We will begin with a business update from CEO Lauren Antonoff. CFO Russell Burke will then provide detail on the Q3 financials and outlook, which will be followed by a Q&A session. We will make forward-looking statements during this call, which are subject to risks and uncertainties. A summary of these risks can be found in the risk factor section of our Form 10-K filing with the SEC dated March 2nd, 2026. These statements are based on assumptions we believe reasonable as of today, November 9, 2026, and we have no obligation to update them except as required by law. We will also present both GAAP and non-GAAP financial measures. Reconciliations are included in the media release on our Investor Relations website. This call is being conducted as a Zoom audio webinar with no slides.
Our quarterly investor presentation is available as a reference on our website, along with the quarterly shareholder letter from Lauren and Russell. All participants will be in a listen-only mode until the Q&A. When we come to the Q&A, please raise your hand using the raised hand icon on the bottom of your Zoom screen. Once prompted, you may unmute your line to ask your question. Participants who have joined by telephone will be in a listen-only mode throughout. With that, I'll turn the call over to Lauren.
Good afternoon to everyone in the U.S., and good morning to those in Australia. Thank you for joining us today to discuss our Q3 results and outlook. We're pleased with how our third quarter landed. Total GAAP revenue grew 40%, driven by subscription revenue growth of 29% and a boost from our advertising acquisition in Q1. Operating leverage in our core subscription business is helping to fund investments in future growth. You can find more detail on these strong third quarter results in our shareholder letter and investor presentation on our IR website. Russell and I are going to touch on the highlights here. Starting with monthly active users, or MAU, Q3 continued to show healthy growth. We added 5.3 million MAU, reaching over 107 million globally, with international markets crossing the 50 million active user mark for the first time, and the U.S. rising to nearly 56 million.
MAU is growing the fastest in our Anglo markets, where our retention and conversion to paid is among our highest. We also drove strong momentum in paying circles, with 188,000 net adds, bringing the total to 3.4 million. This is an increase of 26%, fueled by strong growth in both the U.S. and international markets. Average revenue per paying circle rose 4%, with growth primarily from members shifting toward our higher price offerings as a result of our AI-driven optimization, which I'll come back to in a moment. This momentum is reassuring as we extend the price change to all members in Q4. That rollout's going smoothly, with churn in line with our expectations. Our work to optimize onboarding and engagement in international markets was an important driver in the third quarter.
We're doing more marketing with key local influencers, establishing distribution partnerships, driving increased media interest and coverage, and tuning performance for local app stores and devices. One of our campaigns in Anglo markets in Q3 drove a brand moment worth highlighting, both for its specific impact on our results and for the broader cultural conversation it sparked in the U.K. We partnered with celebrity chef Jamie Oliver on a short-form miniseries that showcased the Life360 family connection in a fun and unexpected way. The campaign generated nearly 100 million social views, driving a lift in Life360-related searches and double-digit registration increases in the U.K. and Canada. The series drove conversations about the benefits of location sharing in major outlets, including Forbes, the BBC, Ad Age, and many more.
The U.S. and our major international markets continue to grow nicely, and in Q3, we made strides in understanding our newer international markets. These learnings are informing our product and marketing strategy in Q4 and into 2027. For example, in Germany, we had success in both acquisition and retention, and we're putting more marketing to work there. As we've spent more time with customers in Latin America, we've made a strategic decision to focus our efforts on localizing our product capabilities ahead of scaling marketing further. Our core value props around connection and safety resonate around the world, but what safety means to customers in different markets varies. Getting the local experience right first provides the foundation to scale marketing efficiently and build a healthier and more profitable business over time.
Turning to advertising, Q3 GAAP revenue was over $25 million, making ads our second-largest revenue line just two years after launch. That's more than triple last year's third quarter as a result of the acquisition. With technical integration behind us, we've been tailoring our sales efforts and extending our capabilities both on and off the Life360 app. Getting the sales motion and the ad experience right took a bit longer than we expected, so revenue's on the lower end of our range. We're encouraged that big brands in auto, finance, retail, consumer goods, and more are investing with us and seeing good ROI. New high-value formats like video are showing promise as well, and while 2026 budgets are largely committed, early signals for 2027 look good. To set us up to scale advertising further, we're thrilled to welcome Donna Sharp to lead Life360 Ads.
