Life360 Inc (LIF) 2021 Q2 法說會逐字稿

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, which 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 our call today. I'll jump straight to the punch and share some good news. Growth is accelerating across the board, and we're seeing the back-to-school wave we anticipated. So the bottom line is that H1 was a great result, in particular, our accelerating growth in Q2. Even with a Delta variant, our confidence for the rest of the year remains extremely high.

Before I move to the detail of the results, I want to highlight the accelerating growth we delivered in our key metrics during the first half. We had rapid acceleration in MAU in Q2. Although we were flat year-over-year in Q1, largely due to the pandemic and a decreasing user base in low-value regions like India and Brazil, growth came roaring back in Q2 as vaccines took hold, and we moved slightly closer to normalcy. This all-time peak was achieved despite our paid acquisition spend reducing more than 50% from our 2019 levels and we are seeing this growth continue.

We exceeded 1 million paying circles with year-on-year growth rates accelerating from 6% to 19% between quarters 1 and 2. Q2 delivered record quarterly paying net circle additions. And we delivered more than $100 million in annualized monthly revenue for June 2021, a year-on-year growth rate of 36%, up from 26% in March.

And with the current momentum the business is delivering, we are increasing our guidance for December 2021 AMR to $100 million to $125 million, having previously guided from $110 million to $120 million.

We're very proud of the impact that the Life360 app is having in the real world. Our mission is to bring families closer, and that starts with ensuring that loved ones are safe and secure. The testimonials on this page are from free and paid users illustrate why our mouth growth remains so strong.

Our users are our strongest advocates. And the user metrics on this slide highlight the ways in which we both save lives and provide peace of mind to families.

Slide 7 provides a snapshot of our performance in the first half of 2021. Revenue of $48 million increased 27%, supported by 29% growth in direct revenue and 11% increase in indirect revenue. Total expenses, excluding stock-based compensation, increased 29%, reflecting investment in growth and the increase in variable costs as our revenue grew. R&D costs increased 19% while user acquisition and TV expenses increased only marginally. Variable commissions and cost of revenue increased in line with direct revenue growth. Russell will go into greater detail on expenses later in the presentation.

Investment in the business saw the underlying EBITDA loss increased slightly year-on-year, and our ratio of expenses to revenue was broadly stable. It should be noted that we proved last year, the company could shift to cash flow breakeven with very short notice, and this gives us confidence to lean in on growth investments. The benefits of our strong word of mouth that I mentioned earlier is reflected in the strength of our growing metrics, notwithstanding the stable UA and TV spend.

Slide 8 shows the quarterly trajectory of our revenue. It highlights the growth we achieved throughout the pandemic and the acceleration we've seen in Q2 of 2021 is COVID impacts fade. The strong finish to the half year is reflected in June AMR increasing 36% year-on-year to more than $100 million.

I mentioned earlier the accelerating MAU growth in Q2, and you can see this reflected on this slide. For the Flat, global MAU increased 28% year-on-year to $32.3 million. MAU growth was supported by a viral surgeon downloads through social media, primarily TikTok, which supported a #1 position App Store charts in more than 11 countries in May.

You can see the progressive surge in from English-speaking to Spanish and Italian-speaking in the Portuguese-speaking territories in May and June. While we knew much of the surge be transitory, you can also see that we have normalized at much higher baseline rates in most regions, English-speaking ones in particular. This shows that Life360 is now top of mind as families go about their daily lives.

Turning now to direct revenue, which increased 29% year-on-year. U.S. direct revenue has doubled over the last 2 months as the benefits of the membership launch have accelerated growth momentum. The evolution of our Paying Circles by product line is highlighted on Slide 11. It shows the migration in higher value products over time. You can see the transition from our lower-priced 360-plus product to Driver Protect during 2019 and 2020, and then the transition to our 3 membership peers of platinum, gold and silver for mid-2020.

By the end of June, our membership subscribers made up 40% of U.S. subscribers, a tremendous achievement after only one year. These transitions have underpinned the strong growth in U.S. average revenue per Paying Circle with consistent growth to over $84 in the first half of 2021. ARPPC for new cohort of subscribers was 37% higher than the first half of 2020.

I mentioned earlier that Paying Circle net additions had reached an all-time high in the June quarter, and the drivers of this achievement are outlined in this slide. June quarter new registrations recovered to pre-pandemic levels, notwithstanding significantly lower paid acquisition spend. Even more exciting is the improving conversion metrics, which is a direct result of the work of our product teams. These 2 items have combined to drive significant acceleration you can see on this slide, in Paying Circle net additions in Q2.

