Life360, Inc.: Form 10-Q for the period ended Jun 30, 2025
Filed with the SEC on Aug 11, 2025 and accepted by EDGAR at Aug 11, 2025, 16:12 ET.
Management's discussion and analysis
As filed, 54,693 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 27, 2025 (“Annual Report”). In addition to historical financial information, the following discussion contains forward-looking statements that are based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements as a result of a variety of factors, including but not limited to those discussed in “Risk Factors” under Part II, Item 1A in this Quarterly Report, Part II, Item 1A in our previous Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, and Part I, Item 1A in our Annual Report.
Overview
Life360 is a leading technology platform used to locate the people, pets and things that matter most to families. Life360 is creating a new category at the intersection of family, technology, and safety to help keep families connected and safe. Our core offering, the Life360 mobile application, includes features that range from communications to driving safety and location sharing. The Life360 mobile application operates under a “freemium” model where its core offering is available to members at no charge, with three membership subscription options that are available but not required. We also generate revenue through hardware subscription services and the sale of hardware tracking devices. By offering devices and integrated software to members, we have expanded our addressable market to provide members of all ages with a vertically integrated, cross-platform solution of scale.
Key Factors Affecting Our Performance
We believe that our results of operations are affected by a number of factors, such as: the ability to remain a trusted brand; attracting, retaining, and converting members; maintaining efficient member acquisition; the ability to attract new and repeat purchasers of our hardware tracking devices; growth in Average Revenue per Paying Circle (“ARPPC”); expanding offerings on our platform; attracting and retaining talent; seasonality; and international expansion. We discuss each of these factors in more detail under the heading “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting Our Performance” in our Annual Report. While we do not have control of all factors affecting our results from operations, we work diligently to influence and manage those factors which we can impact to enhance our results of operations.
Key Components of Our Results of Operations
The following discussion describes certain line items in our condensed consolidated statements of operations and comprehensive income (loss).
Revenue
The Company generates revenue from direct and indirect streams. Direct revenue includes subscription and hardware revenue, while indirect revenue consists of all other revenue sources, such as data and partnership, which includes advertising.
Subscription Revenue
We generate revenue primarily from sales of subscriptions on our platform, including Life360, Jio, Inc. (“Jiobit”) and Tile, Inc. (“Tile”). Revenue is recognized ratably over the related contractual term generally beginning on the date that our platform is made available to a customer. Our subscription agreements typically have monthly or annual contractual terms. Our agreements are generally non-cancellable during the contract term. We typically bill in advance for monthly and annual contracts. Amounts that have been billed are initially recorded as deferred revenue until the revenue is recognized.
Hardware Revenue
We generate our hardware revenue from the sale of Jiobit and Tile hardware tracking devices and related accessories. For hardware and accessories, revenue is recognized at the time products are delivered. We sell hardware tracking devices and accessories through a number of channels including our websites, brick and mortar retail, and online retail.
Other Revenue
Other revenue consists of data and partnership revenue, which includes advertising revenue. We generate data revenue primarily through an arrangement with a key data partner that provides location-based analytics to customers in the retail and real estate sectors, municipalities, and other private and public organizations. The agreement permits commercialization of certain aggregated and de-identified data and provides for fixed and variable monthly revenue amounts. We generate partnership revenue through agreements with third parties which grant them access to anonymized data insights or advertising on the Company’s mobile platform, and through the recognition of revenue related to the Related Party Warrant.
Cost of Revenue and Gross Margin
Cost of Subscription Revenue
Cost of subscription revenue primarily consists of expenses related to hosting our services and providing support to our free and paying subscribers. These expenses include personnel-related costs associated with our cloud-based infrastructure and our customer support organization, third-party hosting fees, software, and maintenance costs, outside services associated with the delivery of our subscription services, amortization of acquired intangibles and allocated overhead, such as facilities, including rent, utilities, depreciation on equipment shared by all departments, credit card and transaction processing fees, and shared information technology costs. Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel.
We plan to continue increasing the capacity and enhancing the capability and reliability of our infrastructure to support member growth and increased use of our platform. We expect that cost of revenue will increase in absolute dollars in future periods.
Cost of Hardware Revenue
Cost of hardware revenue consists of product costs, including hardware production, contract manufacturers for production, shipping and handling, packaging, fulfillment, personnel-related expenses, manufacturing and equipment depreciation, warehousing, tariff costs, customer support costs, credit card and transaction processing fees, warranty replacement, and write-downs of excess and obsolete inventory. Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel.
Cost of Other Revenue
Cost of other revenue includes cloud-based hosting costs, as well as costs of product operations functions and personnel-related costs associated with our data and advertising platforms. Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel.
Gross Profit and Gross Profit Margin
Our gross profit has been, and may in the future be, influenced by several factors, including timing of capital expenditures and related depreciation expense, increases in infrastructure costs, component costs, tariffs, contract manufacturing and supplier pricing, and foreign currency exchange rates. Gross profit and gross profit margin may fluctuate over time based on the factors described above.
Operating Expenses
Our operating expenses consist of research and development, selling and marketing, and general and administrative expenses.
Research and Development
Our research and development expenses consist primarily of personnel-related costs for our engineering, product, and design teams, material costs of building and developing prototypes for new products, mobile app development and allocated overhead. We believe that continued investment in our platform is important for our growth. We intend to continue to invest in research and development to bring new customer experiences and devices to market and expand our platform capabilities.
Sales and Marketing
Our sales and marketing expenses consist primarily of commissions to the Company’s third-party platforms (each a “Channel Partner”), personnel-related costs, brand marketing costs, lead generation costs, sales incentives, sponsorships and amortization of acquired intangibles, bad debt expense, and allocated overhead. Commission payments to Channel Partners in connection with annual subscription sales of the Company’s mobile application on third-party store platforms are considered to be incremental and recoverable costs of obtaining a contract with a customer and are deferred and typically amortized over an estimated period of benefit of two to three years depending on the subscription type.
We plan to continue to invest in sales and marketing to grow our member base and increase our brand awareness, including marketing efforts to continue to drive our business model. We expect that sales and marketing expenses will increase in absolute dollars in future periods and will fluctuate as a percentage of revenue. The trend and timing of sales and marketing expenses will depend in part on the timing of marketing campaigns.
General and Administrative
Our general and administrative expenses consist primarily of employee-related costs for our legal, finance, human resources, and other administrative teams, as well as certain executive officers. In addition, general and administrative expenses include allocated overhead, outside legal, accounting and other professional fees, and non-income-based taxes. We expect our general and administrative expenses will increase in absolute dollars as our business grows.
Other Income (Expense)
Convertible Notes Fair Value Adjustment
The Company issued convertible notes to investors in July 2021 (the “July 2021 Convertible Notes”), and as part of the purchase consideration related to the acquisition of Jiobit in September 2021 (the “September 2021 Convertible Notes” and together with the July 2021 Convertible Notes, the “Convertible Notes”). The September 2021 Convertible Notes were recorded at fair value and revalued at each reporting period prior to their conversion to common stock in April 2024.
Derivative Liability Fair Value Adjustment
Derivative liability fair value adjustment relates to the change in the fair value of the embedded conversion and redemption features associated with the July 2021 Convertible Notes prior to their conversion to common stock in June 2024.
Loss on Settlement of Convertible Notes
Loss on settlement of convertible notes relates to the conversion of the July 2021 Convertible Notes into common stock, which resulted in a loss recognized upon settlement.