Donna's widely recognized in the ad industry and knows Life360 well, having been an advisor to us as we built out the ads business. She understands the deep value of the trust and connection that we've built with families and has the industry track record and vision to land that message with advertisers. Before I turn the call over to Russell, I'd like to highlight two areas that will make increasingly meaningful contributions over time: Pets and AI. Pets is our first market extension beyond our traditional core family audience. We estimate that more than 60% of our 107 million members have pets, and we're impressed that members have already created over 10 million pet profiles on Life360.
Following on the heels of our first offerings in Pet GPS and tags, we are building experiences to help every pet owner keep their pets happy and healthy, even if they do not have a Life360 device. Building out new verticals like this one takes time, and the progress we are seeing reinforces our belief that pets will become a key element of our family ecosystem and a meaningful contributor to our business that helps extend our TAM and support long-term MAU growth and monetization. We are already seeing early retention benefits from the Pet GPS bundle. Turning to AI, we are seeing a fundamental shift in how work gets done and ultimately how consumers engage with technology. Our shareholder letter highlighted two examples where we see advertising delivering benefits both in the short term and the long term. First, there is a lot of excitement in the market around emerging personal assistants.
Last week, we opened our Family Intelligence platform to third-party agents such as Muse that help our members manage daily life, giving families new insights for everyday decisions like who is in the best position to pick up the kids when they have to go home early. An agent ordering dinner can time the order based on when everyone will arrive home, and soon, an agent monitoring school emails will be able to surface an upcoming soccer game on the Life360 family map so everyone in the family can see where and when to show up and cheer. We are excited about the connection we built for AI assistants to work with Life360, but it is just the start of how AI will enhance our product experience.
While the proliferation of agentic personal assistants promises to take over all sorts of tasks, what will continue to differentiate Life360 is that our unique real-world, real-time data lets us craft experiences that keep members coming back to the app, not just because they are useful, but because it feels good to stay connected. Consumer adoption of AI is a meaningful opportunity for Life360 to increase the value we deliver. Separate from these product use cases, we have shared over many quarters that AI has been helping us lift productivity and focus our efforts on higher-value opportunities. We also continue to see benefits to our financials. Our AI monetization engine, powered by Life360 Family Intelligence, is doing more for us all the time. Where it started optimizing conversion, it is now also driving a shift to both web-based billing and higher-priced tiers, helping our top and bottom lines.
Overall, we had a strong Q3, and we are excited about our revenue momentum going into Q4 and 2027. We are seeing evidence that advertisers value what we offer, the Pets business is promising, and we see many more opportunities to extend our reach over time. The trust families place in us gives us a durable place in everyday family life, and in an AI-driven world, the human connection we are built around only becomes more valuable. Most importantly, the core of Life360 is strong. Our subscription engine is humming, our global user base is growing, and we still have a long runway ahead. Behind all the numbers is something quite simple. Families want to stay connected and safe, and more than 100 million people around the world are trusting us to help them do that.
That trust compounds, and it underpins our confidence in our objectives of crossing 150 million MAU and $1 billion in revenue on a path to 35% Adjusted EBITDA margins. Thank you for your time, and now I will turn the call over to Russell for more on our results and our full-year outlook.
Thanks, Lauren. During our Q2 call, I outlined our expectations for a strong financial setup in the back half of the year, and I am pleased to report that this is reflected in our Q3 results. As Lauren highlighted, we delivered impressive operating metrics with momentum in MAU and Paying Circles and continuing strong growth in the core business. I will detail how this is translating into our financial performance, with all financials referenced here unaudited and denominated in U.S. dollars. Total Q3 revenue was $174.1 million, with growth accelerating to a 40% increase year-over-year. As Lauren noted, subscription revenue was up 29% year-on-year to $124.2 million, and core subscription grew even faster, up 32% year-on-year. This was largely driven by volume, with a 26% uplift in Paying Circles.
