps that are out there and getting popularity today as we bring those in. I think that’s where we have a more significant opportunity for monetization. But it’s really too early to predict that now. Right now it’s really about engagement, creating value and learning about what’s valuable to customers.
And we’ll see about monetization from there.
John Russell Burke (Chief Financial Officer)
And so, Laf, in terms of the price increases, the best way I can characterize that is to look at our gold tier, which is the largest proportion of our paid members. We had a two dollar increase to the monthly price, which is about 13%. In terms of timing, that started to be noticed in October, starts to come in in late November. So we’ll see some impact of that in Q4 and then the full impact next year as that flows through. For other revenue, very specifically, we had a $3.7 million inflow in Q3, which to some extent was a catch up for the three quarters.
So if you look at that as a sort of $5 million run rate going forward is the best way to characterize that.
Lafitani Soteriu (Analyst at MST Marquee)
Thank you.
OPERATOR
Thanks, Laf. Next up we have Andrew Boone from Citizens. Andrew, please unmute yourself and go ahead.
Andrew Boone (Analyst at Citizens)
Thanks so much for taking the question. I’d love to talk about advertising. Can you just help us understand what happened in the quarter? Any response to kind of new leadership changes and then how does that change your trajectory for expectations for advertising in the medium term? Thank you.
Lauren Antonoff (Chief Executive Officer)
We’re really excited about the trajectory that we’re on. You know, advertising has become our second biggest ever, our second business, second largest revenue line two years after we started it. So we’re on a good path, but it has taken us a little longer to get here than we expected. The things that we’ve done are on app. We’ve taken a very cautious approach to make sure that we don’t interfere with the customer experience. So during Q3 we actually paused programmatic for a little while while we worked on ad quality to make sure that our members were maintaining a really high quality experience, and we were cautious about introducing things like video. We now have all that stuff in place. We’ve got high ad quality, we’ve got monitoring built in to make sure that it stays high. We’ve got those new formats in place. So that sets us up well for going forward.
Similarly, our go-to-market efforts, when we brought the companies together, there was a lot of excitement about focusing on selling in-app, but that was a little bit ahead of where we had those capabilities and we were ready to scale on-app, and that took some distraction for our off-app selling motion. So over the course of Q3 we brought those together and we’ve now got a really strong sales motion in place that looks at on-app and off-app together.
But by the time we got that going, we were a little late to secure 2026 budgets. What we did though is we have attracted a lot of brands that are looking at the results that we’re getting and it’s what helped us close on bringing Donna Sharp in. You know, she can see the potential that we have and was eager to get involved, and she’s somebody who is well recognized in the ad industry, and I would say being able to up-level our leadership in that way is a sign of the potential we have and the credibility that we’re building in the market.
So that’s being well received and part of why we have such confidence in our trajectory going forward.
Andrew Boone (Analyst at Citizens)
Thank you.
OPERATOR
Great. Thanks Andrew. And next up we have Eric Cho from Barrenjoey. Eric, please unmute yourself and go ahead.
Eric Cho (Analyst at Barrenjoey)
Oh, thank you so much, Yolanda. I might only do two, two really quick ones. Sorry, the first one just on AR PPCs. Again Russell, can I please confirm your new subscription revenue guidance is implying sort of mid single digit percentage increases in the fourth quarter versus third quarter and then if that’s the case, like you said, there’s a 13% increase. Right. So if you’re assuming mid single digit uplift in the fourth quarter, do we assume like most of the benefit comes in 4Q26 and then 1Q27, i.e., two quarters.
That is very similar to the 2022 example where you also had two quarters and then. Sorry, just one quick follow up on advertising. I think Russell, you said before that we shouldn’t take Nativo 60 million bucks of revenues because you’ve exited some. So if we assume like Nativo revenues were in the 50s and you’re guiding to 100 of advertising this year and last year was 31, it sort of implies your organic advertising growth is 15 million or you’re guiding to about 15 million in FY26 and is that the right math?
And if so, based on all Lauren’s comments just sent, you expect a better result than that into FY27. Thank you.
John Russell Burke (Chief Financial Officer)
Yeah, thanks. Thanks, Eric. So to take those one at a time, in Q4, our guidance is a combination of the momentum that’s been driven by the strong paying circle growth throughout the year, really, and the price increase. As I mentioned earlier, the price increase will start to see the impact in the latter part of the quarter. So what we’re projecting in our guidance for subscription revenue is a combination of those two pieces and just reflects the continuing strong growth in that business.