Slide 13 shows examples of the improved onboarding process we have designed for new and existing users. It includes design upgrades and new upsell books, which educate users on the benefit of premium plans to encourage conversion.

Turning to Slide 14. Indirect revenue increased 11% year-on-year to contribute 24% of total revenue. Over the past 2 years, U.S. indirect revenue has almost doubled to $10.5 million. Data revenue continued to deliver year-on-year growth. Its performance was ahead of our expectations as the business was able to navigate IDFA changes better than initially anticipated. As I mentioned previously, while data makes a valuable contribution, it is not our core focus. Our auto insurance lead gen partnership maintained its monthly contribution of around $0.5 million. While we would have liked to have made more progress in developing this initiative, we continue to see significant upside potential.

Turning now to an update on our strategy. The progress we've made against our strategic objectives in the first half of 2021 and our plans for the second half are summarized on this slide. Our first goal to build a large user base of engaged mobile users, delivered more than 32 million MAU in the first half and the formation of our family advisory council. Our second goal to grow membership to disrupt legacy incumbents to achieve more than 1 million members and a record half year of net Paying Circle additions. And our third goal to expand reach and revenue through additional lead gen and new services resulted in the acquisition of Jiobit and our ongoing evaluation of strategic partnership opportunities.

I'll now move to outline some of our initiatives for the second half. On our February call, I talked about the investment we are undertaking in the free user experience to keep building our user base. We will soon launch free data breach alerts for all U.S. members. We focused on ID theft as an area of vulnerability for many families. In the U.S., 1 million children have their identity stolen and 1 in 3 surveyed members have experienced ID theft.

The way this process works is outlined in the slide. We actively scan the dark web and alert users as soon as we detect the breach. We then share next steps to secure user accounts and prevent ID theft.

Providing free data breach alerts to all users is a powerful platform to the conversion to our paid product. And this slide outlines the onboarding process from free to premium plans. I'd like to highlight this as an example of what we have been talking about when we say that B2 of membership is not about new features per se, but enhancing the ones we already have and bringing them front and center in the user experience.

Here are some details of the Family Safety Council I mentioned earlier. These well-known celebrities and influencers have all invested in Life360 and together with their families, will help shape our product and marketing strategy. The individuals are active users of the Life360 app and will contribute to creating and expanding features that felicitate trust between parents and children.

During our February call, I outlined how we are expanding our marketing beyond pure performance to a broader array of channels. Our upcoming brand campaign will focus on a broader membership message beyond dislocation use cases. With the goal of establishing Life360 as the category leader in family coordination and safety solutions more broadly. The campaign will target parents with children aged 6 to 17 across a mix of channels and launches in early September to leverage back to score reopening momentum. The success of our U.S. membership model provides a strong base for international expansion, our plans to launch the full membership experience in Canada and the second half remains on track.

Canada is the first of Tier 2 countries we have targeted, which are a similar driving culture in GDP to the U.S. The chart on the slide highlights the strong momentum we have achieved with paying users in Tier 2 countries, which have grown by 88% from January 2019 levels. We continue to invest in the free app experience for all global users.

Turning now to the second goal of our strategy to grow membership. Version 1 of our membership offering was launched a little over a year ago, and as mentioned, has been a relatively self-contained experience that is not steeply incorporated into the app and things like our new ID theft product, bring it much more front and center.

Our membership 2.0 initiatives go beyond these feature enhancements and extended things like product marketing and our brand campaigns where we introduce customers to the broader life agency feature set in new ways. Much of our uplift in conversion is from these new efforts.

The third goal of our strategy to expand reach and revenue resulted in the acquisition of Jiobit, a provider of wearable location devices for young children, pets and seniors. We see an exciting opportunity to expand Life360's relevance to a broader set of family life stages. We also see the potential to bundle Jiobit devices with our membership peers to encourage upsell to our platinum offering. As you can see in the charts on the slide, Jiobit's operating performance has bounced back very strongly at for COVID. And in December 2021, we expect it to achieve annualized monthly revenue of $11 million to $12 million.

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

Thanks, Chris, and thanks to everyone who's joined the call today. Please note that all the numbers I will be discussing are denominated in U.S. dollars, are in accordance with U.S. GAAP accounting standards and are unaudited.

Before I go through the financial results in more detail, I'll provide an update on some of the unit economics that I've discussed on previous calls with some additional perspectives.

Slide 26 illustrates the retention rates of our U.S. organic users and the retention of membership subscribers. The organic user retention for March cohorts highlights the initial negative impact of COVID, followed by a bond of reactivation.

Pleasingly, retention rates for the March 2021 cohort are running at all-time highs. The longevity of our relationship with users is illustrated in the length of the lines which stretch out for more than 4 years as well as showing low levels of churn after the first year.

