Life360 Inc

NASDAQ:LIF

Good morning, and thank you for joining the Life360 2024 Q1 Results Conference Call. This is Jolanta Masojada and I head up Investor Relations for Life360 in Australia.I'd like to introduce and welcome my new colleague Raymond Jones, who has joined Life360 to head up Investor Relations in the U.S. [Operator Instruction].Just a reminder that will make forward-looking statements regarding future events and financial performance, which are subject to material risks and uncertainties and actual results may differ materially from such statements.Some of these risks have been set forth in the risk factors in our filings with the ASX and the SEC. These forward-looking statements are based on assumptions that we believe to be reasonable as of today, and we have no obligation to update these statements as a result of new information or future events.Additionally, we will present both GAAP and non-GAAP financial measures on today's call. These non-GAAP measures are not intended to be considered in isolation from, a substitute for or superior to our GAAP results, and should be read in conjunction with the company's consolidated financial statements prepared in accordance with GAAP.A description of these non-GAAP financial measures as well as a reconciliation to the nearest GAAP financial measures are included at the end of the company's earnings release issued earlier today which has been posted on the Investor Relations page of the company's website.In addition to restrictions related to U.S. security laws, we are unable to provide any further detail on this call related to today's announcement regarding our Form S-3 registration statement or proposed U.S. IPO.The agenda for this morning's call will begin with a business update by Co-Founder and CEO, Chris Hulls; and CFO, Russell Burke will provide details on the Q1 financials. Chris will then provide some outlook comments, which will be followed by a Q&A session.I would now like to turn the call over to Chris.

Good morning everyone, and thanks for joining our Q1 results call. Before I jump into the details of the results, I'd like to address today's announcement that we have filed an S-3 registration statement for a proposed U.S. IPO.We have previously indicated that we may pursue a dual listing which would involve a possible U.S. IPO, while remaining listed on the ASX. We've also said that with our headquarters in the San Francisco area and pre-existing SEC reporting obligations, we view the U.S. IPO and increased exposure to U.S. investors as a natural step in our growth.The timing, and number of shares to issued and pricing of the USA IPO have not yet been determined, and are subject to consideration of several different factors and conditions. It is expected that the U.S. IPO would consist of a primary issuance of new Life360 shares as well as a secondary sale of existing shares in order to reduce dilution for existing shareholders. Restrictions related to U.S. securities law mean we are unable to provide any further detail on our proposed U.S. IPO at this time.Turning now to Q1. Life360's Q1 '24 results showed continued momentum with net Paying Circle additions nearly doubling to 96,000 from 54,000 in Q4 '23, achieving a new first quarter record. In addition, our efforts in relation to both our free members and international expansion are paying off with 4.9 million new monthly active users, also a new first quarter record.The market opportunity is on a global scale, and we believe we have significant headroom to grow as we expand to new regions and launch new features that expand our relevance to different life stages. This momentum has continued so far in Q2 '24 with the addition of a further 32,000 net Paying Circle additions during the month of April.Q1 U.S. Paying Circles increased 16% year-over-year on the back of both higher registrations and improved conversion and retention metrics, while international Paying Circles maintained strong momentum, up 39% year-over-year.U.K. Paying Circles increased 23% year-over-year with a modest uptick in Q1 '24 churn, as expected due to the price increase to existing subscribers in January 2024. The U.K. Triple Tier Membership launch and price increase to existing subscribers helped drive 53% higher ARPPC relative to the prelaunch baseline. These metrics are outperforming the Canada launch, which achieved 31 ARPPC growth at the same time versus the baseline.Australia and New Zealand achieved record quarterly net subscriber additions and a 47% year-over-year increase in Paying Circles. The full triple-tier product was launched to 100% of members in Australia and New Zealand in late April. Enhanced features for subscribers include breakdown assistance, emergency services, dispatch with crash detection and digital safety for the whole family.Prices were increased for existing subscribers ahead of the launch, which combined with the pricing impact from the triple-tier introduction, is expected to result in a significant increase in ARPPC. To date, the rollout has proceeded smoothly with the expected impact of temporarily increased churn following the price increases.We're already delivering value to new triple-tier members such as [ Anita and Chris ] in Queensland, who were alerted when their daughter was in a car accident and benefited from the automatic emergency service notification from Life360.Q1 global ARPPC increased 3% year-over-year. U.S. ARPPC increased 8% year-over-year, benefiting from price increases for existing U.S. Android subscribers in Q2 '23. Global Q1 ARPPC increased 3% year-over-year and was stable quarter-over-quarter. The positive impacts from price increases were offset by the higher mix of international Paying Circles and lower-priced territories.Q1 net hardware unit shift was modestly down year-over-year for the stand-alone hardware business and average selling price was slightly lower year-over-year due to the higher mix of multipack units. Tile's product refresh is on track for the Q4 '24 holiday season.We continue to make meaningful progress on our path to profitability, reducing our net loss and delivering our sixth consecutive quarter of adjusted -- positive adjusted EBITDA and a fourth consecutive quarter of positive operating cash flow. Our commitment to balancing fiscal responsibility with prudent investment to position of business for long-term success is reflected in revenue growth of 15% year-over-year, while operating expenses increased just 3%, underpinning positive adjusted EBITDA of $4.3 million for the quarter. This operating leverage demonstrates that we are on track to reach our target, a sustained positive EBITDA in CY '25.We are also excited that our new advertising initiative is now officially live in production with U.S. members and early results are promising. We have completed the development work that allow us for programmatic ad and expect to be set up for direct sales at scale by the end of June.As expected, initial advertising revenue in Q1 '24 was minimal due to our measured approach. As we've already shared, we anticipate significant growth, although still a modest revenue contribution in the second half of CY '24, especially during the peak holiday season.We are still building out the overall infrastructure that will allow things like audience segmentation and retargeting, which will create much higher volume. We continue to build confidence that we have many opportunities to scale this and other indirect channels for monetization. By tapping into the real-time location data, we are strongly positioned to serve ads to our members in a way that is complementary to the user experience.For example, we recently launched WatchMeFly, which automatically notifies you and your circle when you land in an airport. Integrating a ridesharing upsell is something we can build on top of our existing infrastructure and ties in with an organic interaction with the app and a great user experience.Beyond advertising within the app, we believe we have a major opportunity to connect our members of the brands, products and services that are relevant to them off-site. With our scaled logged-in experience, audience, rich first-party data, and unique reporting capabilities, this is a significant opportunity for scaling advertising revenue in a manner that is privacy first and complementary to the customer experience.In the context of indirect monetization, which includes our new advertising initiative in our existing data business, we are thrilled to announce the signing of a non-binding letter of intent to establish a partnership within a small investment in Hubble Network Inc., a space technology firm led by Life360's co-founder, current Board member and former CTO, Alex Haro.Hubble's proprietary satellite technology enables 2-way communication between ground-based Bluetooth devices like Tile and this newly launched satellite constellation. This potential partnership is an opportunity to open yet another low effort, high-margin revenue stream intended to allow us to monetize the latent demand for enterprise tracking services via Tile, a venture we had previously set aside to focus on our consumer offerings.By integrating our Bluetooth finding network with Hubble satellite technology, we plan to offer global tracking solutions for assets such as pallets, fire sensors and vehicle fleets without relying on cellular connections. This setup is expected to not only extend our indoor tracking capabilities where satellites cannot reach, but also to enhance coverage in outdoor and rural areas.Additionally, this collaboration would position us to enhance the tracking capabilities of our consumer devices, potentially surpassing those offered by Google and Apple. While currently only 2 prototype satellites are operational, the full constellation, if successful, will eventually provide unparalleled global leverage.We believe our potential partnership with Hubble will lead the development of this combined phone and satellite network, primarily targeting enterprise applications like tracking pallets and ships. We expect an initial launch with Hubble Network in early '25 and no related revenue in 2024.With that, I'll turn the call over to Russell to run through the financials.