ARPPC was 4% higher, which primarily reflected a shift in product mix to higher-priced offerings and the early impact of recent U.S. price increases. U.S. subscription revenue increased 27% year-on-year, supported by Paying Circle growth, which benefited from improved conversion metrics. International subscription revenue increased 40% year-on-year, with an outstanding performance from the core territories of the U.K., Australia, New Zealand, and Canada. Hardware revenue decreased 20% year-on-year to $9 million, primarily driven by lower hardware units shipped, with a larger-than-expected impact following our strategic exit from brick-and-mortar retail channels. Advertising revenue of $25.4 million more than tripled in size year-over-year, reflecting the acquisition of Nativo and the continuing ramp of the business. While this was good momentum, it was lower than we anticipated as we made adjustments to the sales motion and the ad experience for members.
Our other revenue increased 61% year-on-year to $15.5 million, including partnership revenue recognized during the quarter. Annualized Monthly Revenue reached $578 million, an increase of 29% year-on-year, underpinned by continued subscriber growth and other recurring revenue. Third quarter gross margin was 77%, driven by the distinct margin profiles of our four revenue streams. Subscription gross margin increased to 87% from 85% year-on-year, benefiting from the shift towards higher-priced offerings. As expected, hardware gross margin declined to - 19% from - 3% year-over-year, reflecting the ramp in Pet GPS, partially offset by lower tariff costs. As we have said before, we are using hardware as an acquisition tool for paid subscriptions, with further benefits from improved retention. Advertising gross margin of 55% was lower than the same quarter last year as we scaled the business and delivered incremental revenue that has higher direct costs.
These are mainly traffic acquisition and hosting costs associated with building the full-stack digital advertising platform following the Nativo acquisition. Other gross margin of 89% increased from 88% year-over-year due to higher-margin partnership revenue. Operating expenses as a percentage of revenue decreased to 72% in the current quarter from 80% in Q2 as we continue to drive operating leverage. Operating expenses increased 38% year-over-year, primarily reflecting higher personnel costs due to company growth, the acquisition of Nativo, higher app store commissions, and group media spend. Lauren spoke earlier about the benefits of our emerging AI-native operating model. We're encouraged to see this beginning to translate into improved financial metrics, with Q3 delivering an early revenue impact from increased conversion to our highest Platinum tier. We're also starting to see our AI tools enable a managed flow of new subscribers into web-based billing.
In addition, we're actively managing AI costs to support operating leverage through a combination of model selection, optimization of token usage, and the benefit of ongoing market-wide reductions in model pricing. We expect these efforts to deliver meaningful benefits from 2027 onwards. GAAP net income was $22.5 million, which includes a $17.8 million gain from the increase in value of our investment in Hubble. Basic EPS was $0.28, and diluted EPS was $0.26. Adjusted EBITDA of $34.6 million increased 41% from $24.5 million in Q3 2025, driven by continued strong higher-margin revenue growth and the scaling of the business. The Q3 adjusted EBITDA margin of 20% outperformed our guide of 18%, reflecting the earlier-than-expected contribution of high-margin partnership revenue. We ended Q3 2026 with $465 million in cash and short-term investments, and we generated operating cash flows of $27.2 million, up 3% year-on-year.
Following the announcement of our share repurchase program in May 2026, we've repurchased shares of common stock for an aggregate purchase consideration of $44.4 million through the end of Q3. This leaves approximately $180.6 million available for further repurchases under the program. Our repurchase activity is in line with our commitment to return value to our shareholders and reflects the disciplined approach that we outlined when the board authorized the program. We plan to offset dilution measured by stock-based compensation expense on a rolling 12-month basis from the launch of the program, and we've exceeded that target through the end of Q3. We will remain opportunistic and retain the flexibility to adjust the pace and timing to market conditions. Our full-year guidance reflects our long-term commitment to balance investment to drive future growth with sustainable profitability underpinned by expanding margins.