The chart in the top right-hand corner measures month 1 user retention over time. While there's seasonality in this series, it illustrates the initial negative impact of COVID and the recent recovery in the June quarter to all-time highs.

Now that we have a year's worth of data, we also wanted to show the impact of membership on retention rates. You can see that year 1 membership retention rates are delivering well ahead of pre-membership averages for both monthly and annual subscribers. The broader offering of services within the membership plans is clearly resonating with our subscribers and our ongoing efforts to increase awareness of the range of products available within each tier should help us to keep improving retention.

This slide shows revenue retention by half year period for users who had signed up at the end of the previous period. While we experienced a modest covered related decline in the first half of 2020, you can see a recovery to historic levels in subsequent periods. The delivery of revenue retention in excess of 100% reflects our success in driving free users to paid subscriptions and also paid subscribers into higher price point plans. This level of revenue retention demonstrates the strength of our business model.

The movement of free users to paid and paid subscribers to higher-priced plans is illustrated on Slide 28. ARPPC has increased progressively over time, increasing for successive cohorts, which can be seen by the line starting at higher price points each time. The upward slope of the lines shows that we're able to increase average pricing even within the same cohort.

The launch of the membership plans in Q3 of 2020 saw a substantial step-up in ARPPC with a further increase to around $120 in subsequent quarters. The current flatter curve for the membership cohorts is a reflection of the recent surge in absolute subscriber numbers into the gold tier, somewhat diluting the proportion of higher-priced platinum subscribers.

Turning to look at marketing ROI. This chart outlines payback curves on investment across all marketing channels by cohort. The return to user growth in Q1 and Q2 of 2021 underpins the decision to increase marketing investment including brand and TV spend above the levels of Q2 and Q3 2020, where marketing spend was constrained due to the curved environment.

We expect to accelerate the marketing spend into the second half to take advantage of the momentum of our user growth. This will include a national brand campaign, which Chris mentioned earlier and an expansion in performance marketing spend to support the launch of the direct premium web experience.

We take a longer term of user monetization with the goal of achieving profitability between 12 and 24 months. And that's what's reflected in the lines on this chart. This high-level top-down view of blended spend across marketing channels is related to a bit different from the bottom-up ROI analysis of user acquisition, which we undertake on each individual channel and initiatives. This top-down approach captures all spend in aggregate, including brand and TV spend, some of which may not be directly measurable.

Turning now to the details of the income statement. Total revenue increased 27% to $48 million with strong growth in both direct and indirect revenue. Cost of revenue increased 30%, and gross profit was 26% higher at $38.8 million. Underlying gross margin was slightly lower at 80.7% due to technology costs associated with indirect revenue. Operating expenses increased 30% to $49.2 million as we increase investment to scale the business. Research and development expenses of $19.4 million increased 19% year-on-year as a result of a higher head count to support product development.

User acquisition costs of $2.4 million reduced by 41% year-on-year as we shifted from traditional performance marketing to new channels, including streaming TV. Sales and marketing expenses of $16.1 million include variable sales commissions paid to Apple and Google, which accounts for $9.4 million. The year-on-year increase resulted from strong growth in our direct revenue with proportionate commission increase. Higher marketing expenses reflect the investment in streaming TV channels.

General and administrative expenses of $6.4 million increased 49% year-on-year, reflecting the scaling of headcount to support growth. as well as insurance, facilities and public company-related costs. Stock-based compensation of $4.9 million increased 38% year-on-year as a result of new hires and the continuing competitive marketplace in which we operate. The statutory EBITDA loss of $10.4 million increased 46% year-on-year, reflecting the investment in growth and underlying EBITDA loss, including -- excluding stock-based compensation and nonrecurring items increased to $4.8 million.

Now to the balance sheet. Cash and cash equivalents of $50.6 million reduced by $5.8 million from December 2020, reflecting the cash outflow from operating activities. Accounts receivable of $3.8 million related to the timing of receipts from a channel partner. Prepaid expenses and other noncurrent assets decreased by $3.1 million due to the prepayments of technology and insurance expenses in the prior period. The convertible note receivable of $2.5 million relates to the Jiobit acquisition. And other current liabilities of $2.1 million reflect the convertible notes in connection with the Family Advisory Council investment.

Turning now briefly to cash flow. Operating cash flow outflow of $4.9 million reduced by $0.6 million. Net cash outflows from investing activities of $2.5 million related to the Jiobit acquisition, net cash inflows from finance activities reflect the $2.5 million proceeds from convertible notes in relation to the creation of the Family Advisory Council. Life360 ended the period with a cash balance of $50.8 million.