In terms of advertising, I think broadly the way you characterize it is correct. If you look at organic growth structured that way, it’s likely in the early 20% range in terms of growth, and as we’ve said, what we’re seeing in the business now is really starting to build more. As Lauren just sort of went through, there’s a number of elements that are really starting to come into play there. We would definitely expect that to grow a bit more strongly next year.
Eric Cho (Analyst at Barrenjoey)
Thank you so much, Russell.
OPERATOR
Thanks, Eric. Next up we have Riley Adicevich from Canaccord. Please go ahead. Riley.
Rylee Adicevich (Analyst at Canaccord Genuity)
Hi, this is Rylee on from Maria Rips. Thank you for taking our question. Broadly speaking, as you look to capture greater share of advertising budgets in 2027 and beyond, what are some of the longer term product and investment priorities? As you continue to build out the advertising platform and as you think about areas like measurement, attribution and self service capabilities, where do you see the biggest opportunities to unlock incremental advertiser spend?
Lauren Antonoff (Chief Executive Officer)
So in terms of where we expect growth in advertising, both on app and off app, we see a tremendous opportunity on app. It really is about creating the formats and the placements to engage in the app. And we’ve been doing a lot of work to evolve our core experience to create more space for advertisers to show up. An example is with our driving reports. That’s something that’s very attractive to people in the auto industry and they’re looking for ways to have content and experiences within the app that they can engage with.
So if you think about extensions that we’re doing into pets and things like that, that’s a major area where we see an opportunity to grow on app. Off app, it really is about building our sales motion and some of the tools that we’ve developed, some of the technology we’ve developed over the last year that allows us to get higher match rates and deliver more scaled results as we reach out to audiences across the markets that we’re operating in.
John Russell Burke (Chief Financial Officer)
And just to add on to that, just as an example, part of the reason that’s really contributing to our uplift in Q4 is a slight change in mix towards both on app and those special services, including things like measurement. So that’s starting to come into play and we expect that to be a continuing feature.
Rylee Adicevich (Analyst at Canaccord Genuity)
Thank you very much.
OPERATOR
Thanks, Riley. Next up we have Lindsay Betiol from Goldman Sachs. Lindsay, please unmute yourself and go ahead.
Lindsay Betiol (Analyst at Goldman Sachs)
Thanks, Yolanda. And hi everybody. Question on your MAU growth. If I just look at how you’ve segmented it, you have 1.8 million added in the US, 1 million added in your triple-tier regions, but then you had a really strong other international MAU period. I’m presuming that’s driven by the new regions you’ve launched recently, but could you just talk about maybe, like, dissect that a little bit and just help us understand where those two and a half million other international MAUs have come from?
Lauren Antonoff (Chief Executive Officer)
Yeah, other international can be a little bit unpredictable. And so we did have some benefits from the kind of activities that happen in regions that we’re not as active in combined with benefits in the regions that we’re focused in, like Mexico and Brazil. So we saw benefits really distributed across multiple places. I think across all of them we’re seeing benefit from optimization in our funnel. So things that we’ve done like social sign-in, Google sign-in, that makes it more likely that somebody who tries to sign up with us actually gets through and becomes an active user.
Those things are benefiting all regions.
OPERATOR
Great, thanks. Thanks, Lindsay. Next up we have Rob Sanderson from Loop. Rob, please unmute yourself and go ahead.
Rob Sanderson (Analyst at Loop Capital)
Yes. Excuse me. So, good evening. Good afternoon. Good morning. I have a couple of questions on user growth as well. You’re reiterating the 17 to 20% guide. The question is really what could get you to the higher end of the range? You’ve got a lot of things going on internationally. It sounds like LATAM, you’re doing a little bit of retooling here on localization and fourth quarter is not usually your strongest. And I think Lauren suggested likely to see fewer additions in the fourth quarter.
I just want to make sure I got all that correct and, you know, curious about the potential for 20%. It’s like, why is that still on the table? Commentary suggests that it may not be. So I just want to make sure I understand that. And second question also on users, as we look in regions beyond Germany, Brazil, Mexico, you know, what are other larger regions you’ve got your eye on that are kind of coming close to that 3% tipping point that seems to be an inflection on adoption? Thank you.
Lauren Antonoff (Chief Executive Officer)
You understand it very well. And I think really from where we started to see those technical issues and had to focus attention on that, we continue to sort of trend toward that lower end of the range. We’ve kept the range as is because of the unpredictability of events that have often driven spikes in the past. And, you know, we don’t really want to focus on what we guide to. We want to look at the overall trajectory of where we’re going. What was the second part of the question?
