... Will be in a listen-only mode throughout. The agenda for this morning's call will include a business and strategy update by Co-Founder and CEO, Chris Hulls, which will be followed by an overview of the quarterly financials by CFO, Russell Burke. Chris will then provide some outlook comments, which will be followed by a Q&A session. I would now like to turn the call over to Chris.
Good morning, everyone, and thanks for joining our call today. We had an exceptionally strong Q3 back-to-school period with our largest ever quarterly MAU growth, both internationally and in the U.S. Additionally, AMR of $184 million is up 53% year-over-year, and we finished the quarter with cash and cash equivalents of almost $59 million. We delivered more than 100,000 net Paying Circle additions in Q3, despite our price increase of almost 50% for new U.S. monthly subscribers, which took full effect in August and is currently being implemented for existing iOS monthly subscribers, with full effect coming in December. This performance, together with lower than expected churn, is a testament to the value we provide to our subscribers and sets us up for a very strong recurring revenue growth in CY 2023.
Tile's Q3 hardware unit sales were in line with expectations and improved versus Q2, which saw the impact of returns undertaken to right-size channel inventory and exit less profitable channels. However, we currently see headwinds in the U.S. consumer electronics market, with major retailers taking a very cautious approach and significantly reducing targeted weeks of inventory for current orders into the holiday period. This has been evident in recent public announcements from retailers, including Amazon and from other consumer electronics hardware companies. While this will likely result in Q4 hardware sales being below our previous forecasts, the impact on our CY 2022 Adjusted EBITDA and cash flow are expected to be much more limited due to continued strong momentum in Membership, disciplined cost control, and our prudent approach to hardware inventory.
We expect to exit CY 2022 with an AMR excluding hardware of more than $215 million, a growth rate in excess of 50%. Looking forward to CY 2023, we believe we have very strong Membership revenue momentum due to our successful price increase, which lifted US ARPPC by more than 47% year-on-year for the month of October for new US Membership subscribers. At the end of Q3, less than 10% of US subscribers were on the new pricing tier, providing significant ARPPC upside as higher pricing takes effect for all existing monthly iOS subscribers. While Q4 net adds will likely be flat due to the expected one-time increase in churn by existing subscribers, to date, churn is well within our target parameter of a 10% reduction retention.
Importantly, we expect significant improvement in paid user acquisition retention from the full integration of hardware bundling, which is on track for early CY 2023 Q1 as a third phase of our integration plan. On our August call, I outlined the initial phases of our Tile integration plan, which included bundling via promotions, delivering the up to 10x expansion in the size of the Tile Finding Network, and Tiles now visible on the Life360 map in the U.S., with international rollout to be completed in CY 2023 Q1. These show strong early signs of success and have been or are in the process of being rolled out to our user base as we speak.
While we delayed our third phase launch to accommodate work on the price increase, we are on track for a Q1 launch, and we expect this new bundle to become the catalyst for our next wave of Membership growth. The benefits of bundling together with our higher price points give us the confidence to bring forward by a quarter our target for consistently positive Adjusted EBITDA and operating cash through CY 2023 Q3. This expectation takes into account turbulence in the macroeconomic environment with current headwinds in standalone hardware retail and incorporates an appropriate balance of fiscal responsibility with prudent investment to leverage the many exciting growth opportunities that are available to us.
We're also encouraged by the steady progress we are making in driving efficiencies from integration and controlling costs, even in the face of increasing inflationary pressures, while maintaining our focus on the core customer experience. Turning now to details for the quarter. We finished Q3 with a global MAU of 47 million, an increase of 5 million with record net additions in both the US and international markets. US MAU increased 32% year-over-year, with international delivering a 52% uplift due to ongoing strong growth in developed markets and surges in new users in the Philippines and Japan. Paying Circles continued strong momentum, up 36% year-over-year with net additions of 100,000. US net adds held up strongly despite a significant price increase for new members introduced in August.
