Life360 Inc (LIF) 2020 Q4 法說會逐字稿

Good morning, and thank you for joining the Life360 2020 Full Year Results Conference Call. This is Jolanta Masojada, and I head up Investor Relations for Life360. This call is being conducted as a Zoom audio webinar. (Operator Instructions)

The agenda for this morning's call will include a business and strategy update by Co-Founder and CEO, Chris Hulls, and the guest appearance from Life360's newest Board member, Randi Zuckerberg. This will be followed by an overview of the financials by CFO, Russell Burke. 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 the call today. I'm pleased to be able to share an update on our 2020 performance review. The global pandemic was certainly not anything we planned for. And while the operating environment was challenging, we're extremely proud of the results we achieved. We maintained growth, proved our ability to generate positive cash flow and deliver on our road map and believe we are well positioned to accelerate our performance in the back half of the year when the world returns to normalcy.

Before I move to the details of the results, I want to highlight some of the important achievements of 2020. We launched our new membership model on time, delivering more than 152,000 new cohort subscribers and a 34% uplift in average revenue per paying circle. Our business exhibited more marketable resilience with an 8% year-on-year growth in paying circles and 39% year-on-year revenue growth. Remarkably, we maintained net subscriber revenue retention above 100%. Our disciplined spending approach during the pandemic underpinned an increased gross margin and a substantial improvement in underlying EBITDA loss, which outperformed our guidance.

Finally, we finished the year with a cash balance of more than $56 million, supported by a significant slowdown in cash burn during the year.

The power of the Life360 app and the impact it is having in the real world is demonstrated on this slide. Our mission is to bring families closer, and that starts with ensuring that loved ones are safe and secure. Our premium services quite literally save lives. And during 2020, we dispatched more than 14,000 ambulances. The testimonial on this page is one of many we receive on a daily basis and demonstrates why our organic word-of-mouth growth remains so strong.

Slide 7 provides a snapshot on our 2020 performance. Normalized revenue of $81.6 million increased 39% and supported by 35% growth in direct revenue and 50% increase in indirect revenue. Total expenses increased 10%, substantially lower than our revenue growth. This reflects the scale benefits and the flexibility of our discretionary expense model. Russell will go into greater detail on expenses later in the presentation, including our new disclosure on cost of revenue.

At a high level, there are significant divergence in cost growth drivers with R&D costs increasing 16%, while user acquisition expenses reduced 65%. Variable commissions increased in line with the direct revenue. The strong revenue growth, combined with cost discipline met with the underlying EBITDA loss, reduced substantially from $22.9 million to $7 million, and our ratio of expenses to revenue continue to improve. What this result proves is our ability to be cash flow and EBITDA positive and to deliver growth despite COVID and substantial reduction in our user acquisition spend.

Slide 8 shows the quarterly trajectory of our revenue. We achieved growth in every quarter of 2020 despite the pandemic and finished the year with annualized monthly revenue of $89.7 million, up 19% year-over-year.

Turning now to monthly active user performance. The early days of the pandemic saw a substantial decline in new global registrations from April, which impacted the first half growth rates. Despite this, U.S. MAU held stable in the first half, with the growth returning in the second half. The impact on international users is more significant with a meaningful decline in Q2, as you can see on the chart on the right. These declines were concentrated in developing markets, which make an insignificant contribution to revenue.

Additionally, there was also some impact from Huawei losing its access to Google services, which made Life360 incompatible with the affected phones, which compounded this decline in lower value markets. Interestingly, countries that manage the COVID crisis well saw significant outperformance during Q2. Total international MAU has returned to growth in the second half with even better performance in countries, which manage COVID more successfully. This bodes well for our return to faster growth later in the year.

This Australian case study provides an in-depth look at the link between a better performing COVID country and the performance of the Life360 business. In Australia, you'd be well aware of the difference between your COVID circumstances in many other countries. As you can see, there was an early drop in Australian MAU numbers in Q2 of 2020 when lockdowns were very widespread. This was followed by recovery, particularly in Q4, which has delivered all-time highs in MAU. Paying circles have remained resilient throughout with only a minor dip in Q2. We expect this pattern to repeat here in the U.S.