Rob Sanderson (Analyst at Loop Capital)
Next, regions that are maybe at that tipping point or getting close?
Lauren Antonoff (Chief Executive Officer)
Yeah. So the real insight that we’ve had this quarter is that, you know, we’ve really thought about going into regions as monolithic. We go into a region and we look at product and marketing. And that made a lot of sense when we were going into the Anglo markets, which looked a lot like the US and we already had really strong market fit. And so when we were looking at product and marketing there together, it made sense. What has been interesting this year as we’ve been doing work in Germany, Brazil and Mexico, is that we’re seeing differences in those markets where we go in. And so Germany has that stronger retention and having product and marketing focus together makes sense. But in places like Mexico and Brazil, the learning is that we actually want to pull back on some of the marketing efforts, some of the acquisition efforts, and laser focus on getting the product right so that when we acquire people, we’re keeping them at higher rates.
So moving forward, you’re going to see us do, I think, a lot deeper focus on Latin America while we get that strong. And then, you know, from there we’ll use that playbook to expand to more regions.
OPERATOR
Thanks, Lauren. Thanks, Lindsay. Next up, we have Siraj Ahmed from Citi. Siraj, please unmute yourself and go ahead.
Siraj Ahmed (Analyst at Citi)
Thanks. Maybe last two as well. Russell, just in terms of the implied Q4 guide in the guidance. Just a bit surprised that EBITDA midpoint has been kept the same when you’ve actually increased higher-margin subscription and other revenues also come in higher. So is there something else that’s offsetting it? I mean, typically OPEX is lower in the fourth quarter from a marketing standpoint. So please help in terms of the building blocks. And secondly, Lauren, in terms of advertising, good color as to what’s happened. So given now you have a combined business that’s close to 100 million of revenue, you think Ruth sort of mentioned that you should expect organic growth picking up from the 20% this year. Is that combined business of 100 million that you think growth can be more than 20%? Would really appreciate some color on that as well. Thanks.
John Russell Burke (Chief Financial Officer)
So to the first question, there’s a few elements there. Yes, we have raised subscription revenue guidance, given the really strong momentum there. The advertising revenue that’s coming down, the incremental revenue has a high margin. So largely sort of focused in the on-app area, which we’ve, as we talked about earlier, so that flows through at a high margin. So when you look at the overall guidance, we’ve definitely raised subscription revenue. You need to take into account the sort of commission element of that in operating expenses because that flows through.
And we’ve brought down advertising revenue and hardware revenue. As I said, with the advertising revenue at a high margin, there’s. Then there’s a couple of other elements in operating expenses. Relatively small impact, but we’ve talked about our investment in pets in Q4 as well.
Lauren Antonoff (Chief Executive Officer)
And looking at the overall advertising growth, we do expect stronger growth going into next year, both on-app and off-app.
Siraj Ahmed (Analyst at Citi)
And Lauren, just follow up on this. So in terms of, and to Russell’s mention about in-app being lower. Right. Did you sort of see, because like you said, you’re focusing on member experience. Did you sort of see sort of some disengagement or something from members or from users because of the ads that were there? I mean, interesting that you were saying quality of ads was a key focus for you.
Lauren Antonoff (Chief Executive Officer)
We didn’t. We didn’t. It’s good that you sort of call this out. We have our sort of own internal sense of, you know, what is the bar for a member experience? And we hold a very high bar out ahead of where members may be. And so we didn’t want to jeopardize trust and wait till we saw potential signals. We saw some ads getting through that we weren’t comfortable with and decided to really put another layer of control in place to make sure that ads that didn’t feel like they were appropriate or ideal for our audience weren’t getting through.
So that was just a self-imposed bar-raising activity that we did.
OPERATOR
Thank you. Thanks, Raj. Next up we have Stephen Chu from UBS. Stephen, please unmute yourself and go ahead.
Stephen Chu (Analyst at UBS)
All right, thank you. So, Lauren, Russell, yeah. I think you talked about auto, finance, retail and CPG and, you know, for some of these categories like auto and CPG, you seem to be bucking the headwinds that we’ve heard about, you know, for the sector. So can you talk about the relative wins here and the steps you will be taking with Donna now in the building to become a larger line item with brands and agencies? Because there is definitely a much larger ad market out there beyond these verticals that you cited.
Thank you.
