Life360 Inc

NASDAQ:LIF

Earnings Call Transcript 2021-Q3

[Jolanta Masojada, Head of Investor Relations]

This is Jolanta Masojada, and I head up Investor Relations for Life360. The call will begin with some prepared remarks from Co-Founder and CEO, Chris Hulls; and CFO, Russell Burke, followed by a Q&A session. This call is being conducted as a Zoom audio webinar. [Operator Instructions] I would now like to turn the call over to Chris.

[Chris Hulls, Co]

Good morning, everyone, and thanks for joining our September quarterly business update call. This was another milestone quarter for Life360, with growth continuing to accelerate in the U.S. as the country emerges from the pandemic. We are excited by the metrics the business is delivering, in particular the second consecutive quarter of record subscriber additions. This has taken us to more than 1.1 million Paying Circles, supported underlying revenue growth of 45% year-on-year and delivered $120 million in annualized monthly revenue for the first time. As a result of this momentum, we have upgraded our CY '21 AMR guidance. Monthly active users continued to increase from the second quarter despite the expected roll-off of lower quality users from the viral surge in downloads we experienced during that quarter from TikTok. While there was some modest decrease in international MAU due to the viral surge and regions with greater pandemic restrictions, this was in line with our expectations. U.S. MAU growth was robust, increasing by 1.9 million from the June quarter to 22.2 million, reflecting the traditionally strong U.S. back-to-school period. We're also excited to see the high levels of engagement from our users with the increase in returning monthly active users at the highest level in our history. During the September quarter, we continued to deliver on our strategic road map. We closed the acquisition of Jiobit. And while there were short-term constraints from supply chain issues, we see the opportunities to significantly large and enhance our core user base of families. We rolled out our new free data breach alerts to 100% of the U.S. user base. This service addresses an important area of vulnerability for many families and establishes a powerful platform to drive conversion to our paid product. In relation to the commissions we pay to the app stores, the recent changes from Android and iOS validate our long-held view that these charges would reduce over time with long-term benefits to our operating margins. The changes from Google are expected to take effect at 1 January 2022. On an annual basis, this would reduce commissions by around $2 million based on current run rate. A similar change by Apple will result in a far greater impact, and we are excited that these larger platforms are under pressure to reduce fees and allow a more competitive payments marketplace. We are also delighted to welcome Carrie Cronkey as Life360's first-ever Chief Marketing Officer. Prior to joining Life360, Carrie served as CMO of the leading family care platform, Care.com, and her expertise hits the sweet spot of subscription services and family-focused products. With our momentum in the market, we're ramping up investment in the company's overall product marketing strategy and amplifying the brand story. Turning now to detail for the quarter. As of September 2021, Life360's global monthly active user base was 33.8 million, an increase of 1.5 million for the quarter. U.S. MAU of 22.2 million increased 32% year-on-year and 9% for the quarter. International MAU of 11.6 million increased 29% year-on-year or reducing slightly from June '21's TikTok inflated base. In our listed home of Australia, the MAU of 836,000 increased 45% year-on-year, holding steady at June '21 levels despite widespread COVID-related lockdowns. Revenue in the September quarter increased 45% year-on-year to $29.3 million, excluding Jiobit, and 17% for the quarter. For the month of September, annualized monthly revenue, excluding Jiobit, was $120.1 million, a year-on-year increase of 48%. Including 1 month's revenue contribution from Jiobit, consolidated revenue was $29.7 million, a year-on-year increase of 47%. Direct revenue delivered accelerating momentum, benefiting from the Paying Circles increase of 26% year-on-year and 10% for the quarter to 1.1 million. Net subscriber additions of more than 104,000, were a second consecutive quarterly all-time record, increasing 15% from the June quarter. ARPPC increased 24% year-on-year, with the new Membership cohort subscribers delivering an ARPPC uplift of 39% versus the first half of 2020 prior to the Membership launch. The Membership model now has 445,000 new and upsell subscribers, accounting for 49% of U.S. Paying Circles. Indirect revenue, which includes data and lead gen, delivered year-on-year growth with higher data revenue and lead gen consistent with previous quarters. Data revenue performance has not been affected by IDFA changes as users upgrade to iOS 14.5. Paid user acquisition spend of $1.7 million increased $1.3 million in the June '21 quarter. Total investment in user acquisition and TV channels of $3.1 million increased from $2.5 million in the June quarter. These investments are being undertaken to accelerate growth in the improving environment and to support the back-to-school brand marketing campaign, which has proven to be a very big success. Underlying EBITDA loss, excluding stock-based compensation and other nonrecurring adjustments, of $3.3 million (sic) [ $3.2 million ] increased from $1.5 million in the March quarter, reflecting our higher investment in growth. I'll now turn it over to Russell who will share more details on our cash flow performance for the quarter.

