Conference Transcript - LIF 2026-03-03

Andrew Boone, Analyst — Citizens

Hello, everyone. I'm Andrew Boone. I cover internet here at Citizens. I'm very honored to welcome Russell Burke to the stage, the CFO of Life360.

Russell Burke, CFO

Great to be here, Andrew.

Andrew Boone, Analyst — Citizens

All right. We're going to have a little conversation about Life360. We'll talk about the quarter, and then we'll talk about the overall business, and we'll have a good conversation. So let's go back to the last quarter. You guys reported yesterday. So let's clarify a few items, and then we'll do some bigger picture stuff. Yeah. Talk to me about malgrowth, right? You guys talked about 20% for 2026, but 1Q is below that level. Explain that to me and then help me understand what was kind of like the volatility

Russell Burke, CFO

that you talked about in terms of malgrowth for the call. Yeah, absolutely. So we've guided to 20% growth for the 26th year. Again, we saw 20% growth in 25 as well with a big Q4. And as the numbers get bigger, that 20% target gets bigger volume-wise. But we are very confident of that target. And we have a history in terms of guidance delivering or over-delivering what we say we're going to. So we're absolutely confident of that. But we typically see variation in MAU. And if I step back, there's a few strands to MAU for us. There's the developed territories, the US and the Anglo markets where we've rolled out triple tier, so UK, Australia, Canada. And then there's the other parts of international. and for other international we often see quite a bit of variance and we've referred to that occasionally as sort of lumpiness because we might get a spike, for example, in the Philippines where we have a kidnapping scare and it'll spike in one period. Those users are not our typical users, so they tend not to retain as well. so that the next quarter or next period we absolutely see some some retracement there and that's what we're seeing in Q1 we're seeing some some headwinds in the international other again to be clear those territories in particular do not have any sort of short-term impact on revenue you there that they will be important for our long-term growth but in the short term there is no no revenue impact there's really no impact on results but but we we often see this and that's that's why we manage MAU on an annual basis and we're very confident on that that 20% target so if I say it back to you you

Andrew Boone, Analyst — Citizens

guys had a pull forward of international you guys are now coming off of that spike and that we should expect basically growth to accelerate in the back half of the year as comps are more

Russell Burke, CFO

or less easier? Yeah, I think that's right. And it's not necessarily comps. It's a lot of the things that we're doing and that we're seeing in the flows. And I should say that the U.S. looks very stable. It's continuing to grow. And within that 20% target, we typically see the U.S. in the sort of mid-teens and international in the mid-20s. So it's a composite there. But there's lots of things that we see that are happening over the course of the rest of the year that really helps us with that confidence on that 20% target. For example, there's things in the product that will help with engagement, really help with active users rather than passive users. There's a go-to-market plan for international in our priority territories in 26 of Brazil, Mexico, Germany. So we know we're going to have a lot of activity there. Plus, with our general focus on international, we're brought in a head of international. We're brought in a VP who's going to look after Latin America. And then there's just things within the onboarding flow itself where we continue to optimize. So all of those things combined give us a lot of confidence in that target.

Andrew Boone, Analyst — Citizens

One of the other questions that I had coming up from yesterday was advertising the cadence for 2026. Understood the seasonality of advertising, but just walk us through kind of what the expectations should be now that we have Nativo on the platform and the cadences we think about advertising through the year.

Russell Burke, CFO

And if you don't mind, I'll step back and just say a couple of words on Nativo because we're really excited about this acquisition. It completed in the early part of January. It's really going to enable us to get to that next level in really optimizing the incredibly valuable data and audience that we have. That first-party, real-time family audience is something that we have that really no one else has. So we want to take advantage of that. What Nativo does is it gives us the infrastructure. It gives us the sales team that we really haven't had before. it gives us very importantly the relationships with advertisers and publishers that we haven't had before so it's a great structural base to really ramp up the Live360 advertising revenue stream so that's why we're so excited about it as I said the transaction closed in early January we're in the process of integrating right now What that does do is give us a little bit of a fixed cost base that we're bringing on that we'll have from day one in January and we'll use to ramp up that revenue over the course of the year. So when we look at that ramp, as we map out the quarters, it looks like about sort of 15% of that annual revenue will happen in Q1 and that will more than double by Q4. We always see some seasonality in advertising, particularly in Q4, but in this case, we're both ramping up and seeing that seasonality. So it does shift our revenue profile and along with that, the bottom line profile more towards the back end of the year, even while we're investing in the early part of the year.