Lauren Antonoff (Chief Executive Officer)
So, you know, because we’re new in the market, our scale is still, still building or sort of on the smaller side. So we’re not necessarily, necessarily subject to some of the broader trends that are impacting advertisers that are already at scale. So for us, the engagement we’re seeing are new and growing and we’re building up evidence, really in all of those categories with great proof points. I think that sets Donna and her team up well to shape that strategy.
But she’s been at the company just a few weeks, so we’re going to give her a little bit of time to build that strategy before, you know, I start announcing whatever that is to the world.
Stephen Chu (Analyst at UBS)
Fair enough. Thank you.
OPERATOR
Thanks, Stephen. Next up, we have James Bales from Morgan Stanley. James, please unmute yourself and go ahead.
James Bales (Analyst at Morgan Stanley)
Yeah, thank you. Another question on advertising. If you’re aiming for 20% plus growth in FY27, can you maybe talk to the limiting constraints that you see? Is it the number of active advertisers or publishers? Is it the ability to expand inventory or to manage user experience? And then secondly, you called out AI having the potential to drive greater direct billing long term. Can you maybe talk to where you think you might be able to take that?
Lauren Antonoff (Chief Executive Officer)
Okay, let me start and I’m going to turn it over to Russell to add some color. But, you know, with advertising, I think the two things that are our biggest limiting factors as we are driving growth are building out the right in-app experiences, which we’ve made huge progress on this year, and then building awareness of the brand as a B2B brand. You know, Life360 is well known and well established as a consumer brand, but we’re very new as an advertising brand, so we’re early in that journey.
I know, Russell, you wanted to add some color there.
John Russell Burke (Chief Financial Officer)
Yeah, yeah, I, you know, when we talked about it before, it was 20 plus. So, yeah, I think we should keep that in mind. And then you asked about AI and as it’s impacting billing for us and, yeah, that’s something we’re really excited about where these AI tools are giving us the ability within the funnel to make almost instantaneous decisions of whether there would be friction created by taking someone off to web billing. So we’re starting to see some real success there.
That’s starting to build and I think that’ll be an opportunity for us going forward.
James Bales (Analyst at Morgan Stanley)
Great. Thanks, guys.
OPERATOR
Thanks, James. Next up we have Julian Malkay from RBC. Julian, please unmute yourself and go ahead.
Julian Malkay (Analyst at RBC)
Thanks, Yolanda. Just a couple for me. Firstly, with the sales and marketing spend was up quite a bit on last year and also on the previous quarter. So would you say that it’s actually delivering the MAUs you expected for those campaigns or is it just getting a little bit harder to bring in new MAUs? And secondly, on the advertising thing, how far down the track are you getting the brands to actually value the location data and the sort of profile you have on your users?
Lauren Antonoff (Chief Executive Officer)
So just starting in terms of how to think about the advertising that we do, you know, our focus really is on building awareness so that when people encounter Life360, they’re more likely to act. So it’s not quite the same as performance marketing where we expect immediate ROI and we’re seeing good progress on that. The second question was about, repeat the second question.
Julian Malkay (Analyst at RBC)
Do you think that the brands are anywhere near valuing the information you actually have on your users in terms of profile, interactions, where they go, that sort of thing?
Lauren Antonoff (Chief Executive Officer)
Yeah, absolutely. We’re getting a lot of attention for this and we’re starting to build the proof points that actually show that we’re able to physically move people who are seeing ads to show up in stores and things like that. So there’s a lot of interest in it. And increasingly there’s a lot of proof points that show what we can do and what’s special about having that location-based targeting.
Julian Malkay (Analyst at RBC)
Right. But back on the first one, so the number of MAUs you added, is that what you expected for such a spend on sales and marketing in that quarter?
Lauren Antonoff (Chief Executive Officer)
I would say that the momentum that we see in MAU is from a lot of things. It’s not primarily driven by our marketing spend. I think marketing spend supports it. So we’re happy with our ROI, but it’s not the main thing that’s driving MAU results in quarter.
Julian Malkay (Analyst at RBC)
Okay, thanks, Lauren.
OPERATOR
Thanks, Julian. Next up we have Andrew Gillies from Macquarie. Andrew, please unmute yourself and go ahead.
Andrew Gillies (Analyst at Macquarie)
Morning, guys. Thanks for the opportunity. Just the first one, you mentioned, you know, some of the early retention benefits that you’re seeing from the pets bundle. You know, what are those retention benefits? Can you put some numbers around it? And then just a second one maybe for Russell, just on cash conversion, like, you know, is this still sort of a seasonal quarter? Are there any differences in operating cycle or working capital requirements we should expect based on the changing revenue mix that you’ve given in the guidance?