I mentioned earlier the substantial decline in new global registrations from April that accompanied the first impact from the pandemic. While this has dampened our MAU growth rates, we've seen a very positive performance from our returning users or RMAU. There was some impact in RMAU in the early days of the crisis when families were in hard lockdown together, and had little reason to use the app. However, we saw a recovery after April along with usage from our new 2020 cohort.

I wanted to mention another achievement of 2020 with a collaboration we announced with Google to bring family coordination features to Google assistant devices. Although screen-based voice assistants are in their infancy, we are excited that Google recognize our leadership in the category by making us a default provider to power family location features. Exclusive partnerships like these will increase barriers to entry as voice platforms gain mainstream momentum.

2020 has also been a year when we have continued to develop our profile and solidify our position as a mainstream brand. We've achieved significant levels of media coverage, and our aided brand awareness among all U.S. parents has increased by 36%. I mentioned in our half year presentation, our engagement with teams on TikTok, and this has yielded some very impressive results and a resetting of team's views on Life360, and our current iTunes App Store rating is at 4.5, a near all-time high.

Now shifting to revenue. We delivered a strong 35% year-on-year growth in direct revenue, with particularly strong performance in the U.S. Slide 15 outlines the key drivers of direct revenue. Paying circles increased 8% year-over-year to 889,000 and 5% versus the first half, an impressive performance in the context of very low levels of paid acquisition spend during the year.

Average revenue per paying circle increased around 11% in the U.S., benefiting from the higher ARPPC and new membership plans. Note, there was a modest impact on U.S. versus international ARPPC in the second half from the adoption of new attribution methodology.

I'd now like to talk a bit more about our membership launch with our marquee -- which is our marquee product for new development this year. As a reminder, the core idea behind membership is that we can leverage our user base and advantageous mobile economics to provide access to a set of safety and security features at a far lower cost than our competitors. And we have now moved beyond just location sharing and driving to a much broader feature set that includes identity, travel, disaster and medical assistance, to name just a few of the benefits we offer.

If you were to try to replicate this offering by purchasing individual subscriptions, you could pay more than 10x the cost of Life360 Platinum membership. We believe that once consumers recognize the value we bring, we will prove to be highly disruptive to these legacy incumbents.

During our first half results presentation, we provided the early results of our mid-year membership launch and our expectations for the full year performance. I'm happy to report that performance in all key membership metrics has met or exceeded our expectations despite the significant deterioration of COVID conditions over the course of the second half.

I mentioned earlier, the 34% uplift in ARPPC we delivered versus the first half for new subscribers, which is above the top end of our expectations. This has been supported by a more favorable mix of new subscribers with a larger portion than anticipated choosing our higher tier Gold and Platinum options. As of December, we had new and upsell subscribers in the membership plans of more than 152,000, 21% of our paying -- U.S. paying circles. We're also seeing improved retention among our grandfathered subscribers given the additional features of the membership offering.

Turning to Slide 18. Indirect revenue increased 50% year-on-year to more than $20 million and contributes 27% of revenue. Data continued to deliver strong growth despite COVID impacts. I've mentioned frequently that while data makes a valuable contribution, it is not our core focus. Performance was assisted by the deferral to the 2021 of any potential changes to the Identifier For Advertisers, or IDFA, previously considered for iOS 14. However, we do expect some level of negative impact when the changes are implemented.

Our auto insurance lead-gen partnership with Allstate continued to make a monthly contribution of around $0.5 million. While COVID has impacted the pace of expansion on this business, we would have liked to make more progress here from the user experience standpoint. We see significant upside opportunity, which I will discuss in more detail further in the presentation.

We're also excited that we've added a new director, Randi Zuckerberg, to our Board. Randi was one of the earliest employees at Facebook and was part of the leadership team that saw the business transition from what was merely a website for college students into a mainstream global platform than it is today. I'd like to welcome Randi to say a few words.

Thanks so much, Chris. I'm delighted to join the call today and to share some of the reasons why I joined the Life360 Board. As Chris mentioned, before I founded my own company, Zuckerberg Media, I was one of the early Facebook employees. And for me, similar to those early days, I truly see right now such a strong need for people to connect, especially with more intimate groups, and Life360 offers that intimacy for families. I think it's very impressive to see the progress that's already been made with the first-ever family safety membership. And as a mom, that's something that's very important to me and to many people to help keep loved ones safe and secure.