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

Before I turn to specifics of the outlook, I wanted to provide some perspective on Q3 performance to date. While we wouldn't do this in the normal course of events, we believe it's appropriate with the recent spread of the COVID-19 Delta variant in the U.S. As highlighted on this slide, the impact of this surge in our business is very different to the first wave of COVID. Whereas U.S. new registrations fell more than 50% between March and April 2020, and the Delta wave, we are seeing considerable resilience with the recent weeks even showing an uptick as we benefit from the back-to-school season.

Life360's strong Q2 performance in MAU and Paying Circles has continued into Q3 despite the rapid spread of the Delta variant in the U.S. As a result, we now expect annualized monthly revenue by December 2021 in the range of $120 million to $125 million for Life360's core business ahead of the original CY '21 guidance of $110 million to $120 million. While this updated guidance takes the current delta impact into account, at the time of this release, cases are still growing exponentially and the ultimate changes in social distancing patterns and government restrictions remain unclear.

Life360's current momentum, along with our track record of successfully navigating prior COVID spikes, provides confidence to accelerate investment in growth initiatives.

Life360 will be increasing spend on brand marketing, paid acquisition, R&D and joint initiatives of Gobi. These investments will increase CY '21 underlying EBITDA loss, excluding stock-based compensation from the original CY '21 guidance of no greater than $15 million for the core business.

Jiobit's annualized monthly revenue for the month of December '21 is anticipated to be in the range of $11 million to $12 million, with a $3 million contribution in CY '21 post acquisition. The underlying CY '21 EBITDA loss contribution from Jiobit from the time of acquisition is expected to be approximately $3 million.

The acquisition of Jiobit marks a milestone but on a completion of the strategic review originally announced in February 2021. Life360 is actively evaluating opportunities to accelerate progress towards our vision of being the dominant platform for a much broader speed to family services. This includes transactions that could simultaneously result in a dual listing on a U.S. Exchange.

The recent Jiobit acquisition has raised our profile with other companies that similarly see the potential to accelerate Life360's platform vision. While discussions with insurtech companies are ongoing, we are seeing a dislocation between public market multiples, which have fallen recently and private market multiples which continue to rise, and we are maintaining a disciplined approach to evaluation. As a result, we have expanded our search beyond insurance verticals and are in early-stage discussions with companies and other family service verticals, which may or may not result in a transaction. There is no certainty that the review will result in any additional transactions or any changes to the current listing arrangements. We remain committed to our existing strategic plan and will only consider complementary pathways that we believe will 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 question-and-answer portion of our call today.

Thanks, Chris. (Operator Instructions) First up, we have Laf.

Just a few questions for me, if I may. I hope you're well. In relation to the EBITDA guidance, can you just clarify the language on that is entirely clear. Did you -- is it moving from no more than USD 15 million to above USD 15 million?

Yes. We will be increasing the loss -- It's not going to be something massive. We don't know the exact number, which is why I didn't give a range, but definitely in that single-digit ish. But on the lower side, just thematically, since things are going so well, we have so many things we'd like to do. We just wanted to let the market know we might be increasing investment there.

No, look, that does make sense. I just want to be clear on the magnitude. So it's not going to be too far over that sort of $15 million amount, but obviously, you decide depending on the traction that you get. Can you just be more specific as to what area you're looking to invest that money into test and versus the core business and also versus the U.S. and versus the other geographies?

So the vast majority of it will still be in the core business. We do want to make sure we're funding our Geo integration team to launch that joint initiative next year. We're doing a brand campaign, which we're really excited about and seeing some good early results there, so we want to be able to increase that. We do not want for new ways to deploy capital, and we'd like to be able to start the hiring process to about more teams for next year. That will allow us to put more resources on the free experience, which has been a little bit deprioritized given how well membership has been doing.

We do want to make sure our Canada launch goes well. So we do more -- do all there, we have drive outer for next year. And we do want to make sure we're able to continue to put our investment into lead gen, which also is a good bit of a backseat given how well data was doing, and we do have a bunch of other initiatives that we can both accelerate or open up if we're able to increase headcount.

And then lastly, outside of the brand campaign, which is marketing spend, we are seeing some pretty interesting signs in some new channels, and we'd like to be able to have the dry powder ready to increase spend there. And as you and most people on the call know, or a freemium business to the ROI, it's very profitable, but it takes time to pay off. So if we do increase paid acquisition spend, it's really in the out years where you see that influencing revenue.

Sure. And just on the Family Safety Advisory Council, could you just add a little bit more color about some of the features they may be requesting or some projects or things they may be working on to help promote Life360?