[Russell Burke, Chief Financial Officer]

Thanks, Chris, and thanks, everyone, for joining the call today. Please note that all the numbers I will be discussing are denominated in U.S. dollars, are in accordance with U.S. GAAP accounting standards and are unaudited. Life360 ended the September quarter with cash and cash equivalents of $50.4 million and debt of $3.7 million. We remain in a strong capital position to invest for future growth. Cash from operating activities of $4.4 million compared with cash used of $1.9 million in the June quarter. Revenue of $29.3 million increased 45% year-on-year on an underlying basis and was $4.3 million ahead of the June quarter. Receipts from customers of $26.7 million increased from $20.6 million in the June quarter, reflecting the timing and quantum of subscription receipts. Total payments in the quarter were in line with the March quarter. Staff payments of $11.8 million increased from $9.3 million in the June quarter due to the consolidation of Jiobit and the timing of bonus payments. At the end of the quarter, our head count, including contractors, was 330. Advertising and marketing payments, which include paid user acquisition of $3.2 million, increased from $2.5 million in the June quarter, reflecting the new brand campaign and higher user acquisition spend. Research and development payments of $2.2 million reduced from $3.8 million in the June quarter due to the timing of vendor payments. Cost of revenue of $1.8 million reduced from $3.3 million in the June quarter due to the timing of technology payments. Administration and corporate payments of $2.5 million reduced from $3.0 million in the June quarter due to the timing of insurance payments. Cash used in investing activities of $4.4 million reflects the Jiobit acquisition. And cash used in financing activities of $0.5 million relates to the exercise of options and settlements of RSUs. With that, I'll hand it back to Chris.

[Chris Hulls, Co]

Life360's strong performance in the seasonally important back-to-school period underpins our confidence that annualized monthly revenue by December 2021 will be in the range of $125 million to $130 million for Life360's core business, which currently excludes Jiobit. This compares with previous guidance of $100 million to $125 million (sic) [ $120 million to $125 million ]. This strong momentum underpins our current strategy to increase spend on brand marketing, paid acquisition and R&D. Underlying EBITDA loss, excluding stock-based compensation, is now not expected to exceed $15 million for the core business, reflecting the benefit of additional revenue improving our prior guidance. Jiobit has been impacted by global supply chain issues stemming from COVID shutdowns in Asia in the current quarter and is unable to fill demand and is thus sold out in all key sales channels. Mitigation efforts are underway, and we expect to be fully restocked prior to the holiday shopping season. As a result of this supply delay, Jiobit's annualized monthly revenue for the month of December '21 is anticipated to be approximately $1 million lower than our original forecast, in the range of $10 million to $11 million, with a $2 million to $3 million revenue contribution in CY '21 post acquisition on the 1st of September. The underlying CY '21 EBITDA loss contribution from Jiobit from the time of acquisition is expected to be approximately $3 million. Life360 is in active negotiations with potential acquisition targets that will accelerate our vision of being the dominant platform for a much broader suite of family services, including transactions that could simultaneously result in a dual listing on the U.S. exchange. Regardless of the outcome of any M&A transaction, we have engaged advisers to begin the process to dual list on the U.S. exchange in CY '22. There is no certainty that the review will result in any additional transactions or that a dual listing will be completed. We remain committed to our existing strategic plan and will only consider complementary pathways that we believe can result in significant increase in shareholder value.