For me, one of my biggest focus areas, I spent a lot of time looking at the intersection of tech, media and families, and a key appeal of joining the Board for Life360 was being able to use my experience in product marketing, content creation and as a mother of 3, to help the company reach its full potential. I see many parallels between Life360 and early Facebook days when the company was able to make its huge mainstream leap. I'm excited to bring my own experience and perspectives to support Life360's next big Leap. And I look very forward to working with Chris, Russell and the team to make that happen. Thanks, Chris.

Thank you, Randi. That concludes our update on performance for the year, and I'd now like to share some details on what we have planned for 2021 and beyond.

To begin with, I wanted to revisit a slide that many of you may have seen in our IPO presentation. The ultimate opportunity for Life360 extends well beyond our current product range to encompass any business that protects families. Our mobile-first approach provides us with a significant advantage over industries built on 90s technology, which do not meet the needs of digitally native families. Legacy models have high acquisition and infrastructure costs, which lead to overpriced products. With Life360, we leverage our users' technology and are able to develop and deliver a superior product at the lower cost. With our new membership offering, we are now truly living this vision and have expanded beyond the point solutions we offered earlier in our history.

Here's a high-level view of our long-term plan and delivery to date. The first stage of our plan was to build a large base of engaged mobile users. We've delivered more than 26 million MAU, achieved impressive growth in brand recognition and saved thousands of lives. We believe this number can continue to grow.

The second stage was to grow membership and disrupt legacy incumbents. We've disrupted roadside and crash assistance with Driver Protect, and a new membership plan opens up many more options. Our third stage is expand reach and revenue with additional lead-gen and new services. To date, we've achieved 20% of revenue from indirect monetization with significant room to grow into these new verticals. I'll now dive into these 3 elements in more detail.

We're investing heavily in the free user experience to keep building our user base. In particular, we have been leveraging our momentum with teams by offering features that more specifically cater to their needs. As mentioned on our first half call, we're evolving from a where are you to a how are you approach to deliver a more emotional connection within the Life360 experience.

We're also expanding our marketing beyond pure performance to a broader array of channels. We plan to launch a brand refresh that is centered around the concept of independence rather than tracking and are incorporating the new membership offering into campaigns to build awareness of the broader spate of services it provides.

Turning now to the second element of our strategy, to grow membership. The membership offering is still in its very early days, having only launched in mid-2020. The first version of membership is largely a self-contained experience that is not deeply incorporated into the app. Our long-term plans, which we're executing on now, will bring many membership features more front and center into the experience. For example, while we offer identity theft protection today, you have to proactively sign up for it, and there are no organic cooks that drive you into the experience. Our detailed membership will enable dark web monitoring for all users, including free ones, will then be exposed to this new feature set on a regular and ongoing basis with essentially no setup needed. This will increase both awareness and conversion into our new membership peers.

Another initiative is the development of membership sign-up via the web, which will allow us to acquire Premium members directly before they download Life360 from the App Store. And the development of a web dashboard, which will further open up Life360 to members who may not use all location features. I'd like to highlight that this type of user acquisition will allow us to more quickly measure LTV and return on spend because customers that sign up through this channel begin paying us immediately versus what may take many years when someone comes in as a free user. This initiative is still in its early stages, so we don't expect a significant portion of our paid customers to immediately come to these channels. But we do expect direct to premium to come an integral source of our acquisition mix over time.

With the membership model now operating successfully in the U.S., we're looking to begin our international expansion in 2021. The first stage is the launch of the membership experience in Canada in the second half. Results there will serve as a playbook for further expansion into other regions in 2022 and beyond. Our primary focus will be the Anglosphere and EU, regions which have a strong cultural overlap with U.S. In parallel, we will be undertaking additional investment to improve the free app experience for all global users over the course of the year.

Turning to the third stage of our plan, to expand reach and revenue. COVID hampered the execution of lead-gen during 2020, and we plan to accelerate our efforts in this area in 2021. Our focus will be on providing value to customers versus the insurer-centric approach of V1. We'll be rolling out new product experiences in the second quarter with early results expected in the second half of the year.

I mentioned the ultimate opportunity for Life360 extends well beyond our current product range to encompass any business that gives peace of mind to families. During 2021, we plan to launch early testing to explore new verticals to enter in 2022 and beyond. Options include hardware devices for kids and pets, elder care and a broad suite of family financial services.

