This is Jolanta Masojada, and I head up investor relations for Life360. The call will begin with some prepared remarks from Co-Founder and CEO, Chris Hulls, and CFO, Russell Burke, followed by a Q&A session. This call is being conducted as a Zoom audio webinar. All participants will be in a listen-only mode until the Q&A. In order to ask a question, you will need to be connected to this call through your browser. Please raise your hand by pressing the Raise Hand icon at the bottom center of your screen, and your line will be unmuted in turn. Participants who have joined by telephone will be in a listen-only mode throughout. I would now like to turn the call over to Chris.
Good morning, everyone, and thanks for joining our September quarterly business update call. While the resurgence of COVID-19 has been challenging, in the face of these difficult circumstances, the business has performed admirably and proved its resilience. We're excited that we're able to continue growth in revenue and paying circles while also delivering our second quarter in a row of positive cash flow. Much of this success has been due to our new membership offering, which has significantly broadened the applicability of Life360 and continues to deliver a 30% uplift in average revenue per paying circle for new subscriber cohorts versus the first half. Beyond the business results this has driven, we are also delivering real value to our users, and thousands of families have used our new family safety assist features in real times of need.
Although families have not returned to their normal routines and are impacted both by social distancing and new lockdown restrictions, MAU has continued to hold stable and even grow. This is despite less than $1 million of paid acquisition spend in the quarter, showing the strength of our brand and word of mouth effect. This is a considerable achievement given the worsening of COVID-19, which has a far more negative outlook than just a quarter ago. Getting into specifics, Life360's global MAU base was 25.8 million at the end of September, an increase of 500,000 versus June. U.S. MAU of 16.7 million increased 16% year-on-year and 3% versus June. International MAU was in line with the June quarter, reflecting the strong resurgence of COVID-19 in many territories and a modest to moderate impact of some platform changes on Android.
Our Australian MAU base bucked the trend, increasing 22% year-on-year and close to 2% for the quarter. Globally, new registrations were materially impacted in Q2 as excessive lockdowns were implemented in response to COVID-19. While Q3 new registrations remain below the previous corresponding quarter, they have increased 24% from Q2 with a 30% increase in the U.S. For the September quarter, revenue increased 24% year-on-year to $20.2 million. For the month of September, annualized monthly revenue was $81.2 million, a 20% year-on-year increase and 4% ahead of June AMR of $77.9 million. For the September quarter, direct revenue benefited from the 17% year-on-year growth in paying circles to 884,000 and the encouraging ARPPC performance of our new membership offering. We now have around 93,000 new and upsell subscribers in the membership tiers, accounting for around 13% of U.S. paying circles.
This new membership cohort delivered an ARPPC uplift of around 30% versus the first half. Overall ARPPC increased 8% year-on-year, as legacy subscribers are grandfathered on their previous plans. We've always been optimistic about the ARPPC opportunity coming from the membership launch, and it's exciting to see this become a reality. Indirect revenue, which includes data revenue and our Allstate lead generation partnership, delivered solid but moderating growth for the quarter. The Allstate partnership contributed revenue of $1.5 million, in line with the September 2019 quarter, which was the partnership's full quarterly contribution. Data revenue growth moderated due to the impact of COVID-19 and timing issues. The deferral to 2021 of any potential changes to IDFA or Identifier for Advertisers previously considered for iOS 14 is favorable short-term to the data business, but Apple's ultimate plans remain unknown.
During the September quarter, we continued to pause the majority of paid user acquisition spend to adapt to the COVID-19 environment. Investment of $900,000 was slightly ahead of the $200,000 undertaken in the June quarter and well below the $5.2 million in the September 2019 quarter. Other expense management initiatives continued, reflecting the discretionary nature of Life360's business model. We expect to resume investment in growth in the fourth quarter to support the strong momentum being achieved by our membership launch. While investment and user acquisition spend will remain well below normal until the operating environment recovers, we are investing ahead in new channels that could drive future growth. We are excited that the broader membership offering is conducive to things like direct-to-premium acquisition on the web and traditional TV, which were not as much as a fit for our legacy offering.
I've previously spoken about the teen campaign to generate negative reviews of the Life360 app via TikTok. We have continued to engage with teens, and during the quarter, launched a new Bubbles feature, which provides the option of greater location privacy while maintaining all the safety features that are important to parents. Our recent TikTok hashtag challenge has generated more than 4 billion views and overwhelmingly positive sentiment from teens. We are seeing encouraging early signs of a recovery in our iOS App Store ratings, which have now increased to more than four stars. I'll now turn it over to Russell, who will share more details on his cash flow performance for the quarter.
Thank you, Chris, and thanks to all of you for joining us 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. Life360 ended the September quarter with cash and cash equivalents of $59.3 million and no debt, an increase from $58.4 million at the end of June. This provides the company with a strong capital position to continue to invest for sustained growth. Cash provided by operating activities was $1.0 million, compared with $0.7 million in the June quarter, and a use of cash of $7.1 million in the corresponding September 2019 quarter. Revenue of $20.2 million increased 24% year-on-year and 4% versus the June 2020 quarter. Receipts from customers of $15.7 million reduced from $16.9 million in the June quarter, with some impact from the timing of data revenue receipts.
The difference between Q3 revenue and receipts reflects commissions which are not included in the latter. Payments in the September quarter reflected disciplined spend in responding to the COVID-19 environment, with a reduction of 29% year-on-year and 9% versus the June quarter. Staff payments of $8.3 million compared to $7.5 million in the June quarter. At the end of the quarter, our head count was 186. Administration and corporate payments of $1.2 million reduced from $3.0 million in the June quarter, mainly due to the timing of payments of annual insurance premiums. Advertising and marketing payments, which include paid user acquisition of $1.3 million, were slightly higher than June quarter payments of $0.8 million. However, we're down from $8.2 million in the September 2019 quarter. Research and development payments of $2.1 million were in line with the $2.2 million in the June quarter.
Technology payments of $1.4 million reduced from $2.4 million in the June quarter, primarily due to the timing of prepayments. Cash used in investing activities reflects minor purchases of capital assets. Cash flow from financing activities reflects modest proceeds from the exercise of employee share options. With that, I'll hand it back to Chris.
Although the ongoing COVID-19 pandemic has worsened and caused significant uncertainty, our strong organic growth, retention, brand, and balance sheet position us well to weather the storm. In the current environment, we intend to maintain our disciplined spending approach and will focus on stability until there is a clear line of sight to normalcy. For CY 2020, we expect to deliver revenue in the range of $79 million-$82 million, underlying EBITDA loss, excluding stock-based compensation, in the range of $10 million. This compares with our previous guidance of a loss between $10 million and $14 million. Operating cash flow in the range of $10 million. This compares to our previous guidance of a cash outflow of between $10 million and $14 million. 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. As a reminder, to participate in the Q&A, please raise your hand by pressing the Raise Hand icon at the bottom of your screen within the Zoom app. You will need to unmute yourself to ask your question. Also, once unmuted, please tell us your name and what company you're calling from. First up, we have Quinn. Quinn, please state your name and which company you're calling from.
Hi, good morning. Quinn Pierson from Credit Suisse. Maybe just firstly, U.S. users are back to growth, which is great to see. You added about 500,000 U.S. users in the quarter. Could you talk us through the slope of that growth through the quarter and how October is trending so far, please?
Sure. I wouldn't say there's necessarily a clear trend. We've obviously had a strong uptick, so it's been a little bit noisy. I wouldn't say there's been a clear direction, but I'd say we've had a lumpy return to growth and a lot of that is in line with people going back to school, lockdowns happening, not happening. No clear trend other than that clear period.
Yeah, understood. It looks like the lower end of your CY 2020 revenue guidance only needs a similar revenue outcome as Q3. I would've thought with Christmas seasonality, just general increasing levels of activity, of physical activity, I would've thought that would be a very conservative figure. Other than the usual COVID headwinds, of course. Are there any other headwinds or gives and takes to be cognizant of for that Q4 revenue number?
Sure. A few things. First off, we usually have a very large back-to-school bump, which was definitely moderated with COVID, and COVID has gotten a lot worse since September, not better. Q4 until Christmas is actually historically one of our slowest quarters. That's unrelated to COVID. That's normal seasonality. Christmas does have a very large spike, but it's a short one and the impact on revenue is forward-looking. Even if we had a massive number of sign-ups at Christmas, we actually wouldn't book any revenue because there's a seven-day trial period and then we pro-rate as well. This is actually historically our slower period of the year.
I guess just to layer in on that a little bit, Quinn. We certainly have been a little cautious because of the COVID-19 environment. There's certainly unknowns there, and particularly in terms of the data business. There's real unknowns there. We're looking at that being somewhat flat in the fourth quarter, while the subscription business is consistent growth, but modest at this point.
That's helpful. Thanks. Just lastly from me, of some of the new products and services, and particularly those in the Gold and Platinum packages, can you talk us through usage data? Where are you seeing the best uptake? Things like phone coverage or credit monitoring. I guess, to what degree are you seeing usage of those and travel, for instance, using your travel assistant services. I would imagine those are potentially getting less used than they would in normal times. It would just be keen to hear, how you're actually seeing customer demand from the new services.
Sure. A few things. Identity Theft, you automatically get opted into, so you're sort of just using it, and it sits in the background once you start paying. The other services across the board are largely ones we don't expect high usage of per se, because these are outlier events. It's sort of, if you ask an insurance company how much uptake you have in your homeowners claim, the answer's always going to be a very small number relative to the overall base. It's a very similar effect here that a lot of the new Platinum tier services, with the exception of Roadside, which we already had, they're really truly contingency events. They are being used for sure. We've had many thousands of calls across the board from medical to travel and all these identity. Relative to the base, it's lower.
We're much more interested in what is the sentiment of users. Are they feeling protected? Are they feeling like they're getting a benefit much more than the actual usage? With some of the upcoming product work we're doing, which we talked a little bit about on our last call, there's a big emphasis on product marketing and tweaks to the flows in the app, where we actually might make users take setup steps to "activate" these features. They honestly wouldn't truly be activating anything. It's more just making them activate to help them understand the product and reinforce them that we are giving them that value. Right now it's still relatively easy to actually have benefit from these services, and you might not be fully aware of it. That's all stuff that's coming up soon.
That's helpful. I appreciate your time.
Sure. You're welcome.
Thanks, Quinn.
Thanks, Quinn. Next up we have Laf. Laf, please repeat your first and last name and which company you're calling from.
Hi, it's Lafitani Sotiriou from Bell Potter. I've just got a few questions, if I may. The first is in relation to the new memberships. It looks like you're getting good traction. Are you able to add a little bit of color as to what the mix is that is new completely to memberships versus upgrades?
The vast majority of those new adds are actually new subs versus upgrades, Laf.
Oh, wow. I would've thought the mix the other way around. It's actually new people completely to the products.
Yep.
Yeah. Remember that we are grandfathering people in, so if you're already paying, you kind of got a sweet deal moving into those tiers.
Oh, no, I understand that. I remember you provided some incentives for people to upgrade and some specials. I thought that they would have made up a reasonable amount of the overall people on the new memberships. The fact that there's new ones, the mix is actually encouraging. Just on the attrit-- Sorry, go on.
Oh, yeah. Just agreeing with you that we're very pleased with that.
Just on the attrition rates, has it changed much now that people have got a broader app? I know it is only early days, but the three-month, four-month period that they have been using these additional features, have you found that less people have been dropping off?
It's relatively stable-ish. Our expectation, though, has been when you have higher pricing, you're always going to activate a little bit more early on. It's the out years that look better because we need to start reinforcing this value over time. As you might recall from the membership update, the idea is to have different triggers at life stage that we can now hit. When people have kids, when they go off to college, they might be driving less, they don't churn there. The short answer is that it hasn't changed all that much, either direction, as expected. When we have COVID, it's just very hard to have an apples to oranges kind of comparison because we have no clue how much of an effect COVID is having on early retention because it's a little bit tougher to get habitualized to the product.
What we can very clearly say is, it's performing very well and in line with expectations. Again, that litmus test is going to be in the further out periods where we would often have life stage-based churn.
Okay. Just finally, on the product roadmap, can you just add a little bit more specific examples as to what is currently being worked on and rough timeline?
Sure.
Where are wearables on that as well?
I'll go in backwards order. Wearables is much more in the future out years. One of the things we have done in response to COVID was temper a little bit the growth in R&D and hone in on the core, because we have felt that given how crazy the world is, we should have a bias to a little more stability and cash management, which we've obviously done extremely well with. There's nothing short-term there. I will say, though, very quickly on that topic, that Apple's new Watch is exciting in the sense that we certainly hope it becomes mainstream. They open up those APIs because it's so much better for us if there's an iPhone moment around wearables where we just don't have to really bother with a partnership for development of our own device. That's something we're watching very closely.
If I get into specific things you will see as a user, the biggest one, this is a little more indirect, but just to emphasize the point, we did shift our roadmap pretty aggressively in response to the big wave of what was initially negative sentiment from teens. We've done a lot of new teen features, including our Bubbles feature, which is now fully live in production on the second iteration of that. We're also working on the free version of our Identity Theft product, which will bring the dark web monitoring experience to everyone and also do a much better job of introducing what this means, how it works, and giving people value within the app. The other things we're working on are a little bit longer term, but really revamping the communication elements of the app, focusing on free users is another.