Sure. So I want to make sure I'm not giving away any personal information because these are pretty high-profile people. But as one example, one of the people we got on board they were extremely excited about the identity that features like "Oh my god, this happened to my family and nobody knew how to help me, and this would have been extremely helpful. And my kid just is completely reckless online, and I would have loved this."

So that was how we got one of the folks on board already. So most of these -- well, actually I think everybody was a Life360 user when we reached out to them. So across the board, they had a lot of opinions, there's not really any sort of theme that's emerged, but they're very excited about our vision of telling the world, this is not about tracking and that's not corporate speak, because there is an element of some people feel a little bit sheepish about using Life360 because some of the connotations that attract and they're very excited about us getting our message out around independents. And obviously, it's that messaging and normal sleeve which celebrities can provide.

So they're going to be giving their advice. They're going to be talking about their stories and then we're going to try to find ways to amplify that. So if we do have these really well-known people saying, "Hey, this is how I use Life360. We think that's going to be very powerful."

Okay. And just one last question on the new verticals that you're looking at for potential bolt-ons. Are these areas that you flagged previously the road maps in presentations? Or are some areas new to us as the audience?

There would be nothing completely out of left field. I don't want to be more specific than that because we're obviously talking to people that we would -- we want to keep that private confidential. But again, nothing that will be completely out of left field.

Thanks, Laf. Next up, we have James Bales from Morgan Stanley.

James, you there? We do not hear you, James.

James, you'll need to unmute yourself.

Mel, why don't we move on and see if we can call on James again after the next question.

Okay. He's actually the last one on the list. So unless there's anything that Jolanta has received, then we can go ahead and wrap it up from here. We have one more. Harry Dudley. Harry, I will unmute you now.

Great. Just on the potential Jiobit's transaction. Are we to think that it might be a company that's got a capitalization potentially similar to your own and then you go and list together in the U.S.? Or is this maybe something that's already listed there? Or is it maybe just a smaller company that you would do a listing and an acquisition and a listing of sorts. I don't know if you can give me much color at this stage, but anything helps.

Sure. I appreciate the question. I can't give the full detail you're asking for. But what I can say is we are looking at deals that are much more substantial than Jiobit. We would absolutely be the larger company. So we're not looking at a merger of equals with the current discussions. So we would be definitively the bigger company, but more significant than Jiobit. And then as part of that, we already are over the $100 million ARR number, which has been somewhat the mythical number to do a traditional thing forget about specs and all that, but just having independently successful IPO, but we are looking at transactions that would then put us significantly ahead of that, which would give us a ton of flexibility in terms of what path we take to bring the company to U.S. markets.

Well, this isn't directly your question, one thing I'm very excited about is the recent Square purchase, Afterpay, which now paves the way of having 2 marquee companies show that there is value in being dual-listed. And much of the feedback we had gotten both from U.S. investors and Australian investors was generally just related to the feasibility of some of the structures we were pursuing.

And we think that given that there's this larger company that's top tier in both regions, it really does validate the approach we've been looking at to being a dual-listed company, and it's clearly working quite well for Square and Afterpay.

Now try one more shot for James.

Let's go ahead and try James again.

James, do we have you? Given that we don't, I'll thank everybody for joining and...

Well, we actually have -- sorry, Chris. We have 2 additional people here that have added. So next up, we have Angus.

I think we heard James talking. Was that you, James?

Yes, that was me. Can you hear me okay?

Perfect.

There we are. In the nick of time, James.

Okay. Finally, I got here. So I'd like to just touch on the metrics in Slide 12 and the increase in conversion that you're showing there. Can you maybe talk to how you're achieving that? And whether this is a sort of temporary phenomenon post COVID or whether you see this as a durable, sustainable increase in conversion rate over time.

Could we flip to Slide 12, please? And I will -- let me answer that generically with Slide 12 up for everyone else's benefit. So I'll start with answering the last part of your question, where this is absolutely a durable increase. I try to be very careful in making definitive statements, but this is 1 area where I have supreme confidence that will remain elevated.

The reason I'm so confident is when we launched membership, as we long discussed, it really was orthogonal to the main user experience, and this is very much the low-hanging fruit. So this is very much a metric within our control, sort of the world going into ultra lockdown and people just not using our app like they did in March and April, or using it less.

So I'm very happy to put my name and reputation on the line and say this is not a spike. This is very durable. And I honestly think we have more headroom there. So that's the answer to your last question.

To go back, like what is driving it, what is causing the spike. I think I answered some of that implicitly is it's bringing the membership experience front and center where, as a company, we've been very focused on is building the free user experience. We've never been aggressive around monetizing because we've always felt the right move is to build a good user experience, then introduce new paid features and then push them more aggressively as things bake.