We've lifted our full-year revenue outlook to a range of $665 million-$681 million, compared with $650 million-$685 million previously. Within that overall guidance, we're raising subscription revenue to $483 million-$488 million. We've lowered the high end of the range for both hardware and advertising revenue. We now expect hardware revenue in the range of $35 million-$40 million, and advertising revenue in the range of $98 million-$102 million, versus $98 million-$115 million previously. Our other revenue outlook has increased to $49 million-$51 million. Our full-year Adjusted EBITDA outlook has narrowed to $132 million-$138 million, compared with $130 million-$140 million previously. Our full-year guidance implies a significant uplift in Q4 revenue and Adjusted EBITDA, consistent with the trends that we're seeing in the business.
Following our strong performance in Q3, subscription revenue growth is expected to accelerate due to the momentum in paying circle additions through Q3, the shift to higher price tiers, and the recent U.S. price increases across the existing subscriber base. We expect those price increases to soften the rate of U.S. paying circle additions in Q4 2026, with churn to date in line with our estimates. Advertising revenue is expected to reflect a seasonal uplift in Q4, although somewhat less than previously forecast. We expect Q4 adjusted EBITDA margin to lift as Q4 operating expenses as a percentage of revenue decline versus Q4 2025, consistent with our prior guidance. We expect this margin expansion to be underpinned by revenue scale, cost efficiencies, and investment in new growth initiatives undertaken in the first half of the year.
Looking forward, our operating leverage allows us to invest in future growth while continuing to expand our margins over time. Thanks for your attention, and I will hand over to Yolande to manage the Q&A.
Thanks, Russell. As a reminder, if you would like to ask a question, please raise your hand using the raise hand icon on the bottom of your Zoom screen. Once prompted, you may unmute your line to ask your question. Please mute your line again once you have completed your questions, and limit yourself to one question initially. We will provide another opportunity if we have time. First up, Mark Mahaney from Evercore. Mark, please go ahead and unmute yourself.
Okay, thank you. I am sorry, two questions, please. This MAU outlook, I think you just reiterated it for the year. You showed a little bit of acceleration. Do you feel like you have fully resolved the technical issues that kind of marred MAU growth earlier this year? Any thoughts on the sustainability of MAU growth beyond just the fourth quarter? Just talk briefly about the U.S. price increase. Did that go largely as expected in terms of impact on churn, customer satisfaction, et cetera? Thank you very much.
Great. Starting with MAU growth, we feel really good about the health of the funnel. It's in good shape. We're seeing that benefit us in Q3, and we expect that to continue. Q4 is always generally a little bit lower than Q3, so we won't expect quite the same numbers, but the overall trajectory is really strong as we continue to expand into new markets. All good there.
On the price increase, it's going according to our plans where we felt really good with the initial delivery that we did with the users, and as we expand into the existing base, we're seeing everything in line with our expectations so good to go there.
What I would add to that, Mark, is specifically on churn, as we think about Q4, it has gone very much to our expectations. But when you look at that, our U.S. net paying circle additions in Q4 are likely to be around about half of what we would have expected otherwise. That's largely the one-time churn event with returning to sort of normal, what we think of as normal growth in Q1 next year.
Thank you, Lauren. Thank you, Russell.
Thanks, Mark. Next up, we have Lafitani Sotiriou from MST. Laf, please unmute yourself and go ahead.
Thank you for the opportunity to ask a question. I have just got three parts to it. First, I would not mind better understanding what the monetization strategy is for opening up Life360 to personal agents. Are you looking to only allow it for certain tiers, or is it every tier, or how are you thinking about Life360 making money if it becomes more popular and prevalent? A follow-up question on the U.S. raise pricing. Can you just give us some idea or color around the quantum in new revenue you anticipate to flow through on an annualized basis, understanding really starting in the fourth quarter, but if we were to Russell, best guess, is it an extra $10 million over the next year, or what does that number look like?