Lauren Antonoff (Chief Executive Officer)
Yeah, thanks, Andrew. In terms of pets and retention, we’re still in early days. I would say there’s a logical extrapolation here where someone that has a device that’s using it, that’s engaged is going to retain better. That said, we’ve seen very early results that indicate that retention is improving. But it’ll be a little bit of a long-term view because as part of the bundle we’re getting people to sign up for annual Silver subscriptions.
John Russell Burke (Chief Financial Officer)
In terms of the cash question, yes, it has changed a little bit. You’re going into this time of year in particular, there will be sort of an element of working capital as we build up receivables going into the holiday period. I think that’s probably the biggest impact. But then clearly we’ll see that reverse in Q1 next year.
Andrew Gillies (Analyst at Macquarie)
Okay, so it’s mostly timing driven. It’s not sort of changing revenue mix, it’s sort of the working capital trends that you flagged historically.
John Russell Burke (Chief Financial Officer)
Exactly. It’s mainly timing-based.
Andrew Gillies (Analyst at Macquarie)
Perfect. Thank you.
OPERATOR
Thanks, Andrew. Next up we have Benjamin Jones from J.P. Morgan. So Ben, please unmute yourself and go ahead.
Benjamin Jones (Analyst at J.P. Morgan)
Thanks for taking the question, guys. I just want to unpack some of the product localization efforts that you’re making in your international markets. Just curious about what exactly you’ve identified that you need to add to that platform. And I guess you’ve called out, you know, the efforts in product localization. You mentioned you may be slowing some of the marketing investment in the near term. How should we think about the impact on 27 MAU growth if you’re pulling back on some of the marketing investment, pushing further on the product localization?
Lauren Antonoff (Chief Executive Officer)
Two very good questions. First, on localization, I’ll just use the example because Mexico is one of the places where we’ve been really engaged. We actually took some of the leadership team to meet with other businesses on the ground and customers on the ground in Mexico. And it was really interesting talking to customers because the themes around safety and connection were exactly thematically what you’d hear in the US except for all of the examples talked about safety without mentioning driving.
In the US when people talk about safety, they pretty much mean driving. Like all the examples are about what happens if they get in a car accident. And so the themes are the same but the specific experiences are different. When you think about what that means for the app experience, when we are doing things that are talking about driving, when you’re getting a lot of messaging around that and driving isn’t what you’re concerned about, it’s a bit of a turnoff. And so it’s not necessarily a bunch of new features and capabilities. It’s really tuning the experiences so that the way that we’re talking to customers about the value props we deliver on match their expectations.
It may also include some new capabilities. We’ve talked about the Watch Over Me capability we introduced this year that is much more on personal safety as people move from one place to the other. Having somebody else sort of watch you while you’re in transit, that’s an example of a product enhancement. But it really is that end to end journey and what are the messages we give and sort of where we put importance in the experiences and interactions that people get.
John Russell Burke (Chief Financial Officer)
And I would just add to that on the growth element. These are the things that will help us drive that long term growth. As we think about short term growth, it’s not likely to have an impact. Lauren mentioned earlier that, you know, many of the product changes and improvements that we’ve been flowing through globally have resulted in a pretty broad-based, strong MAU growth. So yeah,
Lauren Antonoff (Chief Executive Officer)
and I’ll just clarify one more thing. We’re not really pulling back on international advertising. We’re really shifting where we’re putting that attention. So marketing is going to double down on those markets that already have the higher retention rates. Markets like Germany, for example, instead of going into the markets where we need the localization first. So there’s a little bifurcation for us in terms of where marketing is focused and where we’re doing that product work.
And then as we see that product market fit sort of get to that right point, then we’ll bring marketing back in. So it’s not how much marketing or the results we see, it’s really where it’s coming from that’s going to shift a little bit.
OPERATOR
Thanks, Ben. So next up we have Paul Graham from Ordmannet. Paul, please unmute yourself and go ahead. Looks like Paul’s no longer with us. So next up we have Annabelle Kuhn from enp. So Annabelle, please unmute yourself and go ahead.
Annabelle Kuhn (Analyst)
Hey guys, thanks for taking the question. If I could just squeeze in two, that’d be great. Maybe the first on pets. Just wondering if you have any early feedback on the pet tags and maybe some commentary around sort of the ongoing pet strategy with the paid device and sort of these initiatives. More around not sort of locking people into the device and expectations around like paying circle contribution from pets and then on advertising. I know there’s been a lot of questions on this, but just around the nature of the advertisers you’re bringing onto the platform.