So this really is just saying, okay, we launched the things. We feel good about it. People are getting value. Now let's bring in these features more into the user experience, let's bring them more front and center let's talk about the more and then things will continue to convert.

The other more meta point, which I'll relate to our Driver Protect launches, there is a consumer repositioning of Life360. So if I first quickly look at Driver Protect, we went from a location app to a driving safety app. There was a lot of question of like, hey, people are coming in for location, seeing where their kids are. It's a completely different use case to monitor how people are driving and keep people safe on the road. In hindsight, it's very obvious that this is a very natural extension. But I think we're going through a similar phenomenon, which is Life360 is a location and driving app, are people really open to this broader membership offering, and it is definitely more of a leap than our last iteration, but it's also a much bigger one.

So we believe that over time, people will know Life360 for the broader feature set, and there'll be more of just a social awareness of paying for this. And our ultimate goal, which we've discussed a number of times is. Can we make this membership so compelling, this becomes almost a right of passage where if you're a family organizer or a parent, of course, you're going to get Life360 because we're offering so much value for such a low price and that we are able to cover your physical safety, digital safety, driving safety, travel, disaster medical safety, it's going to be one of those things that our incremental cost of launching features is so low that the bundle just gets more and more compelling. So this is really a sign of that journey. And again, this is absolutely not a transient spike.

Got it. And then one of those broader features that you mentioned is Jiobit. Can you give us a sense on the timing to actively start selling that into the base?

Yes. So 2 parts to your -- to the answer of -- my answer on this. First is when are we going to do an integration that has this more front and center into the app. That will be starting later this year and will be done probably in about a year from now. We also jammed up resource-wise that will be one that really hits in earnest. So even for H1 year, next year, the impact will not be huge.

The other piece that's relevant to that is even if we had more resources, there's a huge inventory lag time issue with Jiobit that's massively exacerbated from COVID. So I don't have to educate most people on this call, but that's what happening with chip shortages and all that. But even if we wanted to sell -- even via the integration done, we would likely not be able to have much more inventory for Jiobit until spring of next year. So we are, in some ways, that makes it very easy from a decision-making standpoint because we can't make hardware appear if it doesn't exist.

So we're going to try to sync the hardware availability with the team resourcing as well, but that does also tie in with why we're increasing burn a bit because we're not a company that's struggling to figure out what to do next.

We're trying to -- we're struggling with how to prioritize because we have more opportunities in front of us than we can manage.

So that's roughly the high level on Jiobit, but we will be doing some testing this year that we will hopefully be able to disclose to the market at our next full year results, which, on a limited volume, we'll each be able to give some sort of indicative direction in terms of what we expect, whereas right now, it's a little bit more of a vision type integration, kind of an obvious one, though, if you like tracking where you like location features, your older kids is sort of a natural for pests and younger kids. But we'll have hard numbers to show at our full year results that are based on that limited sample size.

Got it. So have you had preorder devices for next year or get some sort of production allocation to ensure that you've got devices arriving on time?

Yes. We have had to do that. They've had to do that. We've only signed a definitive docs a few weeks ago now. We had already told them to pull out all the stops and feel comfortable making bigger commitments. Now they have a bigger balance sheet behind them.

So I think if we were not to have been able to do the acquisition, they probably would have not even been able to get their supplies fulfilled this year, but we were able to use our bigger base as a bit of a bully pulpit to say, if you don't prioritize us, we're going to swap but it has been extremely hard to get commitments for device shipments this year given everything that's happening with the chip shortage.

And everything is coming from Asia, which is obviously ground 0 for where we are having shipping and inventory issues. But we certainly hope and expect by next year, that's a nonissue, but it is also why it's going to be closer to year -- up towards a year from now where we have real units flowing through.

Thanks, James. Next up, we have Angus. Angus, please repeat your full name and which company you're calling from.

It's Angus Wright here from Tribeca. My question, Chris, I just had a question on Jiobit. If I'm looking at Slide 24, reading that correctly, the current annual monthly revenues somewhere between $6 million and $7 million, and you're forecasting $11 million to $12 million by the end of the year, run rate by the end of the year. So sort of a doubling of that run rate?

I'll just -- I'll jump in on that one, Angus, just to be clear, the $3 million is essentially for the period from sort of September through the end of the year. So it's the post-acquisition period. And they are absolutely growing very quickly.

So their rate has been increasing rapidly. Obviously, as Chris just said there, they're managing around supply issues at the moment, but they're absolutely managing that for their own business. They are -- it's a little restricted to be able to provide additional units for Life360 promotion, but they're all managing to their own business. So we still expect them to be sort of hitting that sort of run rate by the end of the year.