Thanks, Chris, and thanks, everyone, for joining the call today. As a reminder, all of the financials I'll be referencing are unaudited and denominated in U.S. dollars.Chris already mentioned our strong operating metrics in Q1, and this flowed through to revenue, particularly in the latter part of the quarter. Q1 revenue increased 15% year-on-year to $78.2 million, underpinned by total subscription revenue growth of 19% to $61.6 million. Core Life360 subscription revenue increased 23% to $57 million, supported by the 21% year-on-year increase in Paying Circles and 3% higher ARPPC.Hardware revenue increased 2% year-on-year to $10.2 million, with benefits from bundling, fewer discounts offered and fewer returns, offsetting lower average selling price and stand-alone units shipped. Other revenue of $6.5 million was in line with the prior period as the company maintained its single aggregated data arrangement.March AMR increased 19% year-on-year, benefiting from accelerating subscription revenue momentum over the course of Q1 '24. Q1 gross profit of $60 million increased 20% year-on-year, with the gross margin increasing to 77% from 73% in the prior year period. This was driven by an improvement in subscription margins resulting from price increases as well as increase in hardware margins, reflecting cost efficiencies.Q1 operating expenses increased just 3% year-on-year, largely due to higher general and admin costs related primarily to compliance with Sarbanes-Oxley. Excluding variable commissions, operating expenses were virtually unchanged year-on-year, despite the revenue increase of 15% in the same period. This reflected cost reduction measures undertaken beginning in Q1 '23 and the related efficiencies achieved across the business as we continue to demonstrate operating leverage.Q1 delivered a $4.3 million year-on-year improvement in net loss from a loss of $14.1 million in Q1 '23 to a loss of $9.8 million this quarter, as well as a positive adjusted EBITDA contribution of $4.3 million versus $0.5 million in Q1 '23 as a result of continued strong subscription growth and ongoing cost efficiencies. The EBITDA loss of $4.1 million improved by $8.5 million from Q1 '23. The difference between adjusted EBITDA and EBITDA in the quarter consisted almost entirely of stock-based compensation.Turning now to the balance sheet and cash flow. Life360 ended Q1 with cash, cash equivalents and restricted cash of $74.6 million, an increase of $3.9 million from Q4 '23. Q1 net cash provided by operating activities of $10.7 million was higher than adjusted EBITDA of $4.3 million, primarily due to the timing of receipts and payables.Net cash used in investing activities of $1.1 million related to payments for internally developed software. And net cash used in financing activities of $5.7 million related to taxes paid for the net settlement of RSUs, partially offset by proceeds from the exercise of options. I note that the cash paid on RSU settlements was higher due to a higher stock price and therefore higher market value at the time of settlement of the RSUs.Thanks for your attention, and I'll hand back to Chris to outline our earnings guidance.