Can you just clarify, finally, in other revenue, there is a noticeable jump from second quarter to third quarter, and I am having trouble finding out what the reasoning is for it. In the shareholder letter, there is some discussion around new data contracts or the like. If you could also clarify that. Thank you.
Okay, I will take the first one and then let Russell take the next two. Working with AI assistants is really new for the world and for us, and we are starting up by really understanding how customers use it. The way that it will start at first is that people adopt agents like Meta's Muse or other agents as they become more popular, and those agents can connect to our platform and ask questions about your circle. If you choose to connect it, you will be able to answer questions like, w here is the best place for us all to meet up? Or things like that. In that case, the agent is doing the work, so Meta's Muse would be bearing those inference costs and doing the work. In the beginning, we are learning about this. We have control over that gateway.
We can decide if we want to make it more limited over time. While adoption is early, it is wide open, and it is helpful for us to learn. Our expectation is that we will bring those kind of agentic experiences into the app proper so that it is more discoverable, and we can create more sort of rich, bespoke experiences within the app. We will learn about that behavior using the apps that are out there and gaining popularity today. As we bring those in, I think that is where we have a more significant opportunity for monetization, but it is really too early to sort of predict that now. Right now, it is really about engagement, creating value, and learning about what is valuable to customers, and we will see about monetization from there.
In terms of the price increases, the best way I can characterize that is to look at our Gold tier, which is the largest proportion of our paid members. We had a $2 increase to the monthly price, which is about 13%. In terms of timing, that started to be noticed in October, starts to come in in late November. So we will see some impact of that in Q4, and then the full impact next year as that flows through. For other revenue, very specifically, we had a $3.7 million inflow in Q3, which to some extent was a catch-up for the three quarters. So if you look at that as a $5 million run rate going forward is the best way to characterize that.
Thank you.
Thanks, Lafitani. Next up, we have Andrew Boone from Citizens. Andrew, please unmute yourself and go ahead.
Thanks so much for taking the question. I would love to talk about advertising. Can you just help us understand what happened in the quarter? Any response to new leadership changes, and then how does that change your trajectory for expectations for advertising in the medium term? Thank you.
We are really excited about the trajectory that we are on. Advertising has become our second-largest revenue line two years after we started it. We are on a good path, but it has taken us a little longer to get there than we expected. The things that we have done are on app. We have taken a very cautious approach to make sure that we do not interfere with the customer experience. During Q3, we actually paused programmatic for a little while we worked on ad quality to make sure that our members were maintaining a really high-quality experience, and we were cautious about introducing things like video. We now have all that stuff in place. We have got high ad quality. We have got monitoring built in to make sure that it stays high. We have got those new formats in place. That sets us up well for going forward.
Similarly, our go-to-market efforts, when we brought the companies together, there was a lot of excitement about focusing on selling in-app, but that was a little bit ahead of where we had those capabilities, and we were ready to scale on app. That took some distraction on our off-app selling motion. Over the course of Q3, we have brought those together, and we have now got a really strong sales motion in place that looks at on-app and off-app together. By the time we got that going, we were a little late to secure 2026 budgets. What we did, though, is we have attracted a lot of brands that are looking at the results that we are getting, and it is what helped us close on bringing Donna Sharp in.
She can see the potential that we have and was eager to get involved, and she is somebody who is well-recognized in the ad industry. I would say, being able to up-level our leadership in that way is a sign of the potential we have and the credibility that we are building in the market. That is being well-received and part of why we have such confidence in our trajectory going forward.
Thank you.
Great. Thanks, Andrew. Next up, we have Eric Choi from Barrenjoey. Eric, please unmute yourself and go ahead.
Thank you so much, Yolande. I might only do two really quick ones. Sorry. The first one, just on the ARPPC again. Russell, can I please confirm your new subscