Life360, Inc.(LIF) - 2022 Q2 - Quarterly Report

Part I - Financial Information Item 1. Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for the period ended June 30, 2022, detailing key financial positions, operational results, cash flows, and significant accounting policies including recent acquisitions Condensed Consolidated Balance Sheets The balance sheet as of June 30, 2022, shows a significant increase in total assets to $323.7 million, primarily driven by a rise in goodwill and intangible assets from recent acquisitions, while cash and cash equivalents decreased to $64.3 million and total liabilities increased to $94.1 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $64,264 | $230,990 | | Goodwill | $133,244 | $31,127 | | Intangible assets, net | $56,822 | $7,986 | | Total Assets | $323,730 | $302,376 | | Total current liabilities | $82,163 | $41,446 | | Total Liabilities | $94,077 | $52,331 | | Total stockholders' equity | $229,653 | $250,045 | Condensed Consolidated Statements of Operations and Comprehensive Loss For the three months ended June 30, 2022, total revenue grew 95% year-over-year to $48.8 million, driven by strong subscription growth and hardware revenue from acquisitions, though net loss widened significantly to $33.0 million due to increased operating expenses Statement of Operations Summary (in thousands) | Metric | Q2 2022 | Q2 2021 | YoY Change | H1 2022 | H1 2021 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total revenue | $48,844 | $25,009 | +95% | $99,814 | $48,001 | +108% | | Gross Profit | $29,288 | $20,249 | +45% | $64,406 | $38,752 | +66% | | Loss from operations | $(33,468) | $(6,807) | +392% | $(60,575) | $(10,659) | +468% | | Net Loss | $(32,985) | $(6,804) | +385% | $(58,207) | $(10,656) | +446% | | Net loss per share | $(0.53) | $(0.13) | - | $(0.95) | $(0.21) | - | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2022, net cash used in operating activities significantly increased to $38.5 million, with $113.8 million used in investing activities primarily for the Tile acquisition, resulting in a $152.0 million net decrease in cash Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(38,528) | $(4,919) | | Net cash used in investing activities | $(113,797) | $(2,500) | | Net cash provided by financing activities | $300 | $1,563 | | Net Decrease in Cash, Cash Equivalents, and Restricted Cash | $(152,025) | $(5,856) | Notes to Condensed Consolidated Financial Statements The notes detail the company's business, significant accounting policies, and financial statement components, highlighting the acquisitions of Jiobit and Tile, changes in data revenue models, and significant customer concentration - The company operates a "freemium" model and expanded its offerings through the acquisitions of Jiobit (wearable location devices) in September 2021 and Tile (smart location devices) in January 2022[27] - The acquisition of Tile on January 5, 2022, had an aggregate purchase consideration of $173.6 million, consisting of $158.0 million in cash and $15.6 million in equity[127] - The company is exiting its legacy data sales model and transitioning to commercializing solely aggregated data through a new partnership with Placer.ai[52][53] Customer Concentration | Partner | % of Revenue (Q2 2022) | % of Gross A/R (June 30, 2022) | | :--- | :--- | :--- | | Channel Partner A | 49% | 37% | | Channel Partner B | 15% | 12% | | Retail Partner A | 13% | 17% | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's Q2 2022 financial performance, highlighting a 95% revenue increase driven by acquisitions and organic growth, alongside significant increases in operating expenses and net loss due to integration costs and strategic investments Q2 2022 Financial Highlights (YoY) | Metric | Q2 2022 | Q2 2021 | Growth | | :--- | :--- | :--- | :--- | | Total revenues | $48.8 million | $25.0 million | 95% | | Subscription revenues | $36.0 million | $19.2 million | 87% | | Net loss | $33.0 million | $6.8 million | 385% | | Adjusted EBITDA loss | $18.7 million | $3.3 million | 445% | Key Performance Indicators (as of June 30) | Metric | 2022 | 2021 | Growth | | :--- | :--- | :--- | :--- | | Annualized Monthly Revenue (AMR) | $174.4 M | $105.9 M | 65% | | Members (MAU) | 42.0 M | 32.4 M | 29% | | Paying Circles | 1.42 M | 1.01 M | 41% | | Avg. Revenue Per Paying Circle (ARPPC) | $89.34 | $79.95 | 12% | - The company is focused on retaining its trusted brand, attracting and converting members, maintaining efficient member acquisition, and expanding platform offerings, such as through the Tile and Jiobit acquisitions[221][222][225] - Operating expenses increased significantly, with R&D up 125% and Sales & Marketing up 116% YoY for Q2 2022, primarily due to increased headcount from acquisitions and higher marketing spend[297][299] - Net cash used in operating activities for the first six months of 2022 was $38.5 million, a substantial increase from $4.9 million in the same period of 2021, driven by a higher net loss[311] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company outlines its exposure to market risks, primarily from interest rate fluctuations, foreign currency exchange rates, and fair value changes of certain liabilities, concluding these risks are not currently material - Primary market risks identified are interest rate, foreign currency exchange, and fair value risk[319] - Interest rate risk is considered immaterial, as a hypothetical 10% change in rates would not have a material impact on financial statements[320] - Foreign currency risk is limited because all sales are denominated in U.S. dollars, though some operating expenses are in foreign currencies[321] - As of June 30, 2022, the company had $10.1 million of liabilities measured at fair value, which are subject to market fluctuations[323] Item 4. Controls and Procedures Management confirms the effectiveness of the company's disclosure controls and procedures as of June 30, 2022, with no material changes to internal control over financial reporting during the second quarter - Management, including the Principal Executive Officer and Principal Financial Officer, concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2022[326] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2022, that materially affected, or are reasonably likely to materially affect, internal controls[327] Part II - Other Information Legal Proceedings The company discloses its involvement in ongoing patent infringement litigation inherited from the Tile acquisition, specifically cases with Cellwitch, Inc. and Linquet Technologies, with outcomes currently undeterminable - The company is involved in a patent infringement claim filed by Cellwitch, Inc. against Tile in March 2019, with the case currently in the trial court with discovery stayed[174] - A separate patent infringement lawsuit from Linquet Technologies was dismissed, but an inter partes review of the patent's validity is pending[175] - The company is unable to predict the outcome of these legal matters or estimate a range of possible loss[176] Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the company's Registration Statement on Form 10 - There have been no material changes from the risk factors previously disclosed within Item 1A "Risk Factors" in the Form 10[331] Unregistered Sales of Equity Securities and Use of Proceeds The company details the issuance of unregistered equity securities during Q2 2022, including stock options and vested RSUs to employees, directors, and consultants, asserting exemption from SEC registration requirements - In April and May 2022, the company granted stock option awards to employees and non-employee directors to acquire a total of 676,461 shares of common stock[332][333] - In June 2022, the company issued 179,118 shares of common stock to employees and consultants upon the vesting of RSUs[334] - The company believes these issuances were exempt from registration under the Securities Act, relying on Section 4(a)(2), Regulation D, or Rule 701[335] Defaults Upon Senior Securities The company reports that there were no defaults upon senior securities during the reporting period - None[336] Mine Safety Disclosures This item is not applicable to the company's business operations - Not applicable[337] Other Information The company reports that there is no other information to disclose for this item - None[338] Exhibits This section provides a list of all exhibits filed with the Quarterly Report on Form 10-Q, including an amendment to a data services agreement and certifications by the CEO and CFO - The list of exhibits includes CEO and CFO certifications pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act of 2002[340] - An amendment to the Data Services and License Agreement with Placer Labs Inc. is included as an exhibit[340]