Okay. Go it. So -- and that's sort of -- so it does look like roughly a doubling of the run -- of the annualized revenue run rate between now and the end of the year. And obviously, well above sort of precoded hires.

Just curious to understand, I guess, what's driving that success? And where they're sort of -- where they're finding that growth rate? And I suppose, if that's sort of an implied growth rate with supply constraints, what do you expect -- where do you expect sort of unconstrained growth to be? If that's a fair question.

So I'll answer that in a few ways, starting with just what's driving that? What do we expect? I'll highlight a couple of things. One is we were -- we had inside information when we did this acquisition where we started talking with Jiobit in late 2020, and the world was still very freakout about COVID. The inside information we had was basically their curves matched ours very closely. And so we didn't have to take their word for the COVID impact, where I think a lot of other investors were extremely worried about what that recovery would look like, which is why I think we got what was a pretty screaming deal, especially when you see one of their competitors just raised money to a pet company called Fi, there was as many as $200 million valuation and the rumor was there, the revenue was in the same zone. But we were able to say, look, their curves are very much matching ours. And so we knew that we were COVID-impacted. We took that leap of faith, which actually wasn't very much of a leap given our insight into this being a company that was going to rebound.

So if you look at their numbers and just hold the rule over their growth rate, they're really just getting back to that curve or where they are going pre-COVID and they've built out the product, they've built up the team. And also some of the generational tailwinds are the same for them as for us. So one thing we've been very clear about is our prime market are millennial parents. And there's still a number of years away from the mainstream of being the kind of the leading parent generation. And it's also why we have much deeper penetration in the South and the U.S. versus the coast where there were families just start younger. So they with younger kids are beneficiaries of that trend sooner because their prime target audiences 5 or 6 years before us. So they have really good demographic tailwinds behind them, and they're just getting back to that pre-COVID growth rate.

In terms of what unconstrained supply would look like, I don't think it would be massively different for this year. I'd say they're modestly constrained for this year. The bigger challenge is more what happens next year because we've already been trying to figure out how do we unlock more inventory, and we have really struggled to find any way to get more units in their forecast until early summer of next year. So next year is much more likely to be artificially constrained because we have no ability to influence their 2021 numbers or even early 2022 just because even if Life360 sells them, we're cannibalizing from units that have already sold. So the litmus test at scale is going to come later next year. That, of course, does assume the chip shortage goes away. If I'm a betting man by the end of this year, we just all as the world acknowledge that Delta is not going away, and we live with it and things slowly unjam, in which case, things get unjammed by summer. We're also going to lean in on spending more to get ahead on inventory and then late 2022 is when the synergy with Life360 really takes into -- has a big impact.

Okay. Great. Maybe one more, if I could. Just wanted to just talk to slide -- the current run rate. Slide that you put up, sorry, in the outlook section, new registrations on Slide 34. Just -- just wanted to sort of understand a little bit maybe the axis there. So that -- you're talking about weekly new registrations. I mean, it sort of goes back into the period where -- obviously, you're still benefiting a bit from the sort of TikTok campaign. So what you're seeing now a sort of a higher weekly new registrations than what you were during sort of the tail end of that TikTok craze. Is that right? And is that sort of -- I suppose if you looked at say, the 2019 for a more normalized back-to-school period, would you say it's consistent with prior back-to-school period? Or how does it compare?

Yes, it's a very good question. So to your first point, this is post TikTok. So we're showing that we are being very resilient in having a back-to-school bump independently. Great point about overlaying it to 2019. I haven't looked at that exactly. But it's a similar issue. We're still very early in the back-to-school period. The prime time is basically like starting now, and this is a few days old. So ask me in a few weeks. So I'm very curious how we do in early September. But it does feel very consistent and much more like a normal year.

Clearly, Delta is not helping us. So we're pretty proud and excited that we're still having this bump even in the face of Delta because we are seeing kids getting pulled out of sports and people being quarantined and distancing. So my hunch is that there weren't Delta would be even higher, but the clear takeaway is -- and what we're trying to communicate is given some of our -- we were a little bit -- we did hedge what we were saying with numbers because of Delta. We just really didn't know.

So the main takeaway is we'd like to give everybody comfort to the best knowledge that we have. As of now, even though these crazy spikes, we're doing pretty darn well. And clearly, if social behavior massively changes or their lockdowns, which I just think are not going to happen, things could change, but it looks very, very, very different to that first COVID surge a year ago.

Thanks, Angus. Up next, we have Julian. Julian, please repeat your full name and which company you're calling from.

Julian Mulcahy from E&P. Chris, I just got a couple of questions on the pre-ID product. Just can you just give us a feel of how significant that is? I mean what's the sort of competitive sort of landscape and why was it costs 3x more for a family to resolve an issue than without that?