With that, I'll turn the call over to Russell, who will run through the financials.

Thank you, Chris, and thanks to everyone who's joined the call today. Before I go through the financial results in more detail, I wanted to revisit some of the insights into our user economics that I discussed on our half year results call, starting with the focus on retention.

The charts on Slide 32 illustrate the retention rates of our U.S. organic users and Driver Protect subscribers. Retention is a measure of how long a given cohort of users remains with Life360. For our organic users, you can see the initial impact of COVID, followed by a bumper of reactivation. You actually see that more clearly in the RMAU chart on Slide 11 that Chris presented earlier. But this shows that users return to the product even after a pause in use. You can see that net-net, we are maintaining our excellent retention even in older cohorts, which have very low levels of churn after the first year.

The churn developments in our Driver Protect product are also encouraging. The more recent cohorts prior to the introduction of membership have seen an impact from COVID since there is less of a value proposition around driving when teams are not leaving the house independently. However, our older cohorts remain remarkably resilient. While it's still a little early to measure retention for new membership cohorts, early indications are good, and we are very optimistic about the impact that the new offering will have on longer-term churn, given that the services provided are now much broader than just driving.

The strength of Life360's freemium model is reflected on this slide. Last time, I showed a single cohort over time to map revenue retention. This time, I wanted to show our success in revenue retention through multiple periods. The slide shows revenue retention by half year period for the cohort of users who had signed up by the end of the previous period. It shows that net subscription revenue retention exceeds 100%, supported by our success in driving free users to paid subscriptions and paid subscribers into higher price point plans. While we experienced a modest COVID-related decline in the first half of 2020, we saw a full recovery to historic levels in the second half.

The charts on Slide 34 show cumulative revenue for user cohorts beginning in the second quarter of 2017. The cohorts are grouped by quarter, given the seasonality in our business, particularly the back-to-school impact in Q3. Key aspects of our business model is shown in these charts. We monetize users for a very extended period of time, and you can see that demonstrated in the lengths of the lines, which now extend as far as 42 months. The improving steepness of the gradients shows our success in increasing monetization through improved retention and higher price points. Unsurprisingly, Q2 '20 was most affected by COVID with trends already starting to improve in Q3.

This slide shows annualized ARPPC for U.S. subscriber cohorts beginning in Q2 of 2017. We showed you this slide for our global subscribers in the half year presentation. This time around, we're focused on U.S. subscribers to show the impact of the membership launch. The chart demonstrates the impact of free users moving into paid subscriptions over time and paid subscribers progressively moving into higher price point products. ARPPC has increased progressively for each cohort of subscribers over time as well as increasing for successive cohorts. What's exciting here is the substantial leg up the membership model has provided in Q3 and Q4 of 2020. ARPPC of almost $120 for the Q4 cohort compares with around $80 in Q4 of 2019.

This chart shows marketing payback curves when we layer in investments across all marketing channels against cumulative margins for cohorts over time. We've always said that the business model is built around taking a long-term view of user monetization, and this graph shows that this is exactly what we've achieved. Some curves are slightly steeper than others, but you can see that they are trending to our goal for this measurement of profitable cohorts between 12 and 24 months. It should be noted that this is a blended top-down view. It's related, but different from our direct payback from user acquisition that varies by channel and region.

We decided to show this view as it captures all spend in aggregate, including brand and marketing, some of which is not directly measurable. This provides a way of looking at overall return on investment without having to make assumptions around attribution, virality or other factors. When we evaluate spending decisions internally, we continue to follow our bottoms-up approach, which looks at the performance of each channel and initiative and apply specific ROI tests against all of that spend.

You can see on the chart that for the cohorts prior to Q2 2020, with the vision of launching the membership model, we invested heavily in paid acquisition and marketing to provide a growth engine and allow us to repeat that Driver Protect playbook. Following the membership launch, we do expect that increases in ARPPC will continue to improve the payback for existing cohorts as we upsell both free users and existing subscribers into higher priced products. In addition, this upward movement in ARPPC will support increasingly efficient acquisition investment for new cohorts.

Turning now to our income statement. Total reported revenue increased 37% to $80.7 million. Normalized revenue of $81.6 million increased by 39%. There was a nonrecurring adjustment of $0.9 million related to the deferral of monthly subscription sales through a channel partner in the first half.