International net adds were a quarterly record with a nominal marketing spend. U.S. subscribers in our Membership plans reached 813,000, up 80% year-over-year, making up 68% of U.S. Paying Circles. Average revenue per Paying Circle delivered ongoing momentum, lifting 7% year-over-year. U.S. ARPPC increased 10% with an offset from international due to currency impacts. Net hardware units reduced year-over-year, reflecting the backdrop of weaker consumer electronics category. The improvement versus Q2, which I mentioned earlier, reflected our actions to right-size channel inventory and exit less profitable sales channels. Actions in CY 2022 to optimize hardware inventory management mean we will be entering CY 2023 with appropriate levels of inventory on hand for plan CY 2023 bundling in retail channels. Consolidated revenue in Q3, including Tile and Jiobit, increased more than 90% to $57.2 million.
Total subscription revenue increased 70% with Life360 subscription revenue up 48% year-over-year, benefiting from our ongoing growth in Paying Circles and the 7% uplift in ARPPC. Hardware revenue of $11.7 million increased from Q2 for the reasons outlined earlier. Other revenue of $6.5 million was in line with last year as expected, due to the transition to the new data arrangement with Placer.ai. AMR for the month of September of $184 million lifted 53% year-over-year, reflecting the strong subscription performance and the inclusion of Tile and Jiobit subscription revenue. With that, I'll hand over to Russell to discuss the remainder of the financials.
Thanks, Chris. I'll begin with gross profit, which increased more than 60% year-on-year to $39.2 million. This reflected a gross margin of close to 69% on a GAAP basis, substantially higher than the 60% gross margin in Q2, and lower than the 81.9% delivered in the same quarter a year ago, which did not include hardware. I also note that GAAP hardware margins were negatively impacted by the inclusion of amortization expense recognized on acquired technology related to intangible assets, as well as the inclusion of additional personnel-related costs and stock-based compensation due to increased headcount. Excluding hardware, gross margins remain stable at 81%.
Consolidated operating expenses of $60.4 million increased from $32.1 million in the prior year, reflecting the acquisitions of Tile and Jiobit and the investment to establish a platform to support the rollout of the bundled Membership offering. However, Q3 expenses reduced from $62.8 million in Q2, reflecting cost efficiencies realized from the leaner organizational structure that we implemented during the first half, even as the organization continued to scale. We've also seen the successful implementation of a number of specific cost initiatives, including consistent improvement in the unit economics of cloud computing expenses. As part of our overall prudent approach to financial management, we've also looked closely at all expenses as we move into year-end.
These cost initiatives, together with the right sizing of Tile's inventory and ongoing strong subscription revenue growth, delivered an Adjusted EBITDA loss of $9.4 million, an improvement from $18.7 million loss in Q2. Turning now to balance sheet and cash flow. Net cash used in operating activities of $16.4 million was largely in line with Q2. The gap between Operating Cash Flow and Adjusted EBITDA is due to timing differences related to prepayments, returns processing, and acquisition costs for some final integration pieces excluded from Adjusted EBITDA. Net cash used in financing activities of $3.8 million reflects the repayment of convertible notes associated with the Jiobit acquisition, which came due as expected.
Life360 finished the quarter with cash equivalents and restricted cash of $58.9 million, on track for our guidance for year-end, which Chris will speak to. With that, I'll hand back to Chris to provide an update on earnings guidance.
As a result of our price increase, we expect to exit CY 2022 with significantly higher than previously anticipated AMR and ARPPC. The price increase is also expected to drive a one-time increase in churn that will result in largely flat net subscriber additions in Q4, ahead of subscriber growth resuming in CY 2023 Q1. While our guidance for continued strong subscription revenue performance is unchanged, our consolidated revenue expectations are lower due to continuing headwinds in the standalone hardware business. We will not have high levels of visibility on hardware revenues until after the traditional Black Friday holiday sales period in the U.S.