Gain on Settlement of Derivative Liability
Gain on settlement of derivative liability relates to the conversion by the holders of the July 2021 Convertible Notes, which settled the embedded share-settled redemption features bifurcated from the Company’s July 2021 Convertible Notes.
Gain on Change in Fair Value of Investments
In April 2025, an observable price change took place related to the conversion of the Related Party SAFE into the Related Party Investment. In addition, in May 2025, the Company entered into a series of transactions with Aura Consolidated Group, Inc (“Aura”), which included a convertible note investment by the Company into Aura (“Convertible Note Investment”). The Company elected to apply the fair value option in accordance with ASC 825*, Financial Instruments.*
Gain on change in fair value of investments relates to the change in fair value associated with the Convertible Note Investment and the observable price change upon the conversion of the Related Party SAFE into the Related Party Investment.
Other Income (expense), net
Other income (expense), net consists of interest income earned on our cash and cash equivalents balances, foreign currency exchange gains/(losses) related to the remeasurement of certain assets and liabilities of our foreign subsidiaries that are denominated in currencies other than the functional currency of the subsidiary and foreign exchange transactions gains/(losses), and interest expense primarily related to the Convertible Notes.
Provision for (Benefit from) Income Taxes
Provision for (benefit from) income taxes consists of U.S. federal and state income taxes and foreign income taxes in jurisdictions in which we conduct business. We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized.
Results of Operations
The following tables set forth our condensed consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2025 and 2024 (in thousands, except percentages).
| Three Months Ended June 30, 2025 | 2024 | % Change | Six Months Ended June 30, 2025 | 2024 | % Change | |
|---|---|---|---|---|---|---|
| Subscription revenue | $88,582 | $65,678 | 35% | $170,456 | $127,257 | 34% |
| Hardware revenue | 12,266 | 11,901 | 3% | 21,173 | 22,089 | (4)% |
| Other revenue | 14,533 | 7,284 | 100% | 27,376 | 13,744 | 99% |
| Total revenue | 115,381 | 84,863 | 36% | 219,005 | 163,090 | 34% |
| Cost of subscription revenue(1) | 13,049 | 10,393 | 26% | 23,190 | 19,708 | 18% |
| Cost of hardware revenue(1) | 10,194 | 9,922 | 3% | 18,791 | 17,934 | 5% |
| Cost of other revenue(1) | 1,637 | 922 | 78% | 2,974 | 1,809 | 64% |
| Total cost of revenue(1) | 24,880 | 21,237 | 17% | 44,955 | 39,451 | 14% |
| Gross profit | 90,501 | 63,626 | 42% | 174,050 | 123,639 | 41% |
| Operating expenses(1): | ||||||
| Research and development | 32,258 | 27,013 | 19% | 62,661 | 54,271 | 15% |
| Sales and marketing | 38,873 | 24,363 | 60% | 74,181 | 49,096 | 51% |
| General and administrative | 17,378 | 14,613 | 19% | 33,027 | 29,014 | 14% |
| Total operating expenses | 88,509 | 65,989 | 34% | 169,869 | 132,381 | 28% |
| Income (loss) from operations | 1,992 | (2,363) | 184% | 4,181 | (8,742) | 148% |
| Other income (expense): | ||||||
| Convertible notes fair value adjustment | — | — | —% | — | (608) | 100% |
| Derivative liability fair value adjustment | — | — | —% | — | (1,707) | 100% |
| Loss on settlement of convertible notes | — | (440) | 100% | — | (440) | 100% |
| Gain on settlement of derivative liability | — | 1,924 | (100)% | — | 1,924 | (100)% |
| Gain on change in fair value of investments | 1,269 | — | 100% | 1,269 | — | 100% |
| Other income (expense), net | 3,353 | (4,607) | 173% | 5,328 | (4,296) | 224% |
| Total other income (expense), net | 4,622 | (3,123) | 248% | 6,597 | (5,127) | 229% |
| Income (loss) before income taxes | 6,614 | (5,486) | 221% | 10,778 | (13,869) | 178% |
| Provision for (benefit from) income taxes | (392) | 5,478 | (107)% | (606) | 6,872 | (109)% |
| Net income (loss) | $7,006 | $(10,964) | 164% | $11,384 | $(20,741) | 155% |
| Change in foreign currency translation adjustment | (101) | (4) | (2,425)% | (100) | (3) | (3,233)% |
| Total comprehensive income (loss) | $6,905 | $(10,968) | 163% | $11,284 | $(20,744) | 154% |
(1) Includes stock-based compensation expense as follows (in thousands, except percentages):
| Cost of revenue | Three Months Ended June 30, 2025 | 2024 | % Change | Six Months Ended June 30, 2025 | 2024 | % Change |
|---|---|---|---|---|---|---|
| Cost of subscription revenue | $716 | $203 | 253% | $884 | $362 | 144% |
| Cost of hardware revenue | 438 | 224 | 96% | 673 | 408 | 65% |
| Cost of other revenue | — | — | —% | — | 4 | (100)% |
| Total cost of revenue | 1,154 | 427 | 1,557 | 774 | ||
| Research and development | 7,780 | 6,467 | 20% | 13,490 | 11,793 | 14% |
| Sales and marketing | 2,047 | 774 | 164% | 3,373 | 1,406 | 140% |
| General and administrative | 4,247 | 3,118 | 36% | 6,698 | 5,074 | 32% |
| Total stock-based compensation, net of amounts capitalized | $15,228 | $10,786 | $25,118 | $19,047 |
The following table sets forth our results of operations as a percentage of total revenue:
| Three Months Ended June 30, 2025 | 2024 | Six Months Ended June 30, 2025 | 2024 | |
|---|---|---|---|---|
| Subscription revenue | 77% | 77% | 78% | 78% |
| Hardware revenue | 11% | 14% | 10% | 14% |
| Other revenue | 13% | 9% | 13% | 8% |
| Total revenue | 100% | 100% | 100% | 100% |
| Cost of subscription revenue | 11% | 12% | 11% | 12% |
| Cost of hardware revenue | 9% | 12% | 9% | 11% |
| Cost of other revenue | 1% | 1% | 1% | 1% |
| Total cost of revenue | 22% | 25% | 21% | 24% |
| Gross profit | 78% | 75% | 79% | 76% |
| Operating expenses: | ||||
| Research and development | 28% | 32% | 29% | 33% |
| Sales and marketing | 34% | 29% | 34% | 30% |
| General and administrative | 15% | 17% | 15% | 18% |
| Total operating expenses | 77% | 78% | 78% | 81% |
| Income (loss) from operations | 2% | (3)% | 2% | (5)% |
| Other income (expense): | ||||
| Convertible notes fair value adjustment | —% | —% | —% | —% |
| Derivative liability fair value adjustment | —% | —% | —% | (1)% |
| Loss on settlement of convertible notes | —% | (1)% | —% | —% |
| Gain on settlement of derivative liability | —% | 2% | —% | 1% |
| Gain on change in fair value of investments | 1% | —% | 1% | —% |
| Other income (expense), net | 3% | (5)% | 2% | (3)% |
| Total other income (expense), net | 4% | (4)% | 3% | (3)% |
| Income (loss) before income taxes | 6% | (6)% | 5% | (9)% |
| Provision for (benefit from) income taxes | —% | 6% | —% | 4% |
| Net income (loss) | 6% | (13)% | 5% | (13)% |
| Change in foreign currency translation adjustment | —% | —% | —% | —% |
| Total comprehensive income (loss) | 6% | (13)% | 5% | (13)% |
31
Revenue
(in thousands, except percentages)
| Three Months Ended June 30, 2025 | 2024 | Change $% | Six Months Ended June 30, 2025 | 2024 | Change $% | |||
|---|---|---|---|---|---|---|---|---|
| Subscription revenue | $88,582 | $65,678 | $22,904 | 35% | $170,456 | $127,257 | $43,199 | 34% |
| Hardware revenue | 12,266 | 11,901 | 365 | 3% | 21,173 | 22,089 | (916) | (4)% |
| Other revenue | 14,533 | 7,284 | 7,249 | 100% | 27,376 | 13,744 | 13,632 | 99% |
| Total revenue | $115,381 | $84,863 | $30,518 | 36% | $219,005 | $163,090 | $55,915 | 34% |
Subscription revenue increased $22.9 million, or 35%, during the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, primarily due to 25% growth in Paying Circles (as defined below) and 18% growth in total subscriptions. Additionally, subscription revenue in the current period benefited from price increases for new and existing Life360 subscriptions implemented during the second half of 2024 and continuing into 2025.