To increase the transparency of our cost structure, we have, for the first time, provided separate disclosure of cost of revenue. This includes customer support and technology expenses, which increased in line with growth. Cost of revenue increased 29% to $15.4 million, and gross profit was 39% higher at $65.3 million. We've also included a reconciliation to the previous presentation in the appendix to this presentation.

Underlying gross margin increased from 79.8% to 81.1%, reflecting efficiencies related to hosting and technology costs and higher ARPPC from the membership launch.

Turning now to operating expenses, which increased 7% year-on-year, significantly below the revenue growth rate. Research and development expenses of $34.1 million increased 16% year-on-year as a result of higher headcount. User acquisition costs of $6.7 million reduced by 65% year-on-year as we paused investment to adapt to the COVID environment. Sales and marketing expenses of 21 -- $23.1 million include variable sales commissions paid to Apple and Google, which accounts for $15.1 million. The year-on-year increase resulted from strong growth in our direct revenue with a proportionate commission increase. In addition, we undertook marketing investment to support the launch of the membership offering along with the investment in brand marketing initiatives that I mentioned earlier.

General and administrative expenses of $9.7 million increased 35% year-on-year with increased overhead spend to scale the business as well as some incremental costs associated with public company compliance. Stock-based compensation of $7.7 million increased 38% year-on-year as a result of the full year impact of 2019 awards in 2020 as well as new hires and the continuing competitive marketplace in which we operate.

The statutory EBITDA loss of $16 million reduced 44% year-on-year, reflecting the higher revenue growth underpinned by much lower growth in expenses. Underlying EBITDA loss, excluding stock-based compensation and the nonrecurring adjustment, reduced 69% year-on-year to $7 million.

Turning now to the balance sheet. Cash and cash equivalents of $56.4 million reduced by $7.4 million from December 2019, reflecting the cash outflow from operating activities. Prepaid expenses and other noncurrent assets increased by $4.7 million due to prepayments of some technology and insurance expenses. The adoption of the new lease standard, ASC 842 resulted in movements in right-of-use assets, other noncurrent assets, accounts payable and accrued expenses and in other noncurrent liabilities.

Now to cash flow. Operating cash flow of $7.3 million reduced by $23.2 million due to strong revenue growth and the $12.7 million reduction in user acquisition spend. As we've previously mentioned, operating cash flow was positive in both the second and the third quarters. Life360 ended the period with a cash balance of $56.6 million and no debt.

Thanks for your attention, and I'll now turn the call back to Chris, who will discuss the outlook.

We are very encouraged that Life360 ended the year with strong annual growth in spite of the COVID-19 headwinds. Early signs of recovery and the top of funnel were evident in January 2021 with year-over-year subscription revenue growth of 20%. Having delivered 2 consecutive quarters of cash flow breakeven during CY '20, we are confident to invest in additional initiatives to drive the growth of the business.

For CY '21, this includes scaling up our marketing and product teams, expanding marketing and acquisition channels and the initial international rollout. While CY '21 H1 will be significantly impacted by the current COVID-19 environment, these initiatives will position us to take full advantage of the key back-to-school period in the U.S. We view this period as a pivot point for reacceleration of growth in CY '21 H2 once vaccines are widely implemented and the world returns to normalcy.

While there are continuing risks in indirect revenue, we continue to see organic growth in core subscription revenue and early signs of recovery in the top of funnel. As a result, we anticipate that by December 2021, Life360 will be delivering annualized monthly revenue in the range of USD 110 million to USD 120 million, a 23% to 34% year-over-year growth rate.

Based on the planned investment in growth in CY '21, we expect an underlying EBITDA loss, excluding stock-based compensation of no greater than $15 million. Given current valuations in the U.S. for high-growth technology companies, Life360 has received inbound interest that could result in an accelerated listing or dual listing on the U.S. exchange, the acquisition of a strategically important business and/or merger with a larger entity. As a result, the Board is determined to conduct a review of strategic alternatives that will include these and other options. There is no certainty that the review will result in any transaction or any changes to current listing arrangements. We remain committed to our existing strategic plan and will only consider complementary pathways that result in a significant increase in shareholder value.