So from a landscape standpoint, this is a very ubiquitous product in the U.S. The market-leading company is called LifeLock. They're more focused on individuals and families. They're now merged with Symantec. They were acquired for a couple of billion bucks, maybe $2 billion to $3 billion a few years ago, growing maple since they're publicly traded. So I'd encourage you to look at the comps because they were spun out from the enterprise division of Symantec. So all their numbers out there for everybody to see.

To the cost piece, are you trying to understand why we're so much cheaper. I didn't understand that quite as much.

No. In the Slide 18, it says it's 3x higher cost for foundries with children to resolve for all of them without.

Got it. Just the moving parts and figuring out how to navigate the system is just challenging because you can't call it for yourself, there's not a return issues, you're kind of just stuck.

So we are the first truly family-focused ID that LifeLock will have, and I don't think that product for families, but we're fully accustomed the entire point in our competitive differentiator is that we do protect the entire family, whereas almost all -- and I think all, maybe there's some small upside, which we haven't gotten a radar, no one else is having a family first experience.

So the entire goal of our product is it's not telling you that you had a breach, it's telling you that your kid had a breach, and there's no easy way of doing that now. We, of course, cover you as well, but that's really the competitive differentiator.

Okay. Cool. And just also on Canada, can you -- how significant do you think that will be this year?

It's going to be very small in terms of number this year. Some of it is just even if we had amazing success in Canada, is vastly smaller than the U.S. and subscription ramps much more slowly.

So Canada is much more about establishing the playbook of what it takes to go international. And a lot of the work has actually not been on our side. It's been telling our vendors saying, "Hey, we've become a pretty big client now." I would imagine we're actually -- this is a bit of a sidebar, but I bet we're we've either surpassed or well on the way to getting close to OnStar, which was the leader in crash detection, which is owned by General Motors.

So we basically, hey, we're a big client now. We want you to go to Canada. They all said, yes, and now they're in the process of expanding their own reach.

So we'll have that model for what does it take to go overseas? What does it take to get a new vendor propped up? And then we hope we can apply that to bigger regions like the U.K. and EU. And then if Australia is easy add-on, even though similar sized to Canada, we'll have a very simple model to say, okay, we -- it's not really complicated per se or it is complicated. It's not complex. We just need to get resources spin out the team, and now we can have a little bit more precision of what happens when we launch the full membership offering because we certainly have high confidence that will work, but the specifics in terms of how much work it takes both internally and externally is a bit unclear. And that's what Canada is going to show.

Okay. And we have one more person, but we are running close to time. So we have another 2 minutes. Up next, we have Lewis.

I was just wondering if the recent increase in virality for the app has impacted how you're prioritizing the product road map? Is there anything that you kind of feel like you should be doubling down on as a result of where those users are coming from?

Sure. Yes and no. One of the themes that became very clear during COVID was that we needed to get ahead of our long-standing vision of moving the app beyond being a utility to more of a communication device? A where are you to how are you initiative. Given how well membership was doing this year, we really went all in on that initiative and put -- we went all hands on debt because we just saw such an obvious path to increased conversion. What I would say the spike has done is reinforce that we really need to not lose sight of that.

And that 2022 is very going to be focused on the free user experience in ways that we talked a little bit about that this year, but membership did so well that we kind of focus on that.

We really need to up level kind of having a delightful experience that isn't pure like brass tax around like where are you how far away are you? Because we've seen a lot of the viral hits on TikTok are funny ways of using Life360 and they are quite funny and silly. So how do we encourage more of that? And we now do -- we've moved from teams as group Parenting360. We haven't really talked too much about it, but anyone has TikTok is going to the Parenting360 handle. We do now have this parenting influencer group that combined has over 40 million followers and they're doing content for us, and they're making some pretty -- they're using Life360 and silly ways that they are more about emotional communication with others.

So that is very clear that in 2022, we need to get ahead of that a, because it's an opportunity to really change the tenor of the app; and b, it's an opening where if people are clearly using location in ways that go beyond how people use Life360 today or in terms of our use cases are set up today.

So 2022, and part of what we are looking at with our increased spend is making sure we don't lose sight of that. We really think we made the right choice focusing on membership this year and even putting more resources to that for this year because the ROI from a dollar standpoint is so clear. We could keep doing that. We want to make sure we have some of that dry powder for the free experience that does tie into that. So that's roughly how I'd answer your question.

Okay. And as there are no more questions, I will hand it over back to Chris.

Thanks again, everyone, for joining. We have a whole bunch of meetings set up for the next few days, and I'm looking forward to spending more time with many of you. Have a great day.