We remain very confident in our ability to use Tile devices to drive Membership in CY 2022 and beyond, and note that the strong momentum in our Membership business will likely mean that standalone hardware sales will continue to reduce as a proportion of group revenue in future years. Life360 expects to deliver core Life360 subscription revenue, excluding Tile and Jiobit, growth in excess of 55%. Consolidated revenue of $225 million-$240 million for subscription, direct hardware, and other indirect revenue. The revenue range is highly dependent on Q4 standalone hardware revenue performance. Adjusted EBITDA loss in the range of $37 million-$41 million. Life360 expects to finish CY 2022 with an Annualized Monthly Revenue, excluding hardware, of more than $215 million, noting this does not include any price changes for existing subscribers, existing Android subscribers.
Year-end cash and cash equivalents are forecast in the range of $55 million-$60 million, and we expect Life360 to be on a trajectory to consistently positive Adjusted EBITDA and Operating Cash Flow by CY 2023 Q3, such that we record positive Adjusted EBITDA and Operating Cash Flow for CY 2024. This target is being brought forward by one quarter, reflecting the very strong momentum in our recurring Membership revenues and assumes no improvement in the current headwinds impacting standalone hardware sales. Additionally, the substantial discretionary spending levers in the business mean we are confident in Life360's ability to fund its future growth. That concludes our prepared remarks, and I will turn over the call to Melissa, who will manage the Q&A 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 full name and what company you're calling from. First up, we have Laf.
Good morning, everyone. Lafitani Sotiriou from MST Financial. A few questions, if I may. The first, I just wanted to unpack the guidance for financial year 2023. First, just wanna understand how much, if any, of bundling is included in that guidance for next year. When you say that there's no improvement in the current headwinds for the hardware sales, are you assuming roughly flat hardware in 2023 versus 2022?
Laf, in terms of the sort of formal guidance, we will of course do that as part of our year-end results. To your specific question, we have, when we look at the cash flow forecast that we've made, what we've factored in there is pretty fairly sluggish hardware situation for next year. We have not assumed that improves significantly.
Is there much bundling included in your estimates for next year?
On the bundling, yeah, we've definitely assumed success because we are very confident given the testing that we've done. As we think about the projections, we're not necessarily assuming a step function immediately.
Got it. Understand. Can I just unpack a few other things that have floated around in the past? One thing specifically, were commissions and what's paid away to Apple and Google. Initially, when the bundling was first raised, there was talk of some of the commission rates falling away over time. It seems to have fallen away a little bit in the presentations. Could you just give us an update as to what the strategy is around the commission expenses and whether there's anything included for next year's guidance?
Laf, this is Chris. I'll start at a high level. Russell can take specifics on the model. We, I would say, are much more confident in our ability to move to and move away from in-app purchase next year because of a lot of what we're seeing with Apple in terms of antitrust stuff coming up, different rulings from different legislative bodies. Different apps, we're seeing exemptions happen much more regularly. We don't want to predict timing because that is very hard. I would say that within a one-year timeframe, I feel very good about it. Because we can't forecast and because we are in a world of a little bit more conservatism, we're being very careful not to make assumptions into 2023 that we can't stand behind.
To Russell's point on even the bundling, we're assuming success but no step functions. We're not modeling much for movement to a different commission structure, but it means we have different opportunities to outperform because we do wanna make sure that we don't need to come to the markets. If any assumptions are wrong, we wanna be able to fund our growth, and we have taken a very prudent and I'd say more conservative view than in the past on revenue just given where the market is.
No, understood. That makes sense. Can I just clarify, you mentioned that the AMR for the end of this calendar year of $215 million includes the price changes, including for iOS, but it doesn't include price changes for Android. Are you able to give us an update?
Correct.
On the Android back book and what the technical limitations are and whether where on the roadmap is your best guess of if you can also reprice that back book?