Is it more around them doing brand marketing and maybe sort of looking at like longer term spend through the Life360 platform? Or is it more shorter term campaigns around performance marketing? Thanks.
Lauren Antonoff (Chief Executive Officer)
So starting with pets, the interest in tags has been good. We had to work through some issues with our initial release where the signup flow had some glitches. So we’re seeing the reviews for that come up as we’ve improved that onboarding flow. The real opportunity that we’re seeing is that the interest in families with pets is really, really high. And so we’re looking for ways to bring that experience into the app so that every family with pets is likely to engage with us on pets, not just those with devices or a tag.
And so those experiences you’ll see showing up quarter after quarter, really starting now. We’ve already introduced some care coordination, the ability to track, you know, who’s walked the dog or things like that, even if you don’t have a tracker on the dog. What I’m excited about in this are the things that people tend to forget, like remembering that it’s flea and tick season and you have to put the right kind of repellent on your animal. Those kind of things are important for pet owners and hard to keep track of in a place that we can really help out.
So we’re doing that investment and we’re super excited about what that means for expanding the relevance in terms of MAU and the likely engagement in the app. And then that of course creates multiple new revenue channels. The second question was an ads question. Can you repeat that?
Annabelle Kuhn (Analyst)
Yeah, sure. Just around the nature of the ad spend you guys have been able to attract so far. Has that been more like the brand style marketing spend where you might see advertising partners sort of stay around longer term on the platform? Or is it more of that shorter duration performance marketing spend that you’re seeing come on to Life360 Ads.
Lauren Antonoff (Chief Executive Officer)
We’re seeing a mix. With early advertising in the Life360 platform, it was definitely more towards that brand awareness, not so much conversion oriented. Now we’ve gotten a little bit farther and now we have a good mix with sort of examples like the 4x ROAS that we’re able to return for a CPG brand. You know, that’s much more clearly a performance marketing campaign. So I’d say we have a good mix now.
Annabelle Kuhn (Analyst)
Thanks guys.
OPERATOR
Thanks, Annabelle. And next up we have Roger Samuel. Roger, please unmute yourself and go ahead.
Roger Samuel (Analyst)
Thanks for taking my question. I’ve got a question on Family Intelligence. Just curious that you open up the platform to Muse. Are you not concerned that Muse may seep into your user base and offer something similar to Life360? Or perhaps there are things that you do to protect your moat without running the risk of being disrupted. And second part of that question, just on Family Intelligence as well, on slide 28 you mentioned that this Family Intelligence has resulted in doubling the share of new subs to Platinum.
Can you explain more on that? Thanks.
Lauren Antonoff (Chief Executive Officer)
Okay, I’ll take the first question, then ask Russell to take the second. So the interesting thing to remember is that the majority of our users are on iOS that have Find My today. If people just want to answer the question, where is somebody, there’s a lot of alternatives that have not disrupted our business. And so we think of the onset of agents like that as something that is potentially complementary. I’ll also say opening it up to Muse is a two-way door.
If we find out that the experience isn’t great for our members or isn’t great for our business, we maintain control over that. But the belief is that the kinds of questions that it’s useful to ask an agent about are things that have to do with coordination and using third-party services. You know, for example, if you’re on a trip with a bunch of people, you know, where’s a good meeting point for us all. You know that’s not a substitute for opening the app and seeing that everybody’s where they should be or just that feeling that you get from seeing your family, and it’s a different complementary experience that makes it more valuable that you use Life360 in the first place.
So our expectation is that as the usage of agents goes up, it makes the platform itself more valuable because having that information makes everything else in your life easier.
John Russell Burke (Chief Financial Officer)
And Roger, the second part of your question was about moving people into Platinum. And this is just another element of what we’re so excited about in terms of the AI tools that we’re deploying within the funnel. Probably relatively small by itself, not likely to move the needle, but we’re definitely seeing twice the sort of flow into Platinum and that’s specifically directed. So you can see in this quarter that the share of Platinum has sort of moved up to 5%.
All of these things are cumulative and we’re excited about the potential for them going forward.
OPERATOR
Great. Thanks, Roger. That’s all we have time for today. So thanks so much for joining our call. And if you have any follow up questions, please reach out to Investor Relations. Have a great day.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
Recent Comments