[Melissa Goodell, Executive Assistant]

[Operator Instructions] First up, we have Laf.

[Lafitani Sotiriou, Emerging Companies Analyst]

It's Lafitani from MST. Just had a few questions, if I may. The first is in relation to Jiobit. So at the last time you spoke on Jiobit, Chris, you mentioned that the chip shortages -- when setting the guidance for AMR, the chip shortage was taken into account. Can you just talk us through a little bit about what's changed between the last guidance and now, albeit small, and just what gives you confidence that you will have stock in time for the holiday season? And if you could just also add some comments around now that you've had the business for much longer, has the strategy changed much? Or what do you see as the opportunities for the next calendar year for that business?

[Chris Hulls, Co]

Sure. So to the first question around supply and what's changed, the Delta variant is the obvious answer for that one. A lot of the factories are coming out of Asia, Vietnam in particular, and those were the regions that were most heavily impacted. And as you might recall, at the time we were closing the transaction, it seemed like things were returning to normalcy. And unfortunately, they got a whole lot worse, especially in regions that were a little bit behind in the vaccines. And a lot of the Asian countries are not taking chances in the same way that we are here in the U.S. So it is purely just a delay and everything from the port systems to airfreight and all that is just much more delayed than anyone, I think, expected. And if anyone wants to just take a look, I think just -- nothing like seeing it live. Just go to jiobit.com, and you'll see when you make an order now, I don't think we're even saying we're going to fulfill until the end of November. So purely a supply problem, not a demand problem. If anything, demand has been up, which is pretty exciting.

[Lafitani Sotiriou, Emerging Companies Analyst]

But what gives you -- just to elaborate on that, what gives you confidence that you will get the stock ahead of the holiday season?

[Chris Hulls, Co]

I am not up to speed on the exact details but largely day-to-day things are using a just-in-time system, and you do have visibility on when different parts are coming in and when they're going to hit. And the Jiobit team, as they report things up, they can have a pretty good view of where the bottlenecks are in the system and when the major things are going to be resolved. So they feel very confident about things being back for the holiday season. And clearly, things could change but right now, it's like...

[Russell Burke, Chief Financial Officer]

Well, the way I'm thinking, the main factories that they use are actually now back online. They also engage in some mitigation strategies to access parts from other locations. So they've got pretty good visibility into their supply chain at this point.

[Chris Hulls, Co]

And then the air freight versus do container shipments as needed because it's obviously small higher-end devices, so the port backups are far less of an issue than for, say, a company that would have larger, heavier goods.

[Lafitani Sotiriou, Emerging Companies Analyst]

And the opportunity for next year, is there a particular target market that they address? Say, the pets or seniors or the toddlers, which one would you say is the key target for your thinking as your strategy evolves?

[Chris Hulls, Co]

Younger kids and pets in the short term and midterm, seniors in the long run. So when you look at our audience overlap, there are two ways of looking at it, receptiveness to the use case. And so by definition, if you're sharing location with Life360, you're a fan of the use case. So if you do have a younger kid, it's not really much of a stretch to add on the Jiobit. The thing is, if you have a teenage family, you probably don't have a kid who's also 6 or 7 or 8 years old, which is Jiobit's core prime target. What we have done, though, is surveys where it's only in the low double digits who have the younger kid at home while also having a teenager. It was something like 60% plus have a pet. And so although the emotional tie to a pet is obviously lower than a kid, by sheer numbers, we think it means that there are going to be equal opportunities. And then senior care long term is such a lucrative and high-value category that really hasn't been disrupted. Over the long haul, we are extremely bullish on being able to leverage Jiobit into becoming our entry point into the senior care market. And as we mentioned on other calls, the thing that's different about Life360 being in the senior care business is grandparents and great grandparents love being on Life360, but they don't like devices that make them feel like they're old. So we naturally already have a Trojan horse that any of our competitors who go directly to a hardware product won't have. So I am highly confident that in a few years, Jiobit will be spearheading this new senior care focus.

