Life360, Inc. (LIF) Earnings

Management highlights

### Core Business & User Growth - Life360 serves over 97 million monthly users, with deep trust from family users as a differentiated moat that drives growth across subscriptions, advertising, and partnerships. The company reached a new milestone of 3 million paying circles, with ARPPC at an all-time high and record quarterly subscription net additions. - Q1 2026 monthly active user (MAU) growth was 17% YoY, below planned growth due to a series of technical issues that suppressed new registrations during peak Q1 marketing. The issues primarily impacted lower-end Android devices, which do not materially contribute to current revenue. All major fixes have been implemented, with new monitoring systems to catch future funnel issues. Management expects MAU growth to return to the planned trajectory by Q3 2026. - Demand for Life360 remained strong during the technical issues: Google Trends searches for Life360 rose over 40%, and revenue-driving iOS segments have already recovered, with strong double-digit growth across key international markets including the U.K. (25%), Canada (32%), and Australia/New Zealand (24%). ### Advertising Business Expansion - Following the completion of the Nativo acquisition, the advertising business reached critical scale, with Q1 revenue near $20 million. Management expects a steep revenue ramp through the peak advertising season in the second half of 2026, and projects advertising will eventually reach the same scale as the subscription business long-term. - The combined business now has reach across over 20,000 publisher sites and connected TV, expanding U.S. ad-eligible adult reach from under 20% to over 95%. Life360's unique first-party real-world family location data enables closed-loop measurement of ad campaigns (linking impressions to real-world outcomes like store visits) while maintaining user privacy, attracting major brand partners including Starbucks and Uber. ### AI Transformation - Management views AI as a critical opportunity to deepen the company's moat and accelerate growth, enabling Life360 to become the go-to app for coordinating everyday family life. In April 2026, the company restructured its R&D organization to become AI-native. - Early AI adoption has already increased engineering team productivity by over 50% YoY, enabling development of high-value features that would have previously required too much manual effort. AI is already driving improved subscription conversion by delivering targeted messages that help users discover existing subscription features. ### Operational Restructuring - The April organizational restructuring reallocated roles from non-core functions to AI-native capability development, with a neutral net financial impact on 2026 full-year results. Operating leverage from AI is expected to compound starting in 2027.

Guidance

- Full year 2026 total revenue guidance is raised to $650 - $685 million, up from the prior guidance of $640 - $680 million. The upward revision is driven by stronger-than-expected performance in the subscription segment. - Subscription revenue guidance is raised to $470 - $475 million, up from the prior guidance of $460 - $470 million. Guidance for all other segments remains unchanged: advertising revenue is expected to be $98 - $115 million, hardware revenue $40 - $50 million, and other revenue $42 - $45 million. - Full year 2026 adjusted EBITDA guidance is raised to $130 - $140 million, up from the prior guidance of $128 - $138 million, representing an approximate 20% adjusted EBITDA margin. - 2026 revenue and margins are back-half weighted: Q1 advertising revenue represents ~18% of full year expected advertising revenue, while Q4 advertising revenue is expected to be double Q1 levels. Q4 2026 adjusted EBITDA margin is expected to exceed the 22% margin delivered in Q4 2025. - Full year 2026 MAU growth guidance is set to 17% - 20% YoY, down from prior planned growth due to the Q1 technical issues. Management reaffirmed the long-term targets of exceeding 150 million MAU, $1 billion in annual revenue, and over 35% adjusted EBITDA margins, with the trajectory unchanged. - The company expects to resume increasing operating leverage by Q4 2026, after front-loaded 2026 investments in advertising platform integration, AI, and brand marketing.

Segment performance

Total company Q1 2026 revenue grew 38% year-over-year to $143.1 million. 1. **Subscription Segment**: Revenue grew 32% YoY to $108.2 million, contributing 75.6% of total Q1 revenue. Core subscription revenue grew 36%, driven by 27% YoY paying circle growth and 7% higher ARPPC. U.S. subscription revenue grew 28%, while international subscription revenue grew 58%. Gross margin for the segment held steady at 87%. 2. **Advertising Segment**: Revenue was $19.7 million, growing 329% YoY (boosted by the Nativo acquisition), contributing 13.8% of total Q1 revenue. This is the first quarter the segment is disclosed as a separate line item. Gross margin for the segment was 60%, expected to improve to ~70% as revenue scales in the second half of 2026. 3. **Hardware Segment**: Revenue was $4.5 million, with a negative gross margin. The decline was expected due to the company's strategic exit from brick-and-mortar retail for Tile. Negative margins stemmed from promotional pricing for pet GPS trackers and exit costs for the brick-and-mortar retail exit. Hardware margins will remain negative in 2026 but will improve from Q1 levels. 4. **Other Revenue**: Grew 30% YoY to $10.7 million, contributing 7.5% of total Q1 revenue.