Life360 has maintained CY '24 earnings guidance and expects to deliver the following metrics, which include both the early revenue and setup costs for the new advertising business.Consolidated revenue of $365 million to $375 million, with core subscription revenue, non-GAAP growth of at least 20% year-over-year. Positive adjusted EBITDA of $30 million to $35 million, EBITDA loss of $8 million to $13 million and positive operating cash flow for each quarter of CY '24 and year-end cash, cash equivalents and restricted cash of $80 million to $90 million.The forecast includes Q2 '24 conversion to equity rather than cash payment of the remaining convertible notes originally issued in connection with the acquisition of Jiobit, amounting to $3.5 million, offset by higher -- expected higher outflows from RSU settlements. The company expects to continue to be adjusted EBITDA positive on a quarterly basis going forward and to achieve positive EBITDA in the first half of CY '25.That concludes our prepared remarks, and I'll now turn over the call to Melissa, who will manage the Q&A portion of our call today.

Thanks, Chris. [Operator Instruction]. First up, we have Chris Gawler from Goldman Sachs.

Chris Gawler from Goldman Sachs. Maybe firstly, just in terms of the momentum so far this year in terms of MAUs and net adds. I'm interested if you could provide us with a bit more color on the core drivers of that, particularly seeing as the user acquisition spend has actually been flat to down so far this year?

Sure. So as mentioned over the years, we have long said that the demographic that's really going to drive our growth are millennials, and millennials are now having kids age into our segments. So that hypothesis is really proving right. Like, you do not have to pitch this product to people of that generation. And when you have kids driving with other kids, there really is no one else in the market.And even for generic location sharing services for cross platform families, there's nothing out there at scale other than us. And international, we were very confident that would do well because we saw the low hanging fruit that was there. We built the infrastructure, we have better translations. So we continue to feel like we're in the early days, as you can see by some of the records we're hitting.And we have a new CMO who's been doing amazing. We've been focused on efficiency. We're opening up new channels for spend. We're readjusting the mix to where we're getting the highest leverage, so we expect more of this. It's very exciting.

Yes, sure. And then secondly, on the full year EBITDA guidance. Just curious on your thoughts around reinvestment as we go through the remainder of the year, particularly given that the net adds are perhaps tracking ahead of what you and the market were expecting?

Sure. So we're very back-half loaded as always. So we have a lot of things we're planning for H2. In terms of reinvestment and growth, we don't want to change guidance. We've committed to showing financial leverage. We're committed to flipping to statutory breakeven next year. So as of now, we're very much staying the course.

And Chris, just to your question, we're not planning to change our approach here. Yes, we decided to leave guidance as it was, but it's early in the year. And as Chris said, our results are very back ended this year in particular.

Yes, that's clear. And maybe just one more question on the Hubble investment. Curious if you're able to quantify the amount of the potential initial investment? And if you could give us any thoughts around how the partnership might work in terms of sharing OpEx and CapEx as that business looks to ramp-up?

Sure. So we are going to do initial investment in single-digit millions. So it's small. The benefit of this is, we have been following Alex. He's worked with me for a very long time and his technology. And just to back up a little bit, this was a massive big swing Alex did to actually have Bluetooth communications from space. Many people thought it was unachievable. But those first 2 satellites were just launched in the last couple of months.And it's because I have that close relationship with Alex, where there's a lot of trust that we can do this partnership and he's going to leverage it. The beauty of this one is we had to do very little. A big theme of indirect revenue for us is that we already have the asset, and we just monetize it.So the vast, vast majority of all the work is going to be given to Hubble, and they are going to primarily be selling to enterprise. So the development of the dev platform, the sales infrastructure, the connection to the satellite, they're going to be doing all of that, because we're a consumer company.So the idea is we launch this, they do most of the work. So in some ways, it's very much a free call option because we are not going in the hole really much at all. Not all that different than, say, our partnership with Placer, Arity on the data front. And we don't mind giving the brand on the enterprise side to somebody else, especially someone with so much trust because we -- that is not our focus, our focus is families.And I should just add that once we do get the satellite uplink connected, that there are huge potentials for what that could do to Tile, because you can imagine a Bluetooth device that can work globally without a cell connection, huge game changer. We want to be careful in terms of making extremely bold statements there because this is almost science fiction level tech. But if that works, and it's looking pretty good right now, very, very exciting for what that means.

Thanks, Chris. Up next, we have Lafitani Sotiriou from MST Financial.

Just a follow-up question on the IPO. It's not around new information, but what you've already detailed. Part of your commentary discusses potential secondary sell-down. Can you just talk us through what that -- you're talking about existing staff may sell into a possible sell-down and just how many shares are in that bucket of potential that may be included?

Russell, do you want to take that one?

Yes, absolutely. Lafi, as you know, we can't talk specifically about it. And frankly, that hasn't yet been determined. What we are focused on is the message that we've had from investors that they are concerned about dilution. So anything that we do here is directed towards what we need to do for an IPO, but as we've said, really minimizing dilution.

Can I just clarify then on this rather than -- I know there's -- you can't tell us how many may be formed part of that sell-down. But can you just tell us how much is currently sitting as the total share register with staff within the business?And then at the moment, for the share-based comp, correct me if I'm wrong, but you're currently buying that stock on market and issuing it to staff who're primarily based in the States. So is that part of this potential sell-down -- do they form part of this potential sell-down?

Yes, I think those things are not connected. The equity grants to staff are through RSUs, so that's sort of effectively a new equity. But -- and as we've said, as they've settled, a substantial piece of those comes back into the pool. Quite separately to that, we haven't yet really build out plans for the secondary, but we would want to make that available to U.S. selected number of people.And I -- in terms of by held by employees, it's a relatively small number on a -- on the capital side. On a fully diluted side, it would be a little larger, but we can get that for you.

Okay, great. Moving on to the Hubble Network. This is some technology questions. Can you just clarify, Chris, is -- from the initial couple of satellites that are out there, are you saying that it's already working, that it's proven, is -- the testing has worked with the Tile solution?And from the Tile product, are you saying that it's just your hardware product that you're exploring? Or -- because I remember when you bought Tile, you said that Tile also licensed its Bluetooth technology for other companies to use. Is that part of the equation as well?

Sure. So there are 2 satellites in the space right now that are making live connections from orbit to the ground, to actual Bluetooth devices using the chipsets that are in Tile or similar manufacturers.So in terms of the key technical laws of physics style risks, those are -- those have largely been solved. And again, this is very, very cutting-edge tech. I think everyone was surprised as to how well it's working and this is an offshoot of me and Alex just thinking about location for over a decade together.In terms of licensing other tech, this will go into our devices. We -- I can't comment specifically on the deal, but in terms of the combo satellite and on-the-ground scanning network, we are looking at exclusivity for consumer use cases. So the combo product could really leapfrog everything else out there.And again, how we think about this is in many respects a free option. The investment will be single-digit millions, extremely high trust relationship, and it is very similar to things like Arity, and Placer and things like ads, where it's not all that much work because the work is really leveraging an existing asset we already have.

And just to clarify, are there many other satellites that are pursuing this solution with Bluetooth technology, or is this the only one you're aware of? Can you talk through --

This is the only one we are aware of. And the vast majority of people thought this was technically not possible. And Alex and his team have proven it, which is extremely exciting.

Got it. That adds a lot of color. Can I just clarify revenue model, because you did add some color in your opening comments and in the last question. So the way that this will work from a Life360 perspective, you are considering this as a new vertical, right? And that even though you guys won't be responsible for building up the teams in the sales base, but ultimately, there will be -- are you looking at the revenues per Tile gadget that is being sold, or how should we think about what the revenue potential is for you guys?So just say, as an example, Hubble Network signs up a huge shipping container, wanting to track all the pallets. What's the -- how does the revenue look like for you guys? After the drop down, what do you guys get?

Sure. So it's a -- I'm going to give an oversimplified version. We are going to get a portion of the revenue that is collected by Hubble from the network fees for what's being called using the federated network. That's our scanning network on the ground, because if you're inside or 5 or 6 pallets deep, you might not work from the satellite, and that's why our finding network is extremely powerful. So we'll get a portion of the fee there.And we will get hardware revenue, albeit very low margin, on the actual hardware sales. So it's really about getting some of that recurring revenue from the actual sale of the device -- of the devices, that we will get. Very similar to how Arity sells, aggregated data, we get our portion of that sale. So we're going to get a portion of the sale generated when it's using our tech.

Got it. And that's a small percentage, a few dollars, or you it's just too early to talk to at this stage?

It'll be a meaningful share. Hubble will be the primary company doing the sales. But, again, it's just taking something we already have. We're going to have very few staff for it, very little dollars. So it's again, we talked about our silver mines and our gold mines. I think this actually could be quite big, but it's leveraging what we have today, so we don't have to do very much work.One clear application I should say, when I think you have new verticals, I often think of us doing our own products, big investment, a lot of uncertainty that's going to pay off. Although this is in some ways a new vertical, I would see it much more as a way to turn on another avenue of indirect monetization, which is kind of great in free margin, and an option that if this really works in the way it works, it could hypercharge the consumer business as this technology gets rolled out into Tile devices. But that is somewhat -- if it happens, great, if it doesn't, it's not the end of the world, because, again, very low investment, and we will just ideally see revenue coming in from the work of Hubbell, and they're getting to leverage our asset.

Got it. And just one final question with the advertising direct sales. Can you just clarify what that means that you have direct sales at scale by June? And so -- because your initial comments when you were introducing advertising, talk to -- I think utilizing AdMob to get the ad products going. Like if we think about in the middle of June, will you be half AdMob half direct sales, or what's the thinking beyond it?

So AdMob and tools like that in Google Ad Manager, you can still have direct sales. They're more an infrastructure play because you need the way of actually getting the ads in the system. So although there are programmatic ads using those services, it's not in conflict to direct sales, you can actually enable the direct sales with this infrastructure. So I don't know what the percentages will be.But obviously, when we get able to segment our audience and customers, they'll just say, hey, you want to show an ad to a smartphone user, when we're able to go and say, okay, I want to build a program or I want to target people who went to this store at this point in time. We can then sit on top of AdMob or Google Ad Manager and say, we want to -- we've created the -- these audience segments, let's target them. And so that's how direct sales fits nicely in with those services.