Hardware revenue increased $0.4 million, or 3%, during the three months ended June 30, 2025 as compared to the three months ended June 30, 2024. This was driven by a $2.7 million increase in revenue primarily from online retail sales, which was in line with a 21% increase in net hardware units shipped. This increase was partially offset by a $1.1 million reduction in revenue related to bundled offerings, a $1.0 million increase in discounts, and a $0.2 million increase in returns.
Other revenue increased $7.2 million, or 100%, during the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, due to a $4.9 million increase in partnership revenue, which includes advertising revenue, and a $2.3 million increase in data revenue, which was primarily attributable to the Amended and Restated Data Services and License Agreement with Placer.ai we entered into in July 2024.
Subscription revenue increased $43.2 million, or 34%, during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, primarily due to 25% growth in Paying Circles and 18% growth in total subscriptions. Additionally, subscription revenue in the current period benefited from price increases for new and existing Life360 subscriptions implemented during the second half of 2024 and continuing into 2025.
Hardware revenue decreased $0.9 million, or 4%, during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024. The decline was primarily driven by a $2.2 million increase in discounts and a $1.9 million reduction in revenue related to bundled offerings. These impacts were partially offset by a $2.7 million increase in revenue primarily from online retail sales, in line with an 8% increase in net hardware units shipped, and a $0.5 million decrease in returns.
Other revenue increased $13.6 million, or 99%, during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, due to a $9.4 million increase in partnership revenue, which includes advertising revenue, and a $4.2 million increase in data revenue, which was primarily attributable to the Amended and Restated Data Services and License Agreement with Placer.ai we entered into in July 2024.
Cost of Revenue, Gross Profit, and Gross Margin
(in thousands, except percentages)
| Three Months Ended June 30, 2025 | 2024 | Change $% | Six Months Ended June 30, 2025 | 2024 | Change $% | |||
|---|---|---|---|---|---|---|---|---|
| Cost of subscription revenue | $13,049 | $10,393 | $2,656 | 26% | $23,190 | $19,708 | $3,482 | 18% |
| Cost of hardware revenue | 10,194 | 9,922 | 272 | 3% | 18,791 | 17,934 | 857 | 5% |
| Cost of other revenue | 1,637 | 922 | 715 | 78% | 2,974 | 1,809 | 1,165 | 64% |
| Total cost of revenue | 24,880 | 21,237 | 3,643 | 44,955 | 39,451 | 5,504 | ||
| Gross profit | $90,501 | $63,626 | $26,875 | $174,050 | $123,639 | $50,411 | ||
| Gross margin: | ||||||||
| Subscription | 85% | 84% | 86% | 85% | ||||
| Hardware | 17% | 17% | 11% | 19% | ||||
| Other | 89% | 87% | 89% | 87% |
Cost of subscription revenue increased $2.7 million, or 26%, during the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, primarily due to increases of $1.7 million in personnel-related and stock-based compensation costs and $0.7 million in technology expenses, attributable to Company growth. In addition, amortization of capitalized internally developed software increased $0.5 million due to the release of new features on our platform. These increases were partially offset by a $0.2 million decrease in costs associated with premium membership offerings.
Subscription gross margin increased to 85% during the three months ended June 30, 2025 from 84% during the three months ended June 30, 2024, primarily due to price increases for new and existing Life360 subscriptions implemented during the second half of 2024.
Cost of hardware revenue increased $0.3 million, or 3%, during the three months ended June 30, 2025 as compared to the three months ended June 30, 2024. This was primarily driven by an increase of $0.8 million in personnel-related and stock-based compensation costs, attributable to Company growth, and a $0.6 million increase in tariff costs. The increases were partially offset by a $0.5 million decrease in hardware freight costs and a $0.6 million decrease in fulfillment and product costs, both associated with a shift in channel mix.
Hardware gross margin remained flat at 17% during the three months ended June 30, 2025 as compared to the three months ended June 30, 2024.
Cost of other revenue increased $0.7 million, or 78%, during the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, due to increases of $0.5 million in technology and other related expenses to support the existing customer base, and $0.2 million in costs associated with the growth in partnership revenue, which includes advertising revenue.
Other gross margin increased to 89% during the three months ended June 30, 2025 from 87% during the three months ended June 30, 2024, primarily due to revenue outpacing the increase in costs.
Cost of subscription revenue increased $3.5 million, or 18%, during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024. The increase was primarily due to $1.8 million in higher personnel-related and stock-based compensation costs and $1.4 million in increased technology expenses, both attributable to Company growth. In addition, amortization of capitalized internally developed software increased $0.9 million due to the release of new features on our platform. These increases were partially offset by a $0.6 million decrease in costs associated with premium membership offerings.
Subscription gross margin increased to 86% during the six months ended June 30, 2025 from 85% during the six months ended June 30, 2024, primarily due to price increases for new and existing Life360 subscriptions implemented during the second half of 2024.
Cost of hardware revenue increased $0.9 million, or 5%, during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024. This increase was primarily driven by increases of $1.1 million in personnel-related and stock-based compensation costs and $0.3 million in technology and other costs, attributable to Company growth, and $0.8 million in tariff costs. These increases were partially offset by a $1.3 million decrease in fulfillment and product costs associated with a shift in channel mix.
Hardware gross margin decreased to 11% during the six months ended June 30, 2025 from 19% during the six months ended June 30, 2024, primarily due to a $2.2 million increase in discounts, an increase in freight costs associated with the shift in channel mix, an increase in tariff costs, and an increase in fixed hardware costs in line with Company growth.
Cost of other revenue increased $1.2 million, or 64%, during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, due to increases of $0.7 million in technology and other related expenses to support the existing customer base and $0.5 million in costs associated with the growth in partnership revenue, which includes advertising revenue.
Other gross margin increased to 89% during the six months ended June 30, 2025 from 87% during the six months ended June 30, 2024, primarily due to revenue outpacing the increase in costs.