Sure. Why don't I take the high level? Russell can share some numbers in terms of the overall mix, which would help determine impact. Google historically follows Apple on almost everything mobile-oriented. They don't tell us anything definitively, but we know it's on the radar because this is something that is a competitive disadvantage for Android relative to Apple. The platforms, given that they're losing the ability to have full control due to antitrust, they need to make their own platforms competitive because they're gonna look for ways to entice users and developers like us not to move away from their own billing platforms. Very similar to things with Apple in terms of not being able to know when something can happen. I'm confident it will happen, but no guidance on timing.
Just to put that in perspective, Laf, you know, you could interpret it from our previous release that your Android monthly users are probably around 17% of our U.S. user base.
Okay. We can go back and work that out. Thanks for that. Just the last question for me is just in relation to hardware. You've given guidance that it's quite challenging next year, and I understand that. How should we think about them internal sales transfer or the component. Ob viously in the bundling, you're gonna have to buy the hardware from one division, I guess, and use a lot of the hardware units. How should we think about that in calendar 2023 when the bundling starts?
I think I've said from previously, from a GAAP perspective, we will need to include the value of hardware as part of the subscription. If you like, the pure subscription would be broken out into subscription and hardware components. But for management reporting purposes, we will provide sort of non-GAAP information on what we view as the subscription, the pure subscription fees.
And is that overall demand in that area? Do you, like-
Yeah, we
In terms of the number of units. Do you
Yes, we will provide units as part of that data.
Okay, excellent. Thank you. Thank you, guys.
Thanks, Laf. Up next, we have Chris. Chris, please repeat your full name and which company you're calling from.
Sorry. Chris Gawler from Goldman Sachs. Can you hear me, guys?
We hear you now, yeah.
Yeah.
Brilliant. Thank you. Yep, just a few questions from me. Firstly, just on that AMR guidance, just unpacking that a little bit more, does that include subscription revenue from Tile and Jiobit, or is that pure Life360 app?
It includes all subscription revenue, so including the Tile and Jiobit subscription revenues, and it includes the consistent indirect revenue.
Okay. Just unpacking that a bit more. I mean, are you able to sort of split out how much of that is the core app versus the recurring indirect and the Tile and Jiobit subscriptions?
In terms of the AMR?
Yeah, that's right.
You know, I guess broadly, if you look at our indirect revenue is roughly sort of $26 million on an annualized basis as a component of that. And then I believe we've split out the Tile and Jiobit revenues, subscription revenues in the past, and they are probably growing quite well, but not as quickly as the Life360 subscription revenue. If that gives you the pieces to look at that.
Yeah, that's helpful. Just on the price increases, I mean, what sort of substitution are you expecting from monthly to annual subscriptions when you do roll out the price increases? Just interested to get your thoughts around the calculus between the LTV of a monthly subscription on the higher price versus an annual subscription on a lower price.
To look at that, you need to back up a little bit and think about how people convert. This might sound very academic, but it's very, very meaningful. Most of our users will just go through upsell hooks. They're kinda new to the service. On onboarding or they hit a paywall, they just convert and, you know, click, click with whatever we put in front of them. That is purely algebraic, and we're gonna test what's highest LTV. Is it monthly? Is it annual? Is it pushing Gold in front of people? Is it pushing Platinum in front of people? We don't have a view of the right answer there, because again, that's where it's not really a vision thing, it's just a testing thing, and the team's very well set up to do that type of growth testing.
We're not really assuming that much of a mix shift in those funnels. The other funnel, which I would estimate is probably a third of our subscribers, are people who are going to the Membership tab and really exploring and getting a sense of everything they get for their dollars. They will probably shift to annual because it's just such a better deal, and if you're a longer term user, why would you not pay for annual when you're getting that discount? Obviously, it's a little bit lower ARPPC, but then much earlier cash recovery and historically lower churn. We're gonna be testing this with where we put in Tile, how we include it.
I think it is a safe assumption that more users will go to annual, but how much is still very unclear, and it might not be as intuitively obvious as just saying, "Oh, everyone's gonna go to annual because that gap is higher.