Got it. And so from your initial guidance to where we are now, this sounds like it's actually moving a bit quicker than what you previously discussed, is that the case? And are you just being conservative with the potential revenue ramp-up in the second half, because you just don't know yet because it's not -- you haven't really got it at scale yet? Or is this something we have to wait till September, December updates to get a pretty clear picture?

I think in general -- so when you get direct sales, it's -- there's a cycle up and spin-up effect. And the general pattern of companies getting into advertising, it usually starts slowly because you have to build out the segments, you have to build up the infrastructure, you have to build up the team, you have to build the relationships, you have -- people have become aware that you're on the market.So I don't think we're being conservative, I think we're being reasonable. And in general, it's once you get the repeatable model, then you start scaling it. So we feel good about the numbers you put out. We're not intentionally over or underselling. So to your point, my infrastructure is a little bit ahead of schedule.

I think I'd say, our view on the evolution of this hasn't really changed. We knew it was going to be a slow build. There's definitely some unknowns in terms of how quickly it will build. We know it will build into the second half, the progress is good, but that view on evolution hasn't changed.

Next up, we have James Bales from Morgan Stanley.

A couple of follow-ups from some of the earlier questions. So firstly, on subs growth. At the full year result from last year in March, you guys were basically pretty cautious on subs growth for this year. But first quarter has come in way ahead of plan. Can you maybe talk to why that's the case? How the MAU growth has gone in April? And whether you still expect the normal seasonality that you've experienced in past years in 2024?

So if we look at why, it's hard to very -- we still grow primarily organically. And as far as we can tell, it's about -- I'm somewhat repeating what I've already said. The demographic tailwind, which we believed had been happening is continuing to happen. We can see it anecdotally. We can see broader use cases in terms of the types of people who use the product. You can see the awareness of location sharing services. I'm sure just anyone on this call, everyone's sharing location now. This really could be social network scale type of penetration. So the TAM is just huge. There's that.And there's also the focus of international. MAU is continuing to grow very, very well into this quarter, and international also continue to do exceptionally well. And that one was -- we we're not surprised on that at all. We just didn't have much of an investment there.Now we have David Rice, who was our COO, very senior guy living in the U.K., making it his full emphasis. And we knew that we had just some easy levers to pull, and that's proving out. And I also think the trends that have driven the growth in the U.S., they should repeat in Europe and other regions because they're usually a little bit behind the curve in terms of trends.Asians are sometimes ahead of the Americans, but Americans usually ahead of the rest of the world. So we just do have a very natural market and demographic tailwind. And the product keeps getting better as well, and we keep getting smarter about how we optimize flows and funnels. We've launched some very small delight features like WatchMeFly, when you get a landing notification. It's not -- doesn't seem like much, but these little things really are these magic moments that drive growth. So net-net, it's, leading to these all-time highs.

And one nuance to add to that, James, and I think we said this at year-end, but the early part of the year had moved sort of -- essentially as we expected. The real growth came in the latter part of the quarter. So that's sort of really driven that -- those metrics in in Q1, and thus our higher AMR as well at the end of Q1. And, as we've said, we're seeing that that that higher growth level continuing.

Okay. Got it. And then maybe a second question on advertising. So you guys talked about, having your own, capability here. The initial product, it seems like you're plugged into Google's infrastructure and sourcing advertisers from then.Can you maybe help us understand how many platforms you expect to be plugged into overtime and the mix of deals that you'll do with advertisers that are directly negotiated versus through some of these third-party platforms? Sure.

Sure. So in terms of the number of platforms we're integrated with, I don't know if that's the right framing in the sense that we need to do lots of different work in different ways to get our audience sliced and diced into ways that are identifiable, marketable, and attributable. And it's not just we keep adding new platforms to do the same thing, we build out different parts of the tech stack, some of the stuff we do see ourselves, some we use third parties for.So we will be continuing to develop that. And then some of the things have to be custom, like you land at an airport, you get a push. Like, we already built that with a WatchMeFly feature. Now how do we link that to our backend? So it's like, hey, who wants to send ads to people who just land at an airport. So that's a little bit niche, but it's an example like we can go out and sell that interaction, and that probably would be something we have a human touch.In terms of what percent of direct sales versus programmatic, there's also some nuance there, because we could do a direct sale to a vertical. So if you look at people like our partners even like Arity, we could do a deal with them where they get a certain amount of inventory for car ads. And then they would be going on to do the direct sales, but the -- it would be a programmatic hook to our engine because it would be programmatic to Arity and then they go out and have a direct conversation with other people and they fill that inventory.So again, it's not necessarily the easiest answer, but I would say if I could abstract maybe the meta-point away, we're going to be building out more and more infrastructure for a number of years before it's done and also going back to how these companies scale, you have to build it out, and that's why you do in years 2, 3, 4, you -- probably more 3 and 4, you see things really ramp-up because you know the hooks that work, you have the analytics, you have the data science, you have the attribution you're known as a source for traffic, you have a sales team, then it all comes together.