(in thousands, except percentages)
| Three Months Ended June 30, 2025 | 2024 | Change $% | Six Months Ended June 30, 2025 | 2024 | Change $% | |||
|---|---|---|---|---|---|---|---|---|
| Research and development | $32,258 | $27,013 | $5,245 | 19% | $62,661 | $54,271 | $8,390 | 15% |
Research and development expenses increased $5.2 million, or 19%, during the three months ended June 30, 2025 as compared to the three months ended June 30, 2024. This was primarily due to a $4.3 million increase in personnel-related and stock-based compensation costs, and a $1.1 million increase in technology and other costs, attributable to company growth. In addition, capitalized construction in progress costs decreased $0.5 million, in line with our product development roadmap. The increases were partially offset by a $0.6 million increase in capitalized internally developed software related to the development of new features and enhancements to our platform, and a $0.1 million decrease in contractor spend.
Research and development expenses increased $8.4 million, or 15%, during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024. The increase was primarily due to increases of $6.9 million in personnel-related and stock-based compensation costs, $2.1 million in technology and other costs, and $0.5 million in professional and outside services spend, attributable to Company growth. These increases were partially offset by a $1.1 million increase in capitalized construction in progress costs, in line with our product development roadmap.
Sales and Marketing
(in thousands, except percentages)
| Three Months Ended June 30, 2025 | 2024 | Change $% | Six Months Ended June 30, 2025 | 2024 | Change $% | |||
|---|---|---|---|---|---|---|---|---|
| Sales and marketing | $38,873 | $24,363 | $14,510 | 60% | $74,181 | $49,096 | $25,085 | 51% |
Sales and marketing expenses increased $14.5 million, or 60%, during the three months ended June 30, 2025 as compared to the three months ended June 30, 2024. This was primarily due to increases of $5.2 million in growth media spend and $4.2 million in commissions to the Company’s third-party platforms and distribution channels (each a “Channel Partner”), in line with the increase in subscription revenue. Additional increases included $3.3 million in personnel-related and stock-based compensation costs, $1.4 million in other marketing spend, and $0.4 million in technology costs, attributable to Company growth.
Sales and marketing expenses increased $25.1 million, or 51%, during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024. This increase was primarily due to increases of $8.6 million in growth media spend and $8.0 million in commissions to the Company’s Channel Partners, which is in line with the increase in subscription revenue. Additional increases include $5.2 million in personnel-related and stock-based compensation costs, $2.5 million in other marketing spend, and $0.8 million in technology costs, attributable to Company growth.
General and Administrative
(in thousands, except percentages)
| Three Months Ended June 30, 2025 | 2024 | Change $% | Six Months Ended June 30, 2025 | 2024 | Change $% | |||
|---|---|---|---|---|---|---|---|---|
| General and administrative | $17,378 | $14,613 | $2,765 | 19% | $33,027 | $29,014 | $4,013 | 14% |
General and administrative expenses increased $2.8 million, or 19%, during the three months ended June 30, 2025 as compared to the three months ended June 30, 2024. This was primarily due to increases of $3.3 million in personnel-related and stock-based compensation costs and $0.5 million in technology and other expenses, attributable to Company growth. These increases were partially offset by a $0.9 million decrease in professional and outside services, driven by lower Sarbanes-Oxley related compliance costs, and a $0.1 million increase in capitalized internally developed software.
General and administrative expenses increased $4.0 million, or 14%, during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024. This increase was primarily due to a $4.9 million increase in personnel-related and stock-based compensation costs and a $1.3 million increase in technology and other costs, attributable to Company growth. These increases were partially offset by a $1.9 million decrease in professional and outside services spend, primarily driven by lower Sarbanes-Oxley related compliance costs, and a $0.3 million increase in capitalized internally developed software.
Convertible Notes Fair Value Adjustment
In April and June 2024, the September 2021 Convertible Notes and the July 2021 Convertible Notes, respectively, were converted to common stock. As a result, the Company recorded no gain or loss associated with the Convertible Notes fair value adjustment for both the three and six months ended June 30, 2025. For the three and six months ended June 30, 2024, the Company recorded a loss associated with the Convertible Notes fair value adjustment of zero and $0.6 million, respectively.
Derivative Liability Fair Value Adjustment
In June 2024, the holders of the July 2021 Convertible Notes converted their notes and accrued interest to common stock and the embedded derivative liability was settled as a result of the conversion. As such, the Company recorded no gain or loss associated with the derivative liability fair value adjustment for the three and six months ended June 30, 2025. For the three and six months ended June 30, 2024, the Company recorded a loss associated with the derivative liability fair value adjustment of zero and $1.7 million respectively.
Loss on Settlement of Convertible Notes
In April and June 2024, the September 2021 Convertible Notes and the July 2021 Convertible Notes, respectively, were converted to common stock. As a result, the Company recorded no gain or loss related to the settlement of the September 2021 Convertible Notes and July 2021 Convertible Notes for both the three and six months ended June 30, 2025. For the three and six months ended June 30, 2024, the Company recorded a loss of $0.4 million related to the settlement of the July 2021 Convertible Notes and the September 2021 Convertible Notes, which were converted to common stock during the three months ended June 30, 2024.
Gain on Settlement of Derivative Liability
In June 2024, the holders of the July 2021 Convertible Notes converted their notes and accrued interest to common stock and the derivative liability was settled as a result of the conversion. As a result, the Company recorded no gain or loss related to the settlement of the derivative liability upon conversion of the July 2021 Convertible Notes for the three and six months ended June 30, 2025. For both the three and six months ended June 30, 2024, the Company recorded a gain of $1.9 million associated with the settlement of the derivative liability.
Gain on Change in Fair Value of Investments
In April 2025, an observable price change took place related to the conversion of the Related Party SAFE into the Related Party Investment. The observable price change resulted in a fair value adjustment and gain of $0.9 million for both the three and six months ended June 30, 2025.
In addition, in May 2025, the Company entered into a series of transactions with Aura Consolidated Group, Inc (“Aura”), which included a $25.0 million convertible note investment by the Company into Aura (the “Convertible Note Investment”), The Company elected to apply the fair value option in accordance with ASC 825, Financial Instruments. As a result, the Company recorded a gain associated with the change in fair value of the Convertible Note Investment of $0.4 million for both the three and six months ended June 30, 2025.
Other Income (Expense), Net
Other income (expense), net includes interest income, dividend income, foreign exchange gains and losses, and interest expense associated with the July 2021 and June 2025 Convertible Notes.
Other income (expense), net increased $8.0 million, or 173%, during the three months ended June 30, 2025 as compared to the three months ended June 30, 2024. This was primarily driven by a $5.6 million decrease in transaction costs incurred in connection with our U.S. IPO and a $1.4 million increase in dividend and interest income resulting from higher average gross yields primarily due to an increased cash and cash equivalents balance. In addition, a $1.2 million favorable change in the impact of currency revaluation contributed to the increase and was partially offset by a $0.2 million increase in interest expense.
Other income (expense), net increased $9.6 million, or 224%, during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024. This was primarily driven by a $5.6 million decrease in transaction costs incurred in connection with our U.S. IPO and a $2.4 million increase in dividend and interest income resulting from higher average gross yields primarily due to an increased cash and cash equivalents balance. In addition, a $1.6 million favorable change in the impact of currency revaluation contributed to the increase.