Yep, that makes sense. Just one last question, just on the paying conversion. I mean, you saw a little bit of a step down in the month in the new user conversion to paying this month as the price increases came through for new users. Do you think that can recover back to over 2%, where it was before the price increases?
I think over time, it definitely can. That's the whole point of Tile and hardware, is that we'll be able to show more value. We'll be able to bring this front and center. When people have something they can touch and feel on their keys every single day, it's gonna change that tenor. What we observe, and a very common observation, is that a lot of times premium subscribers don't even really articulate why they're paying for something, but if they're getting the value and they're kinda feeling this thing has heft to it, they just will retain higher. We certainly think over time that can happen. We are taking a very prudent view given we are coming up to a downturn economically.
We haven't modeled out, well, this is what we think could happen because of the macro going worse. We're just kinda saying, "Hey, let's not make any big assumptions." Hopefully, Tile lets that outperform. But again, it's just a general theme. All our guidance, both for the rest of the year and CY 2023 is with a bit more of a sanguine, a cautiously optimistic view of the world, but realizing that the economy has very much changed.
Yep, that's perfect. Thanks, guys. We'll jump back in the queue.
Thanks, Chris. Next up, we have Julian. Julian, please tell us your full name and which company you're calling from.
Julian Mulcahy from Evans & Partners. Just a couple questions from me. Firstly, with your guidance for this year, in terms of the sort of Tile inventory, you said, you know, you don't really know until you see sort of how Black Friday would be. If sales are better than expected, do you have the inventory to restock the retailers for this year?
The short answer to that, Julian, is yes. To give a little more color on that, we have certainly been managing inventory pretty closely. The headwinds that we're seeing, you know, will mean that, you know, we'll have a little more inventory on hand unless we do get that pickup. We are moving quickly into the 2023 cycle where we launched the bundled product, and we want to make sure we have sufficient inventory for that as well. The short answer is yes, we could cover a pickup post-Black Friday.
Right. Is there a timeline sort of use by date on the inventory because of the battery life?
No. It's because of it's essentially, yes, it would go stale over a long period of time, but it's essentially activated once you get it out of the box.
Finally, with the price increases for the legacy groups, would you expect a higher level of churn given they've been on fairly nominal rates to date and the price increases are quite substantial for them?
Yes, we do. We do expect an elevated level of churn from that group, but it's factored into the blended target that we talked about on the call. That's all part of our calculations and the early indications are that that's falling well within our parameters.
To be a little more pointed, that is what will be the driver of essentially flat net adds. Of course, when you tell people they're gonna have to double their payments in some cases, that's gonna increase churn. We did some early testing with a smaller holdout group. That did help us have a model we feel pretty good about for the rest of the year, and that's why we'll come back to growth. We encourage investors to look at that increase in ARPPC, look at it more about the overall LTV from the user base versus number of net adds, because it is gonna be a shift.
It will not be a bad thing if overall net adds slows down even for a while because the ARPU, which is the revenue across the entire user base, will be going up significantly.
Okay. Thanks, guys.
Welcome.
Thanks. Next up, we have James.
Hi, guys. James Bales from Morgan Stanley. I just wanted to firstly cover off a couple of questions. Are lower hardware sales the only factor in the revised year-end cash balance?
Yes.
Right. I should understand that.
I mean, the answer is yes. I mean, the revised cash balance, it has been impacted by the decline in hardware revenues. We've mitigated that, as you can see, by a number of sort of additional cost savings levers. We've talked before about the levers that we have in the business, and we've certainly activated some of those to make sure that we stay within a reasonable range on cash.
Right. Okay. There's a $20 million revision down in hardware sales and a much smaller revision down in where the cash balance ends. Basically, I
Yeah.
I guess I wanted to sort of understand that there was no other sort of factors moving the needle on the cash balance apart from the timing of payments and receipts relating to hardware. That's the way we should think about it?