[Lafitani Sotiriou, Emerging Companies Analyst]

Yes. Interesting. And do you mind if we just touch on some of the strategy and the confirmation that you will go to a dual listing regardless of whether there's an acquisition there or not. To the acquisition first, you previously talked about where the pricing of some target insurance businesses are at. Can you just give us an update on where that part of it is at? And also how many other verticals are you actively looking at, at the moment?

[Chris Hulls, Co]

Sure. So on the insurance front, as mentioned on prior calls, there was a big dislocation in pricing where when we first kicked off the search, the public markets were skyrocketing and then the private markets followed. As we progressed in the review, the public market started correcting, but the private markets had not followed suit. If you now fast forward a couple more months since we last spoke with the market, the public markets have continued to correct where companies like [ Route ] are actually trading at cash value, not because they have problems assessing risk but they have a customer acquisition problem, which we don't have. It does seem like that market is undergoing a very major correction. So we're still in a wait-and-see approach to see how that follows in the private markets. We have identified a couple of other verticals. We love the response to Jiobit as one example. And as you know, we were -- we have not just been focused on 1 or 2 things. We have this very ambitious vision. So I can't share the specifics we're looking at because I don't want to unwittingly share some of the live conversation we have going. We do have a very targeted list, including some decently advanced conversations, that we're quite excited about.

[Lafitani Sotiriou, Emerging Companies Analyst]

Okay. And would you look at organically creating any of these new verticals? So building it yourself or...

[Chris Hulls, Co]

We've explored things with our Coin test for child debit cards. We are very, very cautious about overextending ourselves. So with the acquisition of Jiobit and what could be one more addition, that would probably mean we would focus less on building out our own new vertical offerings in the short and midterm. But as I mentioned on previous calls, our idea is, as we showed the engines working, moving into one new adjacency a year is our current target.

[Lafitani Sotiriou, Emerging Companies Analyst]

Okay. Yes, that makes sense. And just thinking about the free offering that you've been building out, in the past, you've said that that's really targeted at building up the funnel of new people coming in and in converting them. With the new launch of the free features, can you just talk us through some of the statistics or patterns you've seen change since you've rolled that out?

[Chris Hulls, Co]

Sure. So it's a slow and steady burn versus any immediate impact. One of the historical anecdotes I've shared is that we're going through our second big shift. We went from a location sharing app, then location and driving. And that was also the slow burn where as people got familiarized with the use cases, they would change as they thought about us and talked about us. And now 4 years after launching our driving features, we're inextricably linked to driving. We have good early indications that similar shifts are happening with membership as over 20% of our customers now view us as a membership versus location sharing app. Our brand recognition continues to get to all-time highs. And more and more, we're hearing anecdotes from our users around using the broader Life360 offering and using it in much bigger ways. And so as we continue to improve the offering, both free and paid. We're going to hear more of that where we'll hear more people talking about different features. The tenor of the service is going to change. The perception of the brand is going to change. And that will indirectly relate to higher conversion because as people understand the brand story and the full value prop, then they understand how inexpensive we are relative to other providers. And you could just, as an example, go on Twitter, see what people are saying. I recall just before this call, I saw a pretty cool tweet of someone talking about, "Oh, my god, this is so much cheaper than AAA. Why is everybody paying so much? And you get so much more." So we're seeing those signs, and it's very promising and very exciting.

[Lafitani Sotiriou, Emerging Companies Analyst]

Okay. And just one last final question. The AMR guidance you've been providing throughout the year has been very handy. When we get to roll over to next financial year, calendar year, is it your intention to continue providing that for financial year '22 for the year ahead?

[Chris Hulls, Co]

Russell, can you take that one?