Provision for (benefit from) Income Taxes
Benefit from income taxes increased $5.9 million during the three months ended June 30, 2025 as compared to the three months ended June 30, 2024. Benefit from income taxes increased $7.5 million during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024. The changes are due to the estimated growth in the Company’s annual estimated effective tax rate in the U.S. Provision for income taxes which consists of U.S. federal and state income taxes in jurisdictions in which we conduct business. The annual estimated effective tax rate in any quarter may be subject to fluctuations during the year as new information is obtained, which may positively or negatively affect the assumptions used to estimate the annual effective tax rate. We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S., introducing several changes to the U.S. Internal Revenue Code of 1986, as amended. While the enactment of the OBBBA had no impact on our financial results for the three and six months ended June 30, 2025, we are currently evaluating its potential future impact on our condensed consolidated financial statements and related disclosures.
Key Performance Indicators
We review several operating metrics, including the following key performance indicators, to evaluate our business, measure our performance, identify trends affecting our business, develop financial forecasts, and make strategic decisions. We believe these key performance indicators are useful to investors because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making, and they may be used by investors to help analyze the health of our business. Key operating metrics are presented in millions, except ARPPC, Average Revenue per Paying Subscription (“ARPPS”) and Average Sales Price (“ASP”), however percentage changes are calculated based on actual results. As a result, percentage changes may not recalculate based on figures presented due to rounding. Please refer to “Results of Operations” for additional metrics management reviews in conjunction with the condensed consolidated financial statements.
Key Operating Metrics
(in millions, except ARPPC, ARPPS and ASP)
| As of and for the Three Months Ended June 30, 2025 | 2024 | % Change | As of and for the Six Months Ended June 30, 2025 | 2024 | % Change | |
|---|---|---|---|---|---|---|
| AMR | $416.1 | $304.8 | 36% | $416.1 | 304.8 | 36% |
| MAUs | 88.0 | 70.6 | 25% | 88.0 | 70.6 | 25% |
| Paying Circles | 2.5 | 2.0 | 25% | 2.5 | 2.0 | 25% |
| ARPPC(1) | $135.42 | $125.96 | 8% | $134.49 | $124.41 | 8% |
| Subscriptions | 3.1 | 2.7 | 18% | 3.1 | 2.7 | 18% |
| ARPPS(1) | $116.06 | $104.00 | 12% | $114.57 | $102.60 | 12% |
| Net hardware units shipped | 0.8 | 0.7 | 21% | 1.3 | 1.2 | 8% |
| ASP(2) | $14.81 | $15.92 | (7)% | $15.64 | $16.18 | (3)% |
(1) Excludes revenue related to bundled Life360 subscription and hardware offerings of $(0.3) and $(0.7) for the three and six months ended June 30, 2025, respectively, and $(1.3) and $(2.6) for the three and six months ended June 30, 2024, respectively.
(2) Excludes revenue related to bundled Life360 subscription and hardware offerings of $0.3 and $0.6 for the three and six months ended June 30, 2025, respectively, and $1.3 and $2.5 for the three and six months ended June 30, 2024, respectively.
Annualized Monthly Revenue
We use Annualized Monthly Revenue (“AMR”) to identify the annualized monthly value of active customer agreements at the end of a reporting period. AMR includes the annualized monthly value of subscription, data and partnership agreements. All components of these agreements that are not expected to recur are excluded. This does not represent revenue under GAAP on an annualized basis, as the operating metric can be impacted by start and end dates and renewal rates. AMR as of June 30, 2025, and 2024 was $416.1 million and $304.8 million, respectively, representing an increase of 36% year-over-year, which is largely attributable to continued subscriber growth.
Monthly Active Users
We have a large and growing global member base as of June 30, 2025. A Life360 monthly active user (“MAU”) is defined as a unique member who engages with our Life360 branded services each month, which includes both paying and non-paying members, and excludes certain members who have a delayed account setup. As of June 30, 2025 and 2024, we had approximately 88.0 million and approximately 70.6 million MAUs on the Life360 platform, respectively, representing an increase of 25% year-over-year. We believe this has been driven by continued strong new member growth and retention.
Paying Circles
We define a Paying Circle as a group of Life360 members with a paying subscription who have been billed as of the end of period. Each subscription covers all members in the payor’s Circle so everyone in the Circle can utilize the benefits of a Life360 membership, including access to premium location, driving, digital and emergency safety insights and services.
As of June 30, 2025 and 2024, we had approximately 2.5 million and 2.0 million paid subscribers to services under our Life360 brand, respectively, representing an increase of 25% year-over-year. We grow the number of Paying Circles by increasing our free member base, converting free members to subscribers, and retaining them over time with the provision of high-quality family connectivity and safety services.
Average Revenue per Paying Circle
We define ARPPC as annualized subscription revenue recognized and derived from the Life360 mobile application, excluding revenue related to bundled Life360 subscription and hardware offerings, for the reported period, divided by the Average Paying Circles during the same period. Average Paying Circles are calculated by adding the number of Paying Circles as of the beginning of the period to the number of Paying Circles as of the end of the period, and then dividing by two.
For the three months ended June 30, 2025 and 2024, our ARPPC was $135.42 and $125.96, respectively, representing an 8% increase year-over-year. For the six months ended June 30, 2025 and 2024, our ARPPC was $134.49 and $124.41, respectively, representing an 8% increase year-over-year.
ARPPC is a key indicator utilized by the Company to determine our effectiveness at monetizing Paying Circles through tiered product offerings. U.S. ARPPC has benefited from price increases for new and existing annual subscribers implemented in September 2024 and October 2024, respectively, as well as a shift in product mix towards higher priced products. International ARPPC also benefited from price increases for legacy subscribers, as well as the launch of higher priced tiers across select international markets throughout 2024.
Subscriptions
We define Subscriptions as the number of paying subscribers associated with the Life360, Tile, and Jiobit brands who have been billed as of the end of the period.
As of June 30, 2025 and 2024, we had approximately 3.1 million and 2.7 million paid subscribers, respectively, to services under the Life360, Tile, and Jiobit brands, representing an increase of 18% year-over-year.
We grow the number of Subscriptions by selling hardware units and increasing our free member base, converting free members to subscribers, and retaining them over time with the provision of location tracking and high-quality family and safety services.
Average Revenue per Paying Subscription
We define ARPPS as annualized total subscription revenue recognized and derived from Life360, Tile and Jiobit subscriptions, excluding revenue related to bundled Life360 subscription and hardware offerings, for the reported period divided by the average number of paying subscribers during the same period. The average number of paying subscribers is calculated by adding the number of paying subscribers as of the beginning of the period to the number of paying subscribers as of the end of the period, and then dividing by two. Paying subscribers represent subscribers who have been billed as of the end of the period.
ARPPS for the three months ended June 30, 2025 and 2024 was $116.06 and $104.00, respectively, representing an increase of 12% year-over-year. ARPPS for the six months ended June 30, 2025 and 2024 was $114.57 and $102.60, respectively, representing an increase of 12% year-over-year.
ARPPS has increased year-over-year as a result of price increases for new and existing annual U.S. subscribers implemented in September 2024 and October 2024, respectively, as well as a shift in product mix towards higher priced products in the U.S. ARPPS also benefited from price increases for legacy subscribers, as well as the launch of higher priced tiers across select international markets throughout 2024.
Net Hardware Units Shipped
Net hardware units shipped represents the number of tracking devices sold during a period, excluding certain hardware units related to bundled Life360 subscription and hardware offerings, net of returns by our retail partners and directly to consumers. Selling units contributes to hardware revenue and ultimately increases the number of members eligible for a Tile or Jiobit subscription.
For the three months ended June 30, 2025 and 2024, we sold approximately 0.8 million units and 0.7 million units, respectively, representing an increase of 21% year-over-year. The increase in net hardware units shipped was primarily due to an increase in online retail sales. For the six months ended June 30, 2025 and 2024, we sold approximately 1.3 million units and 1.2 million units, respectively, representing an increase of 8% year-over-year. The increase in net hardware units shipped was primarily due to an increase in online retail sales.
Net Average Sales Price (ASP)
To determine the net ASP of a unit, we divide hardware revenue recognized, excluding revenue related to bundled Life360 subscription and hardware offerings, for the reported period by the number of net hardware units shipped during the same period. ASP is largely driven by the price we charge customers, including the price we charge our retail partners, net of customer allowances, and directly to consumers.
For the three months ended June 30, 2025 and 2024, the net ASP per unit was $14.81 and $15.92, respectively, representing a decrease of 7% year-over-year. The decrease in net ASP was primarily due to a shift in channel mix and an increase in promotional discounts. For the six months ended June 30, 2025 and 2024, the net ASP per unit was $15.64 and $16.18, respectively, representing a decrease of 3% year-over-year. The decrease in net ASP was primarily due to a shift in channel mix and an increase in promotional discounts.
Liquidity and Capital Resources
As of June 30, 2025, we had cash and cash equivalents of $432.7 million and restricted cash of $1.5 million. As of December 31, 2024, we had cash and cash equivalents of $159.2 million and restricted cash of $1.2 million.
We believe our existing cash and cash equivalents and cash provided by sales of our subscriptions and hardware devices will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. We may from time to time seek to raise additional capital based on a variety of factors, including our capital requirements and the relative favorability of conditions in the capital markets. If we are unable to raise additional capital on terms acceptable to us or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, financial condition and results of operations.
Cash Flows
Our cash flow activities were as follows for the periods presented:
(in thousands)
| Six Months Ended June 30, 2025 | 2024 | |
|---|---|---|
| Net cash provided by operating activities | $25,383 | $13,940 |
| Net cash used in investing activities | (32,089) | (2,323) |
| Net cash provided by financing activities | 280,475 | 79,680 |
| Net Increase in Cash, Cash Equivalents, and Restricted Cash | $273,769 | $91,297 |
Operating Activities
Our largest sources of operating cash are cash collections from our paying members for subscriptions to our platform and hardware device sales. Our primary uses of cash from operating activities are for employee-related expenditures, costs to acquire inventory, infrastructure-related costs, commissions paid to Channel Partners and other marketing expenses.
A number of our members pay in advance for annual subscriptions, while a majority pay in advance for monthly subscriptions. Deferred revenue consists of the unearned portion of customer billings, which is recognized as revenue in accordance with our revenue recognition policy. As of June 30, 2025 and December 31, 2024, we had deferred revenue of $47.3 million and $45.2 million, respectively, of which $42.8 million and $39.9 million is expected to be recorded as revenue in the next 12 months, respectively, provided all other revenue recognition criteria have been met.
For the six months ended June 30, 2025, net cash provided by operating activities was $25.4 million. The primary factors affecting our operating cash flows during this period were our net income of $11.4 million, impacted by $30.4 million of non-cash adjustments, and $16.4 million of cash used by changes in our operating assets and liabilities. The non-cash adjustments primarily consist of stock-based compensation, depreciation and amortization. The cash used by changes in our operating assets and liabilities was primarily due to decreases in accounts payable and accrued expenses and other current liabilities, as well as increases in inventory and prepaid expenses and other assets. These cash outflows were offset by an increase in deferred revenue.
For the six months ended June 30, 2024, net cash provided by operating activities was $13.9 million. The primary factors affecting our operating cash flows during this period were our net loss of $20.7 million, impacted by $24.5 million of non-cash adjustments and $10.1 million of cash provided by changes in our operating assets and liabilities, which was partially offset by a payment of $5.5 million for expenses paid on behalf of the selling stockholders in connection with the secondary offering completed during the second quarter of 2024. The non-cash adjustments primarily consisted of stock-based compensation, depreciation and amortization, and fair value adjustments for our convertible notes and derivative liability, non-cash interest expense, gain on settlement of derivative liability, and loss on settlement of convertible notes. The cash provided by changes in our operating assets and liabilities was primarily due to decreases in accounts receivable, net, and prepaid expenses and other assets, increases in accounts payable and deferred revenue, offset by a decrease in accrued expenses and other current liabilities and increases in costs capitalized to obtain contracts, net and inventory.
Investing Activities
For the six months ended June 30, 2025, net cash used in investing activities was $32.1 million, which primarily related to the $25.0 million Convertible Note Investment. Net cash used in investing activities also included capitalization of internally developed software costs in accordance with ASC 350-40, Intangibles - Goodwill and Other, Internal-Use Software, and cash paid for an acquisition. Refer to Note 6, "Business Combinations" for additional information on the acquisition.
For the six months ended June 30, 2024, net cash used in investing activities was $2.3 million, which primarily related to the capitalization of internally developed software costs in accordance with ASC 350-40*, Intangibles — Goodwill and Other, Internal-Use Software.*
Financing Activities
For the six months ended June 30, 2025, net cash provided by financing activities was $280.5 million, which primarily related to proceeds of $320.0 million from the issuance of the June 2025 Convertible Notes offset by payments of $9.6 million for debt issuance costs. In connection with the issuance of the June 2025 Convertible Notes, the Company paid $33.7 million in capped call transactions. Refer to Note 8, "Convertible Notes" for more information on the June 2025 Convertible Notes and the June 2025 Capped Calls. Financing activities also included $25.8 million of taxes paid for the net settlement of equity awards, offset by $29.6 million of proceeds related to tax withholdings on restricted stock settlements and the exercise of stock options and warrants.
For the six months ended June 30, 2024, net cash provided by financing activities was $79.7 million, which primarily related to net proceeds of $93.0 million after deducting underwriting discounts and commissions from our U.S. IPO and $4.5 million of proceeds from the exercise of options and warrants, offset by $15.9 million of taxes paid for the net settlement of equity awards, and $1.8 million payment of U.S. IPO costs. As of June 30, 2024, $4.5 million of the incurred U.S. IPO costs were unpaid.
Obligations and Other Commitments
Our principal commitments consist of obligations under our operating leases for office space, and other purchase commitments. Information regarding our non-cancellable lease and other purchase commitments as of June 30, 2025, can be found in Note 7, "Balance Sheet Components" and Note 9, "Commitments and Contingencies" to our condensed consolidated financial statements.
Critical Accounting Policies and Significant Management Estimates
Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. We base our estimates on historical experiences and on various other assumptions we believe to be reasonable under the circumstances. Actual results could differ materially from the estimates made by our management. Our significant accounting policies are discussed in Note 2, "Summary of Significant Accounting Policies" in our Annual Report. There were no significant changes to these policies during the six months ended June 30, 2025.
Market risk
As filed, 2,175 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates.
Interest Rate Risk
As of June 30, 2025 and December 31, 2024, we had $384.7 million and $134.0 million, respectively, of cash equivalents invested in money market funds. Our cash and cash equivalents are held for working capital purposes. As of June 30, 2025 and December 31, 2024, a hypothetical 10% relative change in interest rates would not have a material impact on our condensed consolidated financial statements.