That concludes our prepared remarks, and I'll now turn the call over to Melissa, who will manage the Q&A portion of the call.

(Operator Instructions) First up, we have Dan.

Dan Coughlan from Crédit Suisse. Just first one on the guidance range provided for the AMR. Growth of 23% to 34% for the full year. I was just wondering if you could help me unpack that a little bit more and provide a bit of a bridge as to what makes that up. In terms of composition from user growth, what portion from ARPU and some offsetting headwind from indirect.

Sure. Why don't I take that at a very high level, and then Russell can chime in on the numbers. So the big theme around our projections are that we are very much in a COVID-impacted world for the remainder of H1. We're all extremely relieved that we now have vaccines coming out, and there's truly a line of sight to the end of this whole thing. But we're largely anticipating that H1 will remain in a relatively lightweight growth mode with a big acceleration in H2, and we're obviously very bullish about membership, given how strong that's been in that subscription offering, which we hope will start scaling with increases in user acquisition around that very important back-to-school period, which is in the August, September time frame in the U.S.

And so Russell, I'll let you give a little bit more color in terms of the specific levers and where that's going to show up in the numbers.

Yes. I guess what I would say, Dan, is that our U.S. subscriber growth has continued to be very positive. We've continued to see organic growth there, and we see that continuing. Where we -- as we come out of COVID, we're certainly planning to reaccelerate growth. And therefore, we do see stronger growth in the second half, which obviously translates into the AMR number. So that's the overview. We certainly do see some risks on the indirect side with the data business, as we've talked about.

That's very helpful. A quick follow-up, and you touched on it there. I think in terms of the early trading, January subscription revenue up 20%. I was wondering if you could provide any color on whether there's been any change to that into February and how that's tracking in the last month or so.

I think we'd just say that, that's been pretty consistent. We've consistently sort of seen growth primarily organically, and that continues to flow through. And as you pointed out in your question, part of the uplift from the new membership pricing is also flowing through into revenue.

And just to double down, we're extremely bullish on everything that is happening with membership, and it is still in this very much B1 state. And so, so much of the year with things that will hit in H2 are some of the upcoming launches on membership. And as Russell said, the increased price points will continue to be a tailwind. So it's going to be a combo in H2 of higher ARPPC with what we expect will also be much higher top of funnel from a download standpoint in that second half, which will drive that big outperformance.

That's very helpful. Last one for me, just on the strategic review. You mentioned there at the end. I was just wondering if you could provide a bit more color, I guess, what does it entail, how you guys being approached. And then on the point around potentially looking an acquisition, what would that be around in terms of the complementary space? And what sort of valuations are you seeing out there?

Sure. I'll break that down into a few pieces. First, from a high level standpoint, we've been getting inbound from both strategic and financial entities who have seen either our potential of our user base to accelerate their businesses or to see a bit of a dislocation in terms of where we're trading for a company that is very much a high-growth, high-margin subscription business. Clearly, COVID was a bit of a hiccup, but so many companies in the U.S. have got a COVID hall pass, which we haven't seen to be getting, even though we have very, very clear correlation to COVID numbers.

And so if you look at the multiples and trading valuations for companies in our space, on U.S. exchanges, they're just significantly higher. So if you take things like bumbles, recent IPO, they have a forward-looking revenue multiple of 17 -- sorry, the '20 revenue multiple of 12.7x going forward. You have Lemonade, which is like over 70x. You have Metromile, which is very relevant to us around driving data and driving with 39 revenue forward-looking and a 9x multiple for 2020.

So if you see that, it does make us look quite attractive, and we are leaning into the insurance space, and that's obviously a very exciting category. So without getting into detail, you can imagine why that does make us very attractive for the amount of liquidity and money that is out there in the U.S., that does seem to be valuing companies like us very different than the ASX currently is.

So we are exploring that. We clearly have a very healthy cash position. We don't need to do anything, but we do feel from disclosure issues. And the rules around that, we do need to let the market know that some of this is ongoing. But we're still very much in the driver seat about what we might pursue, given that we have a number of options in front of us.

That's very helpful. And just a point around if you're looking at acquisition, what sort of area might that be in?