[Russell Burke, Chief Financial Officer]

We'll look at that at the right time, Laf. We'll probably revert to the sort of traditional guidance in terms of overall revenue.

[Melissa Goodell, Executive Assistant]

Next up, we have Quinn.

[Quinn McComas Pierson, Co]

Quinn Pierson from Crédit Suisse. I guess, firstly, just on the AMR guidance upgrade. So I guess the sequential uplift required in the December quarter versus the September quarter is lower. Is that just seasonality? Is that just seasonality after we come off that strong back-to-school period and that December quarter being a bit quieter? Or are there any other factors to be cognizant there?

[Chris Hulls, Co]

That is really a normal pattern. Back-to-school is the big surge. We come to a new baseline. It's a little bit slow in Q4 until we hit Christmas. We have a huge spike at Christmas. That's like our biggest spike, but it's a shorter one. So it's really just overall seasonality as expected. And again, as we've been signaling and talking about for a while that back-to-school is that real litmus test because each year, other than 2020 with COVID, that is where we really take these very big leaps forward as a business. And pretty exciting that, that again happened this year and was a good feeling internally here that COVID is well and truly behind us, at least as it relates to our U.S. customer base.

[Russell Burke, Chief Financial Officer]

I would -- so a point to add, Quinn that it is exit AMR that we're guiding on. So it is our sort of estimate at the end of the year run rate effectively. So we've lifted that based on the strong momentum that we've gotten now to Q3.

[Quinn McComas Pierson, Co]

Yes. That makes sense. And speaking of kind of that back-to-school period, which was very strong, I'm actually surprised you didn't spend more in customer acquisition spend and marketing spend. Can you just talk us through that? Is it because you didn't feel it was needed from -- in that you're getting good organic take-up? Is it maybe the cost of acquiring some of that business in the market? Can you just talk us through kind of your approach and how to think about that, please?

[Chris Hulls, Co]

Well, first, I'm very excited to hear an analyst almost encouraging us to increase our losses because growth is so good. So jokes aside, we are toeing the line at being aggressive and being good financial stewards of the business. And coming out of COVID, it is an extremely hard environment to forecast in. And we were always optimistic. We saw good signs, but we have worked very hard to develop our reputation as a prudent, balanced company. And while we're not scared of risk, we do want to make sure we're pushing on the gas at the right periods of time. So it was our risk-adjusted approach of saying, "Hey, we think COVID is going away. We're really excited about momentum. Let's not get too far ahead." What you will see as we work for plans on next year, we are going to be leaning in on growth. Some of the things we're doing, the strategic review, which hopefully will bear some fruit, are very much along the lines of things are exciting. The market opportunity only feels more and more real. So much of our long-term vision is being validated by the day that we do think now is the time to get more aggressive. And part of why we hired a CMO was specifically for that where I'd say, historically, marketing was a secondary function in Life360. We're elevating that to be equivalent to engineering and product because our view is that there are a number of ways we can really step on the gas next year. And when we believe, and hopefully, we've won the market's trust just to do that as also evidenced by we were relatively conservative coming into the back-to-school season where, I think you're right, in hindsight, we probably could have paid more or spent more, but it was so unknown with COVID just even 3 months ago.

[Quinn McComas Pierson, Co]

Yes, that makes sense. Super. And lastly, I think one for you, Russell. Just on the cash, the operating cash inflow tracked quite a bit above the EBITDA loss. It looked like it was mostly around timing of payments to suppliers. Does that kind of normalize in the 4Q? And in general, do we think of operating cash kind of being pretty close to the EBITDA number? Can you just talk us through how to think about that going forward?

[Russell Burke, Chief Financial Officer]

Yes. So the short answer is yes, Quinn, it will normalize, to a large extent, in the fourth quarter. It was very much about timing, both in terms of receipts from platform providers and also just vendor payments. So there were a couple of sort of major swings right at the end of the quarter, which really drove that very positive cash flow. That will self-adjust in the fourth quarter and normalize in the way that you described it.