So how many people are working on the ads product within your business at the moment?

It's a relatively small number. I don't know exactly how I would quantify it, because many people in -- that are touching ads or touching other things. So data science, compliance, partnerships, the back-end overall team, the infrastructure team, they all have some part in it, but it's very modest relative to say, a brand-new vertical that we're building ourselves.Of course, if it really ramps up, we'll increase the investment more, but part of what we liked about adds when we shared on prior calls is that we can -- we don't have to go deeply into the red to get out there. We'll build it incrementally, so we could always say that the investment in advertising has a positive return within the same year, which is also why we're starting a little bit more conservatively. Small team, incremental wins and we're building it out, and as we add -- as we collect more revenue, we'll spend more infrastructure.

Up next, we have Wei-Weng Chen from RBC Capital Markets.

Yes, just -- I appreciate all the comments on Hubble. Just in your best guess, I guess, how far off are we from first revenue with Hubble?

2025

Okay, so it's not that far away. Okay, cool.

No, the longer arc is a full satellite constellation that would -- if all goes well, and I do want to be open where I think there's low risk and high risk scale. I think it's medium to high that are on the satellite constellation giving the full real-time piece. But you could see in like '26, we're essentially having on-demand wake-ups every few minute time interval that goes right into Tile technology, which benefits consumer.But to actually start getting revenue from the enterprise side, you don't need nearly as much because if you think of the use case for enterprise, like let's just say, you're a pallet company or you're like a fire sensor or an ag sensor like watching humidity on a grapevine, and these are all enterprise use cases, it's very, very, very different than the consumer use case where you need updates every couple of minutes.You just want to know the thing is where it is, you want to get that little bit of data out of it even once a day, and that's where that combo comes in. So if you're out in the field, the Hubble satellite will get you anywhere. But if you're in the network or in the bowels of a ship, you have the Life360 scanning network on the Bluetooth side of things. We essentially have that infrastructure almost ready to go. It's what the money will come in 2025. And the Hubble team is already building out the platform that takes our data and we'll unify it with the satellite infrastructure.

Okay. And just to confirm, there's not going to be like a Tile for business sort of ad product and a Tile for consumer products like it's the same product from a technological perspective, yes?

Yes and no. Hubble can make additional modifications of hardware. We're going to provide an off-the-shelf unit, but the real thing we're bringing and why Hubble wants to work with us, is we have the finding network. So it's actually not the Tile tech, which is the core IP here. Tile's tech is actually relatively straightforward. It's that scanning network of 66 million phones and being able to have scanners, like, where you just imagine the people in the warehouse, they could run Life360 or they could run a dedicated version of our app that specifically we're scanning just sitting in the background, so you have that backup layer. That's really the asset we're monetizing. Counterintuitively, is not necessarily Tile.Yes, they like that we have this off-the-shelf Bluetooth tracker. Yes, they like the Tile as a brand. So when they go and approach these pallet manufacturers, they can say, we're going to probably call it smart PIN. You can get the smart PIN with Tile and that's going to help them, but that's where the IP is actually lighter. It's going back to that network. The real asset of Life360 is our 66 million customers. And in this case, all customers who can scan for devices.

And just to be very clear, there's very little capital involved in that. The effort to have Tile scan for the Hubble network is relatively minimal.

I'd say even beyond relatively, we're talking like the current estimates, this one engineer doing a few weeks of work. And of course, nothing is that simple. You need to maintain, you need to monitor, but in terms of the core work, it's really just update the scanning protocol, feed it to their system and they're doing the rest of the work.

Yes, okay. And then how much work have you or Hubble done on this opportunity in terms of enterprise tracking, including potentially speaking to enterprise customers? Is...

A lot.

What's the feedback been?

Tons. So if I back way up, me and Alex, we've been working together on location technologies for 15 years. And we have -- if even people recall on decks a couple of years ago, we are convinced there's going to be worldwide global coverage for IoT. It's actually inspired Alex to go start this company as he felt he had a unique technical insight with his co-founder there who has a signal processing PhD to figure out how you can essentially have anything with Bluetooth communicate to a satellite versus having to build custom modems and all that.So we have been thinking about this a very, very long time. Part of what was a validation for Alex as like, we had huge demand for Tile to do this, but we didn't want to invest resources and Tile doing this. A, because the focus is family, it's like the consumer opportunities, billions and billions and billions of dollars. So as much as we like enterprise, not worth distracting our company itself, because we don't have a sales team, we're not an enterprise business. But it was already there. There was a lot of demand.And then when the market pulled back even more, we just shut all that down and said, okay, maybe we revisit in a few years. But I have had conversations with Alex for multiple years now, like, hey, if this technology you're doing work, pick up that business. And it's because I have that close relationship with Alex, we were able to just jump on this so quickly. And he's going to be hitting the ground running because he was, obviously, our CTO and currently a director. And it's because of that close relationship, it's moving so quickly and we're able to line this up.

Yes. And then just last question from me, I guess. Is anyone on the 360's Board or in 360 personally invested in Hubble as well?

Yes, some of us are investors, myself included, but we will be disclosing all conflicts and the quantum is -- I think, when disclosed and shared not anything that will raise any sort of eyebrows. Its relatively modest.

Up next, we have Wei Sim from Jefferies.

2 questions from me. The first one is just in regards to Hubble and this Bluetooth tracking. So we're essentially saying that Bluetooth networks can be tracked anywhere, it sounds like. What's the implications for Jiobit, if this were to be the case?

So we are -- we think it only helps Jiobit. So if I back up to our vision, why we wanted Jiobit and Tile is we want to have devices that own the location stack. So they're very different. Even with Hubble, you're not going to get real-time updates. It's going to be over time, it's this high latency.It's why AirTag in Tile. They're just very different than GPS trackers, which are also growing very quickly. So what we want to do, and it's not even completely related to Hubble, but where our mind goes is we want to have devices where you'll get, say, 30 days battery life of real-time tracking. And so we are working on our next rev of Jiobit. We had to backburner that when the market crashes, everybody knows. But next year, we'll have new versions.And the idea is you'll get the 30 days real-time tracking or thereabout, I'm somewhat making up numbers. But say, a month of real-time GPS. Then if you forget to charge, you can have a year backup using Tile Bluetooth tech and then Hubble. So if you think about what we could do, we could just leapfrog all the competitors because we can have the GPS LTE connection last a month.And you know what, if you forget to charge, unlike our competitors' devices which just turn into a brick, you'll get a whole another year with the Tile backup functionality. And once that Tile backup functionality includes Hubble, it won't be as good as GPS, but if your dog runs away, you'll still be able to find exactly where they are out in the woods. Whereas, again, our competitors would -- when their battery dies, they're literally brick. So we have a ton of directions we can go.

Okay, that makes sense. So just in terms of, like the updates that you would be able to get from Hubble, what kind of latency are we talking or frequency are we talking about?

So there's short-term and long-term. Short-term, there's only a couple of satellites in the sky. It's only a couple of days, fine for enterprise, but not so fine for consumer. If you get to the theoretical -- I'm going to get the numbers a bit wrong, but for constellation, you call like 100 satellites and satellites about $0.25 million to launch. I mean, thanks to SpaceX far, far, far cheaper than they used to be. You could be getting updates every few minutes and actually on-demand updates because there will always be some satellite overhead because it's low earth orbit that can make connection with the system.I do want to be careful about over selling things that will take definitely a couple of years, the earliest and is where we're getting into some much deeper tech. But the core tech is validated, and there's a lot of coincidence that it is just a matter of getting the satellites launched and then getting the constellation will be up and running. And I am highly, highly convinced that the enterprise opportunity is going to be very big and justify the investment needed to launch the full satellite constellation. Because, again, it's become so much cheaper because of the SpaceX.

Okay, that makes sense. Sorry for a full constellation, how many satellites are we talking about?

I think it's -- there's an oversimplified answer because it goes by region, and it's a sun-synchronous orbit, so you can imagine the satellite is going north to south. And so based on where you are and your latitude, it's complicated. So I think they're considering a full constellation we're getting very reliable down to a few minute updates as I think, in the dozens and then up from there. But please don't hold me to those specific numbers.

Yes, okay, no problem. The other one was just on the ramp-up of the ad revenues you mentioned previously that you think it's probably more 2 -- years 2, 3, 4 that you see a bit more meaningful. By that, do you mean like FY '25 being year 2? And...

Yes, and we're going to see real revenue in the second half of this year for sure. So I'm not saying it's going to be nothing. So you'll see it. But in terms of like really driving results, so we do believe over multiple years, this could match the subscription business. That's what's going to be much longer term.

And just in terms of like ad revenue per MAU, I think you previously put up some slides around that. I don't know if you've got any more formulary thoughts or commentary that you might be able to provide with -- to us as to how you think that could trend over years 2, 3, and 4?

Nothing overly new. I would say now that we've talked to a number of partners and we're building out this competency, we feel more validated around the uniqueness of our data set and people seeing how there's -- because we have a very unique first-party data there, we have many, many ways to monetize this. So I'd say we have more validation that we are on to something here, but more from the -- seeing the success of response from partners and now we have to build the stuff.

But Wei, I think there's -- there are a lot of examples out there. And we probably don't have anything more specific to talk about right now. But the examples that we talked about before still hold from everything that we've seen. So if you look at what Uber did over a 4-year period, it built it up consistently to a very, very significant business. But that early phase was a slow ramp.

Yes, okay, no, that makes sense. And sorry, just last one for me is just on kind of like the cadence of our new initiatives. Hubble was a bit of a surprise to me. So how are we thinking about that in terms of other new initiatives and that kind of cadence going forward?

Nothing has really changed. Hubble is unique and that the satellites just launched 2 months ago, and I will admit to being surprised that they worked as well as they did. I think honestly, even Alex and his team were surprised. That they thought they might need another rev or 2 that it might kind of work. But it's like they're thinking about its actually close to theoretical limits.So the reason this is being an asset, it's -- although it could be a lot of revenue, there's very, very minimal work here. I'm pleasantly surprised by the number of questions here because we're excited about it as well. But it's definitely, I would not think of this as a brand-new initiative because, again, we are going to make a very modest investment of single-digit millions, and we're essentially giving the asset away, kind of like the data pipe, there' not -- was not that much work for us. And if you look at Placer, we open up a data pipe, we get $20-plus million a year, not all that dissimilar from Arity, we think it's going to be similar with Hubble. Not a lot of it for us to do.

Up next, we have Chris Savage from Bell Potter.

I'm not going to ask a question on Hubble. If I can ask around the IPO, I appreciate you can't say much, so I'll choose my questions carefully. Just general timing, are we talking this year, or are we talking next year?

We want to be ready, we can't disclose specific timing. Russell, anything you can say on that?

We -- yes, we really can't say more than we've already said, Chris. As Chris said, we -- and we've said this before, we do want to be ready for that, and yes, it's going to depend a lot on conditions, yes.

And to be clear, we -- good -- we've already shared the reasons for why we would do this. We will, of course, only move ahead if we're confident those things hold. And we are very sensitive to the amount of dilution we have. And so we were very open that the primaries will not be more than $100 million. And obviously, that's a relatively modest dilution overall. And I think this has been a long alignment around where our value could be most recognized and the right long-term home for us.

And just Chris or Russell, the decision to restart the process, lodge the prospectus, is that on the back of like Reddit it being successful, or is it because of the increased size you are now, or what was the driver?

We can't speak to specifics on that. I think everyone heard me at the last earnings talking about Reddit as a bellwether for the market opening. And we've obviously talked a lot about dilution and multiples and obviously, that our situation has changed quite a bit since then. And we have seen companies like Reddit and others go out. So of course, we've watched those developments.

We would just reiterate that we want to be prepared.

Understood. All right, I'll move on. And just the guidance around the cash, the $80 million to $90 million at year-end, I'm guessing that's before the investment in Hubble, Russell?

Yes, it would be. But as Chris has said, that's -- it's very small potentially. And you're right, I think in line with all of our guidance, yes, the trends are good. We don't feel like it's the right time now to change guidance, but all of our trends are very positive there.

But that investment, you do anticipate making this year?

Yes, it would be.

And just lastly, some clarification around the advertising revenue. I think with the original guidance you indicated a 5% to 10% sort of range in the revenue, is that still the assumption?

Yes, our expectations haven't changed. What we -- everything we're seeing is very positive, but it's that long evolution that we've talked about. So it's a path and it builds over time. We see it definitely sort of ramping up and we will continue to ramp-up, but the major impact is going to be in the second half.

And Chris, it's not what you asked, but just for the point of emphasis, we've always said with regards to IPO, we would continue to trade [ CDAAs ] on the ASX, and we are quite sensitive to our investors that have supported us, and so we are taking all that into account as well.

Has there been any sort of inbound interest out of U.S. investors in getting a U.S. listing?

Actually we can't comment on that one, is that correct, Russell?

That's definitely going into that no comment territory, Chris.

And for our last question, we're going back to Lafitani from MST Financial.

Just a couple of follow-ups. Can I just check with the advertising business, are you -- have you hired or are you looking to hire a key executive to spearheaded that given this could be as much as your subscription revenue? And if you are, where we at that process?

We are interviewing VP of ad sales right now.

And externally, I imagine, and you talk to kind of organizations they currently work in or...

Yes, we're looking externally. We have a search going on, and we've been speaking to a number of agencies and groups. We are a very desirable asset in that regard because people just look at our first-party data and then that's -- it's almost unheard of to have, so very robust demand for that position.

And just going to a comment that Russell mentioned earlier on about this calendar year being very back-ended from an earnings perspective. So would there be really just 2 primary drivers for that reason, or is there 3? So is the seasonality of the hardware and the new product launch is back-ended? Is the advertising revenue that's also back-ended and then there's the back-to-school which is -- should provide a bit of a boost? Are these the things you're referring to, Russell, or is there something else?

You captured it exactly Laf, it's -- it-- yes, we always see that third quarter lift for back-to-school and then these -- and then, I guess the only thing to add to that potentially is your hardware is traditionally a Q4 business in terms of the concentration of revenue, but the other factors that you mentioned in terms of advertising is layering into that as well.

But just to clarify, you do have a new product set launch ready to go for Tile pre-Christmas. And what are your expectations around that?

Absolutely. We're -- that will -- that new product launch will happen for the holiday period. And we've built that into our expectations for the year. That will help us -- it's not necessarily going to result in a sort of a huge lift in sales. It's more helping us maintain that placement in retailers have that refresh of the product and layer into, so they're continuing increase in market share as part of that category as we see the category build.

Okay, got it. And just one final question, circling back to Hubble. Can we -- can you just explain to us the advantages of Bluetooth over the existing solutions? So is it cost, is it a cost factor, or is it a network coverage factor?

All of the above. There are very few -- the entire concept of having IoT-type connectivity to satellites where there's very minimal battery impact is brand new. This is extremely cutting-edge tech. The breakthrough the Hubble had is being able to use existing Bluetooth chips, whereas essentially all of their competitors are doing custom modems, custom hardware and be -- and those don't have the scale. So you went on cost, you went on battery and you'll have the same coverage as the other companies trying to do this. And it's a science fiction level stuff, but that is what they are building.

And as we out of time, I'll hand it back over to Chris for some closing remarks.

Nothing else for me. We're extremely excited about the quarter. We're extremely excited that things are shaping up and looking forward to our next round of meetings with many of you all. Thanks all.