A lot on the product marketing side, which might not sound like product or roadmap work, but we see it that way. How do we bring the features to life in the app? Right now, a lot of the membership features, you have to kind of explore to interact with them and discover the value, and we're trying to bring them front and center. A pretty large initiative we're having is our direct to premium website, which is exciting because it's opening up a new channel for us, that for the first time in the company's history gets us off the App Store for that first download and brings us more to new channels where we can bring people in as paying customers directly, which is also much, much easier to measure from a ROI spend basis. Most of this will be coming in Q1.
It's more incremental over Q4, although we're getting some of the identity stuff out and some smaller individual features. Very big changes coming over 2021 and beyond, obviously.
All right. Excellent. Thank you.
Thanks, Laf. Next up we have Matthew Chen. Matthew, please repeat your name and which company you're calling from.
Hi, it's Matthew Chen here from Foster Stockbroking. Hi, Chris and Russell. I just wanted to ask about how we're thinking about customer acquisition spend going forward. Is it largely going to be in response to sort of the improving environment, namely around COVID? How are you thinking about that?
Sure. I'd answer it in two ways. One is just the directly measurable ROI. The second is more the company's overall posture in this face of what is extremely unusual times.
From a macro element, unrelated to anything we measure, we feel prudence is warranted. I'm glad we took that approach because I think everyone's been a little bit surprised that here we are, and we thought this thing might be going away. We're having all-time peaks and restrictions getting worse, not better. We certainly hope this passes quickly, and we're equally surprised by how quickly it goes away. We think it's prudent to remain disciplined until we just have a clear line of sight to that being gone. Given this is a little more discretionary, we're just watching it in that sense.
The second, which is also COVID related, but much more algebra, is there have been a couple of shifts of just the scale where many digital apps and services are benefiting from COVID, because we are at home and we're using our devices more. That's actually bid up the cost of some of the channels we operate in, and we've obviously held up quite well, but we have more elements of more the brick-and-mortar side where we need people out and about, and their behavior in the real world impacts our funnels. Our view is that just the economics will become more favorable as things return to normal, because we expect that the metrics and the performance of those channels will eventually come back to what they were before COVID. We will be spending more, though, in new areas, which are a little bit more exploratory.
Some of it on the influencer side. There's the stuff we've done on TikTok. There's the new website to do TV. Those ones, we don't have a definitive ROI in the same way we were able to pretty directly measure things on mobile. It's gonna be far, far, far lower spend than we've had, if you go period- to- period, year-over-year. We'll be increasing because we do want to be in a position where, as we reemerge, we're not just reverting back to old channels, which we certainly hope will recover, but there's a lot of unknown.
Yeah.
If we can have three or four new channels in the works, that could very much well position us for very accelerated growth whenever we have our routines back.
Great. Thanks. Are you able to talk about the kind of delta from, well, I guess the return of the cost. Can you sort of talk to any of those measurable quantities in the differences that you've seen so far?
It's very different by channel and different by region and different by platform. The short answer is it's very tough to give specifics, and there are so many moving variables that I'm reticent to say something that wouldn't be completely accurate. In general, our funnel has been negatively impacted because so much of what encourages people to download and use the app is being away from their families and having these just general routines that you need coordination. There have been competitors, if you think about gaming and other apps, that have very much benefited from COVID. There's just a simple supply and demand there that has not worked in our favor for the short term. The silver lining, it has shown just how well organic has held up. We're literally growing.
Yes
with extremely little spend at all.
That's right.
I guess, Matthew, we.
Sorry.
We feel like we're in a sort of great position being nimble, sort of going forward with both the sort of traditional paid acquisition and the new channels that we're looking at so that when we see the opportunity, we'll be very opportunistic in jumping on that to help us accelerate growth.
Great. Do you have a sense of the timing for that sort of more exploratory acquisition channels, like the website that you spoke of and influencers? Is that something that's ongoing?
Some of the stuff on influencers is already happening now.
Yeah
Some of our big TikTok hashtag challenge, which generated, now I think it's up to like 4 billion views. That did involve some payments to TikTok and influencers, and that was less to drive downloads, more to drive brand and change sentiment.
Yeah.
Things like the TV testing, website, most of that will be Q1 with some possible early signals in late Q4, but I want to more set expectations for Q1 on that.
Okay. Great. Thanks, Chris. Thanks, Russell.
You're welcome.
As there are no more questions, I will hand the call back over to Chris for some closing remarks.
These are very quick closing remarks. Thanks again, everyone, for joining, and have a great day.