[Melissa Goodell, Executive Assistant]

Next up, we have Chris.

[Chris Savage, Senior Industries Analyst]

It's Chris Savage from Bell Potter. A slightly different question, can I ask about the recent changes by Apple and Google with their respective app stores? And just to start, Chris, with the all web-based channel for direct payment of subscriptions, can you talk about what sort of uptake you've had there?

[Chris Hulls, Co]

Sure. So it's still quite early there. But I'm also very excited that literally today, we launched our full version of that. So I'm wondering what you would see in Australia, but if you could VPN via the U.S., we did a massive overhaul that literally just went out a few hours ago. So I'm quite excited about that. It took a lot of the data and the learnings with more [ MVP ]. And we have a whole new back-end billing system that will allow us to do so much more that's outside of the Apple platform. We'll have invite codes, referral, way better tracking, CMS for the website, ways of retargeting different people at different stages of the funnel. So it was an extremely big release that went out today, and it's a great foundation that's going to allow us to continue to build that up. If we then look at what Apple and Google are doing, it is pretty exciting. And there are two separate things. One is we are being allowed to have more choice now. So things like Jiobit, bundling Jiobit's to give them away for free if someone signs up for Platinum, it's very clear that Apple is not going to get in the way of that whereas they might have done so in the past. But the bigger arc that we think is more relevant and also somewhat validating of our long-held belief is that, over time, these big platforms are going to get chipped away at, and they're going to have to get more competitive in their own right. So I think the writing is on the wall that 30% is just not sustainable. Google left first and brought things down to 15%. And I think there's a very good chance -- I can't prove it that Apple will follow suit as well because they are seeing what is happening when they get the uproar about such usurious fees. The biggest court case -- or I think it was actually a law was in South Korea where it wasn't a court ruling, it was a legislative action where you're not allowed to force a single payments platform on people. So I think we will see this just across the globe that they will rather preempt that and try to get the regulators off their back versus fight what is probably going to be a losing battle because even if they went in the courts, you can't win on legislative action.

[Chris Savage, Senior Industries Analyst]

Sure. And it might be more so for Russell, but have you done any work yet on -- like you're paying 25% of direct revenue and commissions at the moment to Google and Apple. Have you done any analysis on what that will come down to with just the changes Google has made and also with the launch of your web-based channel?

[Russell Burke, Chief Financial Officer]

Quinn, the immediate sort of impact is pretty straightforward. As you say, our current commissions average around the sort of 25%, 26% level. And that incorporates a mix of both the 30% in the first year and 15% thereafter. So if that comes down to a standardized 15%, that's fairly straightforward in terms of the impact on subscription revenue as a percentage. The web-based one, we'll look at as that develops. It's an area that's going to develop sort of fairly significantly but probably not in the short term. In the short term, we'll look to build that up. But it will be some time before it has a significant impact on the commission rates overall.

[Chris Savage, Senior Industries Analyst]

Sure. And I guess second question back on M&A, probably more so for you, Chris, there seems to be less and less talk about a deal with the SPAC. Is that now almost firmly off the agenda? Or is it just still now more so in the background?

[Chris Hulls, Co]

I would say it's somewhere in between the two. We're quite excited about our performance. And the view from advisers is this would be a pretty slam-dunk, just regular traditional listing without any of the baggage that comes with SPACs, and it wouldn't be that long of a process. That being said, SPACs interesting. And we're a little less focused on the market dynamics, more fundamentally what's best for the business. So it's more of the good news that we're well over the $100 million ARR mark. Some of the things we're looking at from an M&A standpoint would increase that further. So we wouldn't be a second-tier IPO. We wouldn't be a mega IPO. But we feel like we can put together a real deal that would get attention and would not put as at a huge risk for the -- well, I think what we can all acknowledge there's a bit of a slow start on the ASX.

[Chris Savage, Senior Industries Analyst]

So the most likely outcome from your earlier comments, it sounds like it's going to be an acquisition at some stage in the next few months or so.

[Chris Hulls, Co]

We have some active conversations. I wish I could give more clarity. But I would say it's more likely than it was at the last update. Because the last update, we had chased some of these insurance [ threads ] to the ground, and we just weren't getting the pricing we had wanted. Ironically, just a huge amount has changed in the last few months where that correction has been pretty staggering, which I think validates -- that was a good call to hold off and also I hope reinforces our style of management as being prudent where we want to be aggressive. We were not willing to dramatically overpay for what we felt was -- for a category of business that is fundamentally very exciting, but had extremely high multiples, that's coming much more down to earth. So I could see a world where that does reemerge either now or next year because I think the interesting thing with hype cycles is when a hype cycle goes from really hot to out of favor, there are some very good deals to be had. So we are licking our lips a little bit there.

[Melissa Goodell, Executive Assistant]

And next up, we have Julian.

[Julian Mulcahy, Executive Director of Small Caps]

Julian Mulcahy from Evans & Partners. Just a few questions for you, Chris. Firstly, with the sort of membership mix and, it seems to me, a quite strong growth on the Gold side, sort of Platinum sort of mixed with Gold a bit, is that kind of expected and you're just waiting for Jiobit to be included in Platinum to get that growing at a faster rate?

[Chris Hulls, Co]

Largely. So what has really been working for us is these very targeted moments where you run into a feature into the app and then we bring you through a funnel to upgrade in the fewest number of steps possible. So just through pure testing, we found the way to maximize that is to remove the number of choices. And when we put Gold as the single option, that's been the highest NPV decision. And what we kind of long planned for Platinum is bigger than Jiobit but use Platinum as more of the promo categories where, right, some small number of people are always going to want to pay for the best, which is what's happening now. But we can use targeted promotions to say, "Hey, we're running a special on Platinum this month, give the gift of Platinum to a friend, get the free Jiobit with Platinum." So Jiobit will be one of many ways to get people into that higher tier of service.

[Julian Mulcahy, Executive Director of Small Caps]

Right. Okay. And with the savings from the app store commissions, would you be planning just to reinvest all that into the business? Or would you let some of it hit to the sort of profit line?

[Chris Hulls, Co]

Well, we're definitely reinvesting. As to one of the prior questions, we were cautious coming into back-to-school because COVID was just such an unknown. We're in the middle of Delta. We really think the right move is to push hard now. So as a company, we are taking an aggressive stance, and we certainly hope that the investor community sees that. And one of the silver linings of COVID, which I've shared on previous calls, is we did manage to have 2 quarters of consecutive cash flow breakeven and still growing in the face of very dire circumstances. So what was a prior anxiety of us perpetually in cash, I think we've very clearly proven that the company can be profitable whenever we want. We've been hugely resilient. And so the real opportunity is to continue to lock up the market and build that flywheel versus be in harvest mode, which we've now shown we can do essentially within days, not weeks, if we need to do it.

[Julian Mulcahy, Executive Director of Small Caps]

Okay. And also with the TikTok surge and then the expected sort of churn, is that pretty much played out now and you'll see a rebound in growth in international?

[Chris Hulls, Co]

That has played out from a TikTok standpoint. Obviously, different regions still have different impacts on COVID. Australia is obviously back to normal. Some Asian regions, South American regions are not. But if you look at our core countries like U.K., EU, yes, it's behind us and we're back to normal.

[Julian Mulcahy, Executive Director of Small Caps]

Right. And just finally, any comments on how Canada is tracking?

[Chris Hulls, Co]

That is on track to be out by the end of the year. So we're probably about a month away from that.

[Melissa Goodell, Executive Assistant]

Okay. Chris then, if there are no any other questions, I will hand it back over to you for some closing remarks.

[Chris Hulls, Co]

I have no closing remarks other than saying, thank you all. It's been an exciting quarter. And looking forward to the next few months of the year and the growth that we have to come. Have a great day, and thank you for joining.