So the insurance space is something we're very excited about. As mentioned, there are a number of other verticals we've discussed with everyone over time, the hardware space around people, pets and things, even financial services for kids. There are a number of very interesting companies out there, many of whom have been inbound to us because we have the user base and so much of where a number of companies struggle is just on building that audience, which we have in a very strong way. So I'd say insurance is where we're looking most closely, but there are a number of people have expressed interest in working with us.

Next up, we have Matthew. (Operator Instructions)

It's Matthew Chen from Foster Stockbroking. I just wanted to drill down on, I guess, the strategic plan. You've got 3, I guess, large pillars: build, grow expand. Can you drill down a little bit more in your strategic review in terms of time lines and priorities in each of those pillars? I mean just following on from the last question, you've mentioned insurance is certainly that you're sort of closely looking at. But could you give a bit more detail on potential -- or when we might sort of expect updates and in terms of like how you're thinking the priorities and with the Board member on the call as well? How, Randi, you might be thinking about each of those pillars in reference to the strategic review?

Sure. Why don't I start. If I look at build, grow, expand, I'll just go in order. So looking at building, we're very much heads down in terms of the second version of membership right now. The biggest pillar of that is going to be bringing our free Identity Theft products much more directly integrated into the app experience with free dark web monitoring. So you, as a parent, can know if your child's information has been breached, unlike what we have now, where you have to sign up or pay for it, go through a pretty cumbersome setup with a third-party vendor. We're going to bring that all into the experience and essentially automatically set that out for you. So it will be a way of very much organically bringing some of the membership features to Life.

So there are also a number of UI updates, which will help our customers understand what we're bringing to them value-wise, which, in aggregate, we think, will very much expand that core offering, and that will increase ARPPC and conversion. We'll help people be aware of what they're getting in all the value that comes with membership, which we hope over time reduces churn.

And then more in the second half of the year, you'll see some very meaningful changes just around the core map interface, where we've now talked about 6 months on some of the shift to more -- or how are you feeling versus where are you. So we'll make the experience a little bit more emotional, less about tracking and build on that momentum where people are starting to see that we're not this tracking app and that we actually can be used as something more.

So those are all things that will significantly build out things that are already live, but improving upon them with a big emphasis on membership and the free experience.

In terms of expanding, we're very, very excited about some of the new channels we're developing. So we now are seeing some interesting results on streaming TV. We're doing our updated branding, which is very much focused on independence in that next version of what we want consumers to think about us. We have our direct-to-web channel, which is now actually live and has already had real conversions come through it, still extremely early days, but it will move us another step along our path, not just being this mobile app, but something much bigger.

And then when you look at expansion, we do want to be very careful about not overextending ourselves. It's such a common fail case, it's almost proper about here in Silicon Valley for tech companies. So we very much want to make sure we hit the first 2 things first very well. If you take out the strategic review side of things, our focus is still on the lead-gen side of things, which has been very much something that's been a little bit behind. It was impacted by COVID and execution with partners. So we're moving ahead on that.

We're also testing new verticals. As one example, we have a test out that went through our -- a portion of subscriber base testing demand for debit card for kids. And I'm not saying we are going to do this, but the team is very, very good at putting out new tests, new experiments, testing demand within different verticals. This one was coming up from within our user base. So that will more inform what happens next year. The big option, though, to accelerate does tie in with that strategic review, where, given our upcoming verticals are very well published, we have had companies that are smaller than us approach us or already have a relationship with us that could be very interesting targets, especially where we did receive funding unfavorable terms to make that happen.

And then some bigger companies also see what we have and are very excited about that. So if you look at the insurance space, as an example, it's extremely hard for those businesses to grow. They have very low margins relative to us, and so much of the money is going to that customer acquisition. Whereas we have this growth engine, which essentially goes for free, through word-of-mouth, plus we have this very unique data set, which is very, very conducive to how people are driving, pricing insurance, actuarial risk. So it is a very valuable asset.

So when we look at the strategic review, when we look at almost any option, it really is saying, how do we take things that wouldn't be happening until at least 2022, maybe even further and bringing them in through some type of transaction.

I'll just -- I'll weigh in super briefly here. Again, I want to caveat that I'm a new Board member, so I'm still learning and diving in on everything. But for me, a few of the things that I think are the biggest opportunities is from everything that I've seen in my work in social media, but also as a parent and in those communities is that while so much of social media is free and free connections, people have a much bigger willingness to pay for things when it comes to their children and the safety of their family. And so I believe that our membership is set up extremely well for success.