Andrew Boone, Analyst — Citizens

You talked about $63 million for 25 for Nativo. Now that that's going to be the Life360 ad platform, I think we talked about a step down that all of it would carry over. Help us understand that and maybe what's the difference between the TiVo versus the Life360 demand that you guys are bringing forward?

Russell Burke, CFO

So I've said that we'll carry over the majority of that revenue, and I'm sort of thinking about it in terms of maybe 10% to 15% drops off, And that's for categories that Life360, as a family advertiser, doesn't want to get into alcohol, tobacco, pharmaceuticals. But that's a small piece of it. Still gives us a great base to build on when combined with the existing Life360 business. And the exciting thing for us is that we go from being able to really play in this sort of on-app space for advertising to expanding to both on-app and off-app. And we've already seen it, that that just gives us much better traction with advertisers who want to do a big campaign and are attracted by a very valuable audience. But they previously, it just wasn't the numbers that interested. Now we can participate in those campaigns.

Andrew Boone, Analyst — Citizens

Last one in terms of financials. 1Q EBITDA guidance, we talked about low double digits in terms of 1Q. just help us understand that in terms of the what's going on there mm-hmm as I

Russell Burke, CFO

said we're doing a lot of things in Q1 so we've we're brought on that Nativo cost base which will be leveraging later in the year we're also doing a few things in devices we've decided to exit the brick-and-mortar retail business and we're doing a lot of testing for the new pet GPS product that we're very excited about, but we're doing a lot of price testing in particular and we've always seen that as an acquisition vehicle for subscription. So the pricing is not as important as the long-term subscriber retention. So we're definitely looking to optimise that, but that will have accounting-wise at least some negative impact on margin, hardware margins in Q1. And then in addition to that, we've done some brand advertising that we normally don't do in Q1 with the Super Bowl and the Winter Olympics. So all of those, to some extent, compress our margins in Q1, but very intentional, very much things that we wanted to do to help build that growth in the latter part of the year.

Andrew Boone, Analyst — Citizens

And then if I think about that trajectory through the year, right, margins build. You guys are going to exit 26 at what is a fairly healthy margin?

Russell Burke, CFO

We are. Those margins will definitely build. Q1 is definitely the lowest point there. Q2 and Q3 will be more of a normal sort of quarter in terms of the way you've seen our adjusted EBIT grow during the course of the year. And then we are effectively pushing more into Q4. So we just delivered 22% adjusted EBITDA margin in Q4, 25. Q4, 26 will be considerably higher than that. So we'll end the year with a very healthy adjusted EBITDA margin.

Andrew Boone, Analyst — Citizens

Ten minutes later, let's talk about the business. The U.S. has always been one of those questions where you guys have done very well in terms of the U.S. population. Talk to me about where you are in terms of continuing to drive U.S. growth, right? Like Texas and Mississippi has always been two of the states that have been called out in the map that you guys provide. How do we think about U.S. growth? Are you guys saturated, I guess is really the question.

Russell Burke, CFO

Yeah, no, we are a long way from any sort of ceiling or saturation. In fact, we did a little bit of a deeper analysis and related it to your traditional growth S-curve. And even when you look at the highest penetrated states in the U.S., which, as you say, tend to be the Midwest and sort of southern states, they're still really only partway up that growth-esque curve. And, you know, as evidence of that, we look at the growth in those states. It's still – those states are still growing strongly. And then besides that, we have a lot of opportunity in the other states that are more lowly penetrated. And we're seeing those grow a little bit faster, but the growth across the curve is still very strong.

Andrew Boone, Analyst — Citizens

You guys had a pretty successful U.S. advertising campaign last year, right? I think of you dying. Very catchy. I think it caught a lot of attention. How do we think about advertising for 26 and lapping the growth of that campaign?

Russell Burke, CFO

Yeah, you're absolutely right. We've entered into the next stage of maturity in terms of the creativity for our advertising and variously described as edgy, but it's designed to get people's attention, which I think it definitely has. So yeah, Think of You Dying was the summer sort of back to school campaign. If anyone saw the Super Bowl ad on Peacock, it was also very edgy and designed to get attention, but reinforced the tagline is sort of family proof your family. So really designed to reinforce that family message that Life360 is all about.

Andrew Boone, Analyst — Citizens

okay we just talked about international and kind of I think it was what Brazil Mexico Germany is to kind of like growth areas if we think about 26 connect that to the the goal of 150 million users right like what has to happen for you

Russell Burke, CFO

guys to get there we have to just continue on the path that we're that we're on definitely international is a is a big piece of that because we have so much runway there yeah we talked about the US where our average penetration is 16% in the triple tier territories it it's catching up quickly I think in Australia it's something between 12 and 14% but in the rest of the world it's it's definitely in the low single digits and incredible amount of runway there so we're going to intentionally sort of focus on the the areas that will give us the the best return um and and interestingly enough a couple of years ago i wouldn't have thought that brazil and mexico were in that in that range but um there's definitely segments of the population there that um have been very attracted to to uh to to life 360 product uh so we're gonna we're gonna optimize that um we are looking at sort of uh central and and and northern and Europe as a rich field as well. And then we'll continue to tackle the rest of the world. And the great thing about adding advertising to our revenue suite is that we can think about territories where we thought may be very long in the cycle where we can monetize via advertising as well.

Andrew Boone, Analyst — Citizens

Let's transition a little bit. Let's talk about PET, right? You guys talked about the 90% of pets are in free circles. Talk to me about how you guys plan on taking advantage of that opportunity.

Russell Burke, CFO

Yeah, and it's interesting. Pet GPS, like all of our devices, is really seen as a subscription driver. And that's where we want to position it. And PetGPS, because it's a cellular device and requires a subscription, essentially, is perfect for that. So where you mentioned we launched the sort of PetFinder network, which was free to sign up for, and we got 5 million signups in the course of last year, of which 90% are in the free user group. And that free user group is the sweet spot for us with PetGPS, because if we can get a bulk of those free users to convert to subscription as part of taking PetGPS, then the return on that is immediate. So it gives us that real driver to subscription. So we're pretty excited about it. We're doing, as I said, a lot of experimentation with pricing at the moment, and we'd really want to optimize pricing essentially as an acquisition cost. The difference between what we sell it to our members and the cost is really an acquisition cost, which pays back pretty quickly.

Andrew Boone, Analyst — Citizens

Talk about this a little bit more broadly, though. Right. You guys, it's less than 20% of users in the U.S. are on the platform in terms of paying. As you guys think about pushing email push notifications, just making consumers more aware, more broadly, and pushing that device cycle, how are you thinking about that today and the opportunity for 26?

Russell Burke, CFO

Well, our penetration rate does continue to increase, and by penetration, I mean the proportion of paying circles to the whole base. That does continue to improve, and that's a result of a couple of things, just our marketing becoming more efficient, identifying people at the top of the funnel, and then our onboarding optimization, just really moving people to subscription more efficiently. So it does continue to improve, and that's why we're seeing accelerating paying circle numbers, which flows straight into revenue. So that's one aspect. But we'll use that to – we're still very much in growth mode. So we want to continue growing the overall base. we see that as giving us a lot of optionality in the long term.

Andrew Boone, Analyst — Citizens

If I think about 4Q specifically, US paying users grew, I think it was five points faster than what is now growth. So if I think about the growth of paying circles that have performance, is that pet yet? Or are you guys...

Russell Burke, CFO

It is really not yet pet. It's more the couple of things that I spoke about, really optimizing our experience. And we're not, and to be clear, because we're still in growth mode, we're a long way from being in harvest mode, if you like. We could, I think Chris has often said, we could move the paywalls and sort of increase revenue significantly overnight. But we're not in that mode because it's not to the long-term benefit of the company and the shareholders.

Andrew Boone, Analyst — Citizens

All right, let's transition to advertising. on-platform has been really healthy. Like, 25 was a great year for advertising, strong growth throughout the year. Understood the Life360 platform now expanded significantly. But talk to me about the advertising opportunity, right? You guys had the Uber announcement. What's next, I think, about Life360's on-platform capabilities?