Foreign Currency Exchange Risk
Our reporting currency and functional currency is the U.S. dollar. The majority of our sales are denominated in U.S. dollars, and therefore our revenue is not currently subject to significant foreign currency risk. Our operating expenses are denominated in the currencies of the countries in which our operations are located, which is primarily in the United States. Our condensed consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. To date, we have not entered into any active hedging arrangements with respect to foreign currency risk or other derivative financial instruments, although we may choose to do so in the future. We do not believe that a hypothetical 1,000 basis-point increase or decrease in the relative value of the U.S. dollar to other currencies would have a material effect on our operating results.
Inflation Risk
We do not believe that inflation has had a material effect on our business, results of operations, or financial condition. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability or failure to do so could harm our business, results of operations, or financial condition.
Controls and procedures
As filed, 3,172 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2025 pursuant to Rule 13a‑15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The term “disclosure controls and procedures” means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our management concluded that our disclosure controls and procedures were effective as of June 30, 2025.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within a company are detected. The inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
Risk factors
As filed, 17,650 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
There have been no material changes from the risk factors set forth under the heading “Risk Factors” in Part I, Item 1A in our Annual Report and in Part II, Item 1A in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, except for the following risk factors which supplement the risk factors previously disclosed and should be considered in conjunction with the risk factors set forth in our Annual Report and Quarterly Report on Form 10-Q for the quarter ended March 31, 2025. An investment in shares of our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties, described in our Annual Report and Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, together with all of the other information in the Annual Report, and the following information about risks, together with information appearing elsewhere in this Quarterly Report, including our unaudited condensed consolidated financial statements and related notes hereto, and any other documents that we file with the SEC before deciding to invest in our common stock. The occurrence of any of the following risks or of those described in our Annual Report and Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, could have a material adverse effect on our business, financial condition, results of operations and future growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. In these circumstances, the market price of our common stock could decline; and you may lose all or part of your investment. We cannot assure you that any of the events discussed below, in our Annual Report or in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, will not occur.
Risks Related to Legal Matters and Our Regulatory Environment
Changes in laws regulating subscription and auto-payment renewals may be unfavorable, which could have a material adverse effect on our business, reputation, financial condition and results of operations.
We are subject to certain federal and state laws that govern the ability of members to cancel subscriptions and auto-payment renewals. These laws require companies to adhere to various consent, notice, disclosure and cancellation requirements when entering into automatically renewing contracts with subscription customers. As this area of the law evolves, we are committed to reviewing and amending our practices accordingly. Regulators and plaintiffs have brought enforcement and litigation actions challenging automatic renewal and subscription programs. Any failure, or perceived failure, by the Company to comply with any of these laws or regulations could result in damage to our reputation, lost business, and proceedings or actions against us by governmental entities or others, which could impact our operating results.
We are subject to taxation related risks in multiple jurisdictions.
We are a U.S.-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. Significant judgment is required in determining our global provision for income taxes, deferred tax assets or liabilities and in evaluating our tax positions on a worldwide basis. While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that these positions may be challenged by jurisdictional tax authorities, which may have a significant impact on our global provision for income taxes.
Tax laws are being re-examined and evaluated globally. New laws and interpretations of the law are taken into account for financial statement purposes in the quarter or year that they become applicable. Tax authorities are increasingly scrutinizing the tax positions of companies. Many countries in the European Union, as well as a number of other countries and organizations, such as the Organization for Economic Cooperation and Development (“OECD”) and the European Commission, are actively considering changes to existing tax laws that, if enacted, could increase our tax obligations in countries where we do business. These proposals include changes to the existing framework to calculate income tax, as well as proposals to change or impose new types of non-income taxes, including taxes based on a percentage of revenue. For example, several countries in the European Union have proposed or enacted taxes applicable to digital services, which includes business activities on social media platforms and online marketplaces, and would likely apply to our business. Many questions remain about the enactment, form and application of these digital services taxes. The interpretation and implementation of the various digital services taxes (especially if there is inconsistency in the application of these taxes across tax jurisdictions) could have a materially adverse impact on our business, financial condition, results of operations and cash flows. Further, more than 140 countries agreed to enact the Pillar II global minimum tax. While the OECD issued a framework model, each country will enact its own laws to incorporate Pillar II. While Pillar II is a global model, the country by country enactment of different laws to incorporate the framework is complex and there is uncertainty as to how the enactment of these laws will impact us. These changes could increase our total tax burden in the future. Moreover, the U.S. government may enact significant changes to the taxation of business entities including, among others, the imposition of minimum taxes or surtaxes on certain types of income (such as the United States Inflation Reduction Act which, among other changes, introduced a 15% corporate minimum tax on certain United States corporations and a 1% excise tax on certain stock redemptions by the United States corporations).
In July 2025, the U.S. enacted the One Big Beautiful Bill Act (“OBBBA”), which made additional significant changes to the Internal Revenue Code of 1987, as amended. Among other provisions, the OBBBA restored the immediate deductibility of domestic research and experimental (“R&E”) expenditures for tax years beginning after December 31, 2024, while retaining the requirement to capitalize and amortize foreign R&E expenditures. The OBBBA also introduced other complex tax provisions, including changes to provisions relating to income from non-U.S. subsidiaries. Although the full impact of the OBBBA will depend on future regulatory guidance and implementation, these changes may materially affect our effective tax rate, deferred tax balances, and cash taxes.
We continue to evaluate the impacts of these and other recent tax law changes on our business. Changes in or interpretations under the OBBBA or other existing or future tax legislation may increase our tax liabilities or compliance costs. Furthermore, future guidance from the IRS and other tax authorities, or judicial decisions interpreting these laws, could materially impact our provision for income taxes. Additionally, if the U.S. or other foreign tax authorities change applicable tax laws or practices, our overall taxes could increase, and our business, financial condition and results of operations may be adversely impacted.
Risks Related to Our Indebtedness
Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt. Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to satisfy our obligations under our 0.00% Convertible Senior Notes due 2030 (the “June 2025 Convertible Notes”).
As of June 30, 2025, we had outstanding indebtedness with a principal amount of $320.0 million. We may also incur additional indebtedness. Our indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things:
- increasing our vulnerability to adverse economic and industry conditions;
- limiting our ability to obtain additional financing;
- requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes;
- limiting our flexibility to plan for, or react to, changes in our business;
- diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the June 2025 Convertible Notes; and
- placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.
Before March 1, 2030, holders of our June 2025 Convertible Notes will have the right to convert their June 2025 Convertible Notes only upon the occurrence of certain events. From and after March 1, 2030, noteholders may convert their June 2025 Convertible Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. However, many of the conditions that permit the conversion of the June 2025 Convertible Notes before March 1, 2030 are beyond our control. We could be required to expend a significant amount of cash to settle conversions, which could significantly harm our financial position and liquidity.
Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves, to pay amounts due under our indebtedness, including the June 2025 Convertible Notes, and our cash needs may increase in the future. In addition, future indebtedness that we may incur may contain financial and other restrictive covenants that limit our ability to operate our business, raise capital or make payments under our other indebtedness. If we fail to comply with these covenants or to make payments under our indebtedness when due, then we would be in default under that indebtedness, which could, in turn, result in that and our other indebtedness becoming immediately payable in full.
We may be unable to raise the funds necessary to repurchase the June 2025 Convertible Notes for cash following a fundamental change (as defined in the indenture governing the June 2025 Convertible Notes) or to pay any cash amounts due upon maturity or conversion of the June 2025 Convertible Notes, and our other indebtedness may limit our ability to repurchase the June 2025 Convertible Notes or to pay any cash amounts due upon their maturity or conversion.
Holders of the June 2025 Convertible Notes may, subject to limited exceptions, require us to repurchase their June 2025 Convertible Notes following a fundamental change (as defined in the indenture governing the June 2025 Convertible Notes) at a cash repurchase price generally equal to the principal amount of the June 2025 Convertible Notes to be repurchased, plus accrued and unpaid special interest or additional interest, if any. Upon maturity of the June 2025 Convertible Notes, we must pay their principal amount and accrued and unpaid interest in cash, unless they have been previously repurchased, redeemed or converted. In addition, all conversions of the June 2025 Convertible Notes will be settled partially or entirely in cash. We may not have enough available cash or be able to obtain financing at the time we are required to repurchase the June 2025 Convertible Notes or pay any cash amounts due upon their maturity or conversion. In addition, applicable law, regulatory authorities and the agreements governing our other indebtedness may restrict our ability to repurchase the June 2025 Convertible Notes or to pay any cash amounts due upon their maturity or conversion, if any. Our failure to repurchase the June 2025 Convertible Notes or to pay any cash amounts due upon their maturity or conversion when required will constitute a default under the indenture governing the June 2025 Convertible Notes. A default under the indenture or the fundamental change itself could also lead to a default under agreements governing our other indebtedness, which may result in that other indebtedness becoming immediately payable in full. We may not have sufficient funds to satisfy all amounts due under the other indebtedness and the June 2025 Convertible Notes, if any.
The capped call transactions entered into in connection with the pricing of the June 2025 Convertible Notes may affect the value of our common stock.
In connection with the pricing of the June 2025 Convertible Notes, we entered into privately negotiated capped call transactions with certain option counterparties. The capped call transactions are expected to generally reduce the potential dilution to our common stock upon any conversion of the June 2025 Convertible Notes and/or offset any potential cash payments we are required to make in excess of the principal amount of converted June 2025 Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap.
In connection with establishing their initial hedges of the capped call transactions, the option counterparties or their respective affiliates purchased shares of our common stock and/or entered into various derivative transactions with respect to our common stock concurrently with or shortly after the pricing of the June 2025 Convertible Notes.
In addition, the option counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions following the pricing of the June 2025 Convertible Notes and prior to the maturity of the June 2025 Convertible Notes (and (x) are likely to do so during any observation period related to a conversion of the June 2025 Convertible Notes or following any repurchase of the June 2025 Convertible Notes by us in connection with any redemption or fundamental change (as defined in the indenture governing the June 2025 Convertible Notes) and (y) are likely to do so following any repurchase of the June 2025 Convertible Notes by us other than in connection with any redemption or fundamental change if we elect to unwind a corresponding portion of the capped call transactions in connection with such repurchase). This activity could also cause or avoid an increase or a decrease in the market price of our common stock.
We are subject to counterparty risk with respect to the capped call transactions, and the capped call may not operate as planned.
The option counterparties are, or are affiliates of, financial institutions, and we will be subject to the risk that any or all of them might default under the capped call transactions. Our exposure to the credit risk of the option counterparties will not be secured by any collateral. Global economic conditions have from time to time resulted in the actual or perceived failure or financial difficulties of many financial institutions. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under our transactions with that option counterparty. Our exposure will depend on many factors, but, generally, the increase in our exposure will be correlated with increases in the market price or the volatility of our common stock. In addition, upon a default by an option counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of any option counterparty.
In addition, the capped call transactions are complex, and they may not operate as planned. For example, the terms of the capped call transactions may be subject to adjustment, modification or, in some cases, renegotiation if certain corporate or other transactions occur. Accordingly, these transactions may not operate as we intend if we are required to adjust their terms as a result of transactions in the future or upon unanticipated developments that may adversely affect the functioning of the capped call transactions.
Provisions in the indenture governing the June 2025 Convertible Notes could delay or prevent an otherwise beneficial takeover of us.
Certain provisions in the June 2025 Convertible Notes and the indenture governing the June 2025 Convertible Notes could make a third-party attempt to acquire us more difficult or expensive. For example, if a takeover constitutes a fundamental change (as defined in the indenture governing the June 2025 Convertible Notes), then noteholders will have the right to require us to repurchase their June 2025 Convertible Notes for cash. In addition, if a takeover constitutes a make-whole fundamental change (as defined in the indenture governing the June 2025 Convertible Notes), then we may be required to temporarily increase the conversion rate. In either case, and in other cases, our obligations under the June 2025 Convertible Notes and the indenture governing the June 2025 Convertible Notes could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management, including in a transaction that noteholders or holders of our common stock may view as favorable.
Figures reported in this filing
Standardized line items from the XBRL in this filing, for the period ended 2025-06-30. Comparative periods it repeats are left out.
| Line item | Period | Value | XBRL concept |
|---|---|---|---|
| Revenue | 3 months2025-04-01 to 2025-06-30 | $115.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months2025-01-01 to 2025-06-30 | $219.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months2025-04-01 to 2025-06-30 | $24.9m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months2025-01-01 to 2025-06-30 | $45.0m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months2025-04-01 to 2025-06-30 | $90.5m | us-gaap:GrossProfit |
| Gross profit | 6 months2025-01-01 to 2025-06-30 | $174.1m | us-gaap:GrossProfit |
| Research and development | 3 months2025-04-01 to 2025-06-30 | $32.3m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months2025-01-01 to 2025-06-30 | $62.7m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months2025-04-01 to 2025-06-30 | $2.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months2025-01-01 to 2025-06-30 | $4.2m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months2025-04-01 to 2025-06-30 | −$392.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months2025-01-01 to 2025-06-30 | −$606.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months2025-04-01 to 2025-06-30 | $7.0m | us-gaap:NetIncomeLoss |
| Net income | 6 months2025-01-01 to 2025-06-30 | $11.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months2025-04-01 to 2025-06-30 | $0.08 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months2025-01-01 to 2025-06-30 | $0.14 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months2025-04-01 to 2025-06-30 | $0.09 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months2025-01-01 to 2025-06-30 | $0.15 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months2025-04-01 to 2025-06-30 | 84,476,048 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months2025-01-01 to 2025-06-30 | 83,980,695 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months2025-01-01 to 2025-06-30 | $25.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months2025-01-01 to 2025-06-30 | $766.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | At period end2025-06-30 | $432.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | At period end2025-06-30 | $521.2m | us-gaap:AssetsCurrent |
| Total assets | At period end2025-06-30 | $753.6m | us-gaap:Assets |
| Current liabilities | At period end2025-06-30 | $73.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | At period end2025-06-30 | $386.9m | us-gaap:Liabilities |
| Shareholders' equity | At period end2025-06-30 | $366.7m | us-gaap:StockholdersEquity |
Source: SEC EDGAR, the filing index for accession 0001581760-25-000180. Last ingested by Listed: Nov 10, 2026, 02:20 ET. Listed shows no prices and gives no investment advice.