Well, yes, but also what I just referred to is, you know, we've made some moves on discretionary spending and sort of additional cost efficiency. That's all contributing to that smaller movement in EBITDA and cash versus what you might expect from the larger movement in revenues.
To zoom out even more on that, genuinely as a business, it's we have a ton of flexibility. Clearly, there are always trade-offs between growth and profitability, but as we showed during COVID, so much of what we do is discretionary.
We would obviously love to be investing in growth more, but we know the market has changed, and we've rebalanced our overall plan to account for what could be a pretty choppy macro for 2023.
Got it. I guess I'm trying to get at, what sort of working capital swing the other way do you expect from having to hand over the cash to make good on the payables from peak selling season in hardware in the first quarter of FY 2023?
There'll be a pretty limited impact in that respect, James. I understand what you're trying to get to, but probably most of the cash, incremental cash movement that you're focused on here is driven by the discretionary spend reductions that we're talking about.
Okay, got it. Maybe just a quick one, just following up on one of the questions you got earlier on pricing. Do you plan to meaningfully shift the mix to annual plans because you see it as LTV accretive? Or do you see this more as leading price increases with monthly plans and maintaining a similar mix of monthly versus annual?
In some respects, I'd give the same answer to the somewhat related question from a few minutes ago, which is there are the two components where it's just the upsell hooks and the optimization, it's just a simple LTV map. Whichever one works is the one we put in there, and we really are indifferent. If you look at the Membership tab, where people are navigating directly and they're usually more value-conscious customers, we just assume they'll go more to annual. That does obviously have the benefit on marketing spend. The more we can move that way, the more predictable the cash recovery is, and we see the dollars coming in sooner to lower ARPPC. Again, largely indifferent, and it's whatever we give. However we can give value, great.
One thing I think does fall out of monthly versus annual changes is now we can segment our customers. There is something a little bit better for the cost-conscious customer, and then there is something for the people who wanna try before they make a longer commitment. You know, the team will test, and we'll come out with something.
Okay. To put it another way, the price differential between monthly and annual pricing is here to stay.
The price differential, yes. Sorry, if that's what you're asking. We're not gonna change that.
Yeah, perfect. Okay, thanks.
Great. Thanks, James. Up next, we have Chris. Chris, please, tell us your full name and which company you're calling from.
Thanks, Mel. It's Chris Savage from Bell Potter. My first question is a point of clarification, really. You've said in the guidance positive Adjusted EBITDA and Operating Cash Flow in CY 2024. Does this therefore imply that you still expect negative Adjusted EBITDA and cash flow in CY 2023?
Chris, I guess I give the same answer as you. The company's going through our planning cycle at the moment. We'll give formal guidance as part of our year-end release. You know, that's part of our normal process. We'll be working through that. We'll be able to give very specific guidance at that point. What we are very focused on is the trajectory to get to cash flow break even and EBITDA break even. That's why we've specifically said that we have enough visibility, given the flow-through of pricing increases, to be able to bring that forward from Q4 next year to Q3.
Okay. Second question's a bit of a follow on from James Bales' question just before. Can you say when you see the low in cash being hit in CY 2023? And are the working capital movements gonna be similar to what we saw this year?
I guess to start with, we're certainly not concerned about the runway. Given what we see at the moment, and the levers that we've talked about within the business, we're very confident that we have sufficient runway to move through without sort of additional funding. You know, that low point will depend on how we time a number of things like the launch of the bundled product, the marketing around that'll all come out of our planning process.
The overall view is that we're, you know, concerned with the runway and that we'll clearly have enough ability with the levers within the business to manage through that.
What low in cash would you be comfortable with next year? Is it sort of the $20 million-$30 million range?
I don't think it's changed from what we'd said previously, which is that sort of range.
Okay. Just last question, a bit more of a high level question. Just the delay in bundling from Q4 to Q1, what drove that specifically? Like, was it your choice? Was it internally driven, or was it out of your control?