Russell Burke, CFO

There's so many exciting things as we combine and advertising with partnerships like the Uber partnership, like the AccuWeather partnership, there's a lot of crossover in those fields as well. So, you know, I talked about the ability to advertise both on-app and off-app, and that will sort of expand our capabilities quite a lot. But there's many things that we can do that are quite unique that may not even be seen as advertising by most people. And the Uber notification is a great example of that where we send a notification to someone when they land at an airport and offer them an Uber ride. And that's worked exceedingly well. That's a big part of the reason why our partnership with Uber has expanded. But doing things like that, that is seen as a benefit by the member and also hugely beneficial to the advertiser because you're catching people right at that point of decision-making.

Andrew Boone, Analyst — Citizens

Now, let's talk about what Nativo brings in terms of the capabilities. We talked about this a little bit up front. But what's the broader opportunity of, say, an advertiser that used to come to you that now you guys have unlocked?

Russell Burke, CFO

Right. You know, a lot of it is scale. As I said, we definitely had advertisers interested because of the uniqueness of our audience and has definitely participated, but now we're able to offer not just the inventory on our own app, but a much enlarged inventory and a much enlarged reach off-site. And that enables the larger advertisers in particular to come to us and feel confident about really allocating a part of their campaign to Live360. And we're definitely already seeing that, you sort of Fortune 50 companies that are coming and really wanting to advertise with us.

Andrew Boone, Analyst — Citizens

So I'm going to say it back to you and then you clarify what I just said. So advertisers used to come to you. You guys weren't scaled enough to be considered because they couldn't allocate enough that it moved the needle for them. Now that you guys have Nativo integrated, you guys are unlocking those budgets. Is that the right way to think about it?

Russell Burke, CFO

I think that's right. And that they'd always seen the value in the audience, but now they have the scale that really makes sense for them.

Andrew Boone, Analyst — Citizens

Okay. All right, let's connect a couple things, right? We've talked about a billion dollars of revenue in terms of kind of an outpost for target talking about the building blocks of that like we continue to talk about advertising and subscription how do we think about those two components building to that target first thing I'd

Russell Burke, CFO

say is we have we're getting closer much closer and we have very clear line of sight to those goals at this point so frankly there's to get to to that stage and we'll get to that stage and then set more ambitious goals but to get to that stage there's there's not a whole lot different that we need to do the this year we will make a very big step in that direction really not only the growth in advertising in advertising which is you ask a scale factor but subscription is still growing at 30% plus, and with the opportunity with international, we will maintain that growth. So those pieces and building on the use cases for Life360 with things like PetGPS, with things like a focus on elder care, all of those will contribute to that step up to a billion dollars revenue very quickly we haven't talked about the

Andrew Boone, Analyst — Citizens

transition off of the App Store and checkout in a couple quarters give us an update in terms of where you are in terms of testing HTML checkout and kind of how that's going in terms of yeah potentially lowering some of the App

Russell Burke, CFO

Store tax yeah and and you know that we do see that as a potential real opportunity in the in the in the longer term or even closer than that but because commissions do represent roughly 19% of subscription revenue with and with pet GPS for example we're onboarding people directly but by the web so we're definitely doing that already we're experimenting with us regular subscribers we we have we did have a little bit of a setback in as much as Apple got a favorable decision of treating them as prominently in the onboarding process so we had to restart the experimentation process but we're we're looking to find that balance between the member experience and not creating too much friction and the clear economic benefit of onboarding and

Andrew Boone, Analyst — Citizens

paying mechanisms by the web final question let's talk about the path to 35% long-term target margins yeah what do we have to get there what do we have

Russell Burke, CFO

to do together? Again, it's more of what we're doing. We've been on a very consistent growth phase in that respect. We delivered the sort of 22% adjusted EBITDA margin in Q4. We will build on that this year. It's not going to be a direct straight line, but we will step up each period and as I said we have very clear line of sight to that 35% a lot of it at this point is is just going to be delivered by scale as we continue to increase leverage in the operating expenses is the way to think

Andrew Boone, Analyst — Citizens

about this is 26 is an investment you're almost with Nativo coming on at break-even devices now with negative gross profit margins with pet and then 27 we think about the exit rate of 24 Q 26 into 27 I think I think that's I

Russell Burke, CFO

I think that's right. But even this year, with all of that investment, we will still step up our adjusted EBITDA margin. But to your point, by the time we get to Q4, we'll be at a run rate which is considerably higher and much closer to 35%.

Andrew Boone, Analyst — Citizens

Yeah. Russell, thank you so much for doing this. I appreciate it.

Russell Burke, CFO

I appreciate the time. Thanks, and thank you.