The other thing that I was thinking about a lot in the process of joining the Board is that right now, many businesses are having to pivot to a message of safety and trust during the pandemic, but Life360 has always been about safety and trust and that -- so there's no pivoting there just growth and expansion.

Now we're going to hand it over to Jolanta to read some questions received through email.

Thanks, Mel. Chris, there was a question that's allowed to some of the things you were talking about earlier, but it was about the new product experience in insurance lead-gen that plan for the second quarter was the early results expected in the second half. The question is, can you expand on the activities and pilots in this space? And what would success look like in the second half and then over the medium term?

Sure. So I'll start with a quick recap of what we have live right now and how it works. So we have a partnership with a company called, (inaudible), which is a wholly owned subsidiary of Allstate. And what they do is they ingest all our data into their back-end scoring algorithm. They give everybody a driving score. And then they're able to go to insurers and say, we can offer you advertising spots for people who meet a certain criteria.

And so much of the value of insurance lead-gen is knowing are you getting a good customer or a bad customer because the difference of a good customer and a bad customer is massive. A bad customer loses an insurer money, a good customer makes them basically 100% margin. So what we have proven with our integration now is that we can meaningfully impact actuarial risk for the insurers. The challenge that's been a little bit slower is that we're essentially serving the insurers right now, and what we have in the Life360 experience are not all that different from banner ads. They don't really feel personalized. They're not helping you make a decision. And we knew that would always be a phase we had to get through. We have been a little bit disappointed by our speed to actually provide experience that is valuable for the customer.

And so when I talk about value to the end customer, it's how do I create an experience where the customer isn't feeling like we're just advertising to them and give them generic statements about saving money. But how do we actually tell them like, hey, we have information about you, and we know you and we're trusted with this source that can actually help you get the right insurance for you and save money. So what we're moving to, which has been the long-term plan is actually be able to say, based on what you're driving and information you'd give us, we're going to bring you through a quick survey of what kind of car you have, different types of demographic data about you. We're going to pair that with a driving information. And then ideally, actually, give you real live quotes for what you can get relative to your part insurance price on the spot.

And going even more broadly, some of the -- or one of the big underpinnings of membership is creating a place where people will have intent to access and purchase other services. So our goal with B2 of the insurance product is really to drive intent from our users around, hey, I'm coming here because I want to discover the right insurance plan for me versus seeing a banner ad, and yes, a very contextual and timely one, but actually creating a place in the Apple and then I come and go and say, like, I know Life360 will help me find the right insurance plan, let me see what they -- they offer.

And it's very similar to what companies like Credit Karma, which was sold around $6 billion to Intuit all around credit card lead-gen did with their data. They give you a free credit score, you have all this -- they have all this information about you. And all they were doing in many ways was just lead-gen to credit cards, but it was done in a way where, as a customer, you were genuinely feeling like you were learning and getting the best credit card for you. And there was real substance behind it because they had your credit score, they had your information. So it was a very easy way of getting the exact credit card for your specific income level and credit score.

So for us, the early phase of this next release is going to very much measure our ability to get higher intent traffic through the funnel. And so the early results we'll get in early H2 are really much more on the intent and having a full end-to-end experience over the user funnel, which will give us a very good indicator if we can ramp this up. Because we can easily drive more traffic to this experience, we just need to be very careful about it because we don't want to jam a bunch of traffic to something that would right now be perceived like as an ad. And right now, quite frankly, it is just an ad.

So it's that next phase of saying, hey, can we look at our users in the eye and say, we are really helping you make a choice and we're providing you value. So by H2, I -- early H2, I hope you have some really good indicators saying, hey, yes, this is working this new direction. We were both technically able to make this leap forward. We were able to show a strong indicator as this gives value and a strong road map to how we can ramp up the traffic to make this a much more meaningful contributor to our bottom line in 2022 and beyond, which is also when we think things like just the generic data platform will be waning and significance for the business.

Thanks, Chris. We don't have any more questions. So I'll hand back to you for any closing remarks.

No closing remarks beyond. I'd say thank you, everyone, for joining, and I'm looking forward to the meetings we have coming up with many of you over the next few days. So thank you very much, and have a great day.

Thanks, everyone.