It was internally driven, because we decided to do this price increase. It's a longer story in terms of exactly the specifics, but no, that was an internal decision.
No delay...
Let me add one other comment.
by Apple?
No, no, it's unrelated. It was just we had to make resource allocation decisions. I'm giving you an oversimplified answer here. A price increase is not just a button you push. It's user comm, it's training, it's FAQ updates, making sure customer support is ready. It is a very significant undertaking, and we were hearing from other CEOs a lot of the success they had in increasing prices, while we were also hearing other companies having much higher churn than us. It made us feel very confident that we did have a lot of pricing power. When we thought about timing, especially given the macro, there's a lot of air cover right now for companies to raise prices because everybody's doing it.
The thought was we had strong data that says this is a good thing, especially given how well it looked like it was doing for new users. We had a moment of air cover to do it. This has huge impact on run rate going into 2023, and I hope that's not missed on this call, which is the part of the business that everyone needs to do well, did extremely well. Essentially, by doing the price increase now, given how well it's holding, it sets us up for if all external assumptions remain flat, 2023 is a really good year. It's just that resource trade-off saying, "Hey, we can do this quickly. We have a good time to do it." You know, does it delay the bundling? Yeah. Is that frustrating? Sure.
We'd love to have it both ways, but we are now set up with this great run rate coming in 2023, and we've gotten the price increase out while we're in a slew of the majority of companies raising pricing versus if we did it in Q1, maybe the economy's in a worse spot and everyone's done it and we're more of an outlier. We've kinda snuck under the radar, so to speak, from a consumer standpoint.
Is there any discussion with Apple around commission rates? Like, 'cause now you're gonna be bundling hardware software. Any change there?
That ties into what I said earlier, is that I have increased my confidence that we will be able to move off in-app purchase. Some of that confidence is just even some of what Apple has done with other companies that are not even hardware related, where I'll keep it a little close to our chest 'cause we have to be prepared for our fight with Apple. We see other companies that are getting the exceptions that we think from a guideline standpoint, have much less of a case. Apple does seem to be backing down more. The fact that Tile has been a big part of the whole antitrust movement against Apple, we think when that bundling happens, they are gonna really struggle to push back at us. Again, Apple can be extremely fickle.
I do not want to set any expectations around timing, so we just don't know. If I were a betting man, this will change next year. If I'm optimistic, it'd be in the early part, but I don't want to anchor anyone on that expectation.
Sure. All right, thanks, Chris. Thanks, Russell.
Thanks, Chris.
We are going back over to Chris Gawler, who has some more questions for you.
Hey, guys. Thanks for taking just a couple of follow-up questions. I just wanted to ask another sort of operational question on the Tile integration. I mean, noting the other day that now you can see Tiles within the core app in the U.S., but it sounds like for a Life360 user to be part of the Tile Finding Network, you need to opt in. Do you have any sense for what the opt-in rate would be and how far that would go to mitigating AirTag's network effect?
Sure. That's actually rolled out, so I have hard numbers on that. Last I checked, it was around 70+% of users opting in, so they call it ±10% as that fully rolls out. Now we have permission from all those users, and all Life360 users who have the app update and give us that opt-in are now acting as beacons. We are taking a more conservative approach to turning up the dials around when we scan, how we scan. It's. I could go for hours on the technical pieces of that, but we do believe it is gonna go a huge way to mitigate the lead that AirTags has. Because if you think about Life360, we're on over 13% of all iPhones in the country right now.
Yes, Apple is much bigger, but if you look at where you're most likely to lose things, it's where you have a lot of people. Airports, sports stadiums, bars, restaurants, schools, malls. Just imagine how many people walk by and you count to ten, and you've already seen someone with Life360 in their pocket walk past your Tile. Obviously, if you're out in the country, areas without a lot of kids where we have penetration, AirTags will be better. If you think about, practically speaking, where we need density, we will have it.
I think absolutely, it's gonna go a long way, and it's gonna be pretty exciting when we can credibly say that the only two people in the world with a meaningful Find My network are us and Apple, because that is when, as the category emerges and everyone who's not on an iPhone or is a cross-platform family, we'll really be the only choice out there.
Just on that.
Also, not the question you asked, but while we're on the topic, the first half of the year was extremely frustrating, disappointing with all the anti-stalking press, which just really sullied the category. In the last few months, that has changed dramatically, where just look at the coverage around AirTag and look at lost luggage, all these use cases. Although the numbers have been frustrating from the early part of the year, if you look at the predictions we made around this category emerging, they are starting to look really good.
Just on that opt-in point, Chris. When a user gets the update and gets the Tile integration, is the opt-in turned on by default and you need to turn it off, or how does that actually work?
It's a system dialogue. When it's a system dialogue, Apple actually has to throw the prompt. I mean, oversimplified is we've built flows that allow us to throw the prompt. If the user accepts the prompt the first time, it's all done very natively. If they decline the prompt, then we have to make them manually go back to settings. When we do that first ask, it's a simple button click.
Yep, great. Just last question. I just wanted to get an update on the international side of the business. Specifically, do you mind just giving an update on the Canada Membership expansion and your thoughts around going into the U.K. middle of next year?
Sure. Just for background for people who might not be familiar, we launched in Canada late last year. When we say launch, we just basically made the product one-to-one between the U.S. and Canada. There are some minor differences that are not overly material, but for all intents and purposes, now the experience between the U.S. and Canada is the same. We did not really give it any marketing support, but what we've seen is revenue is essentially more than doubled in a single year without us doing anything. It does seem like organic demand, in a way that somewhat actually we're pleasantly surprised about, has picked up more in a record net add for international, even outside of Canada last quarter.
Canada itself obviously is not gonna move the needle in terms of numbers because it's smaller than a single U.S. state. It also ties to why we have not launched in Australia. We love everyone here, but we're trying to do the big needle movers. What we now firmly have is a playbook for international, where in Canada we really didn't do much of anything, like I said, doubled revenue. The plan this year was to launch in the U.K. The Ukraine war situation did really impact our R&D capacity, but that's all now fully readjusted in the U.K. and possibly Europe is on track for next year. We're pretty excited about that.
We're not forecasting huge increases just because, especially due to the macro. We think we want to see success before we make it update the plan significantly. We're optimistic about it and very much on track for that U.K. launch.
Great. Thanks, Chris. That's all for me.
Thank you.
Thanks, Chris. We have Laf again to ask a few more questions.
Hi, guys. Just one follow-up question. I think Russell made the comment that you have a usual process for setting guidance for the year ahead that you're still yet to go through. Could you just talk a little bit more about what that process is, when it occurs, and when we should expect an update on that?
Yeah. Sure, Laf. We're going through, as with most year-end companies, our planning process now. So that will sort of continue through to the end of the year. And that'll help us sort of flesh out our very specific priorities for next year. In terms of the sort of formal guidance, as is part of our sort of standard process, and I think for most companies with the year-end release, we would plan to give full guidance for 2023.
When the result comes out in early February, we would expect a full year guidance for 2023 to be clarified in detail.
Under the new schedule, our year-end release won't be until mid-March. We will look at updating the market before then if there's something significant to say.
All right. Got it. Thank you.
Thanks, Laf. As there are no more questions, I will now hand it back over to Chris for some last remarks.
Thanks everyone for joining. Just as a bit of a recap on the overall period. We have two elements of the business now, Membership and Hardware. We obviously bought Tile to drive Membership, and that is going well ahead of plan, which excites us. We are disappointed by the standalone Hardware performance for the year, but net-net, the piece of the business that we needed and wanted to go well is doing great, and we're very excited for the rest of the year and CY '23, where a lot of this bet and around the R&D we've built really pays off. Thank you everyone for joining, and have a great day.