Risks & headwinds

- Technical issues in the new user onboarding funnel suppressed Q1 MAU growth below plan, and full recovery to the planned MAU growth trajectory will not occur until Q3 2026, delaying the company's long-term MAU growth target (though not changing the ultimate trajectory). - The technical issues led to reduced Google search ranking for Life360, which amplified the negative impact on new registrations. - The advertising business carries higher near-term costs as it scales following the Nativo acquisition, leading to lower near-term margins than the core subscription business, though margins are expected to improve with scale. - Early-stage AI product development and long-term expansion into new family segments (aging parents, pet ecosystem) carry execution risk, and product/market fit for new initiatives is not guaranteed. - The company is still completing integration of the Nativo acquisition, with uncertainty around retention of existing Nativo advertiser clients (though early retention has been strong). - Hardware business will remain unprofitable through 2026 as the company supports the pet GPS launch and completes the Tile exit, creating ongoing margin pressure for the segment.

Analyst Q&A

• Q: Can you share how much of Q1's $19.7 million advertising revenue was organic (vs. from the Nativo acquisition), and what is the go-to-market strategy to hit full-year guidance of ~$100 million? /

  A: The Nativo and Life360 advertising teams have been fully integrated since day one, so a pure split of organic vs. acquired revenue is not technically possible. Roughly half of Q1 advertising revenue is estimated to be organic across both pre-existing businesses. The combined go-to-market is already seeing strong advertiser enthusiasm for the integrated offering, with management expecting Q4 2026 advertising revenue to be double Q1 levels, in line with full-year guidance. (198 characters)

• Q: The Q1 MAU addition was 1.9 million, and your full-year 17-20% growth target implies ~5 million average quarterly MAU adds for the rest of the year. Is Q2 2026 already tracking at growth levels that give you confidence in hitting the full-year target? /

  A: The technical issues primarily impacted lower-end Android devices, while premium iOS and high-end Android devices (which drive nearly all of the company's revenue) already see strong momentum. Q2 2026 is tracking in line with MAU addition levels from Q2 2025, with strong underlying user retention and demand. Management expects full MAU recovery across all segments by Q3 2026, and the MAU issues have no material impact on 2026 financial results. (295 characters)

• Q: What caused the Q1 technical issues that suppressed MAU growth, and what steps are you taking to prevent this from happening again? /

  A: The first issue came from a third-party fraud detection tool that changed its configuration, incorrectly flagging legitimate new user traffic as fraudulent, which suppressed registrations. After fixing that, additional onboarding issues specific to lower-end Android devices were uncovered, which reduced search rankings from Google, further suppressing discovery. The company has now implemented far more robust monitoring of the entire new user onboarding funnel to catch similar issues early. (317 characters)

• Q: Given the strong balance sheet and consistent positive free cash flow, why hasn't the company initiated a share buyback, and what milestones would need to be hit for you to approve one? /

  A: Management agrees that the core business performance is very strong, and confirms that share buybacks are under active consideration as part of a balanced capital allocation strategy. As a growth company, Life360 has multiple high-return organic and inorganic growth opportunities that require capital. Management is currently finalizing Nativo integration and updating multi-year strategic plans, and will factor in market conditions when making a final decision. (292 characters)

• Q: How is retention for the acquired Nativo advertiser client base, and are there growth opportunities with existing clients? /

  A: Overall, the vast majority of pre-acquisition Nativo clients have stayed, and many existing clients are looking to expand their partnerships with Life360 to access the company's unique location data and closed-loop measurement capabilities. Only a very small number of clients that viewed Life360 as a competitor have left, so the base is holding strong with clear upside from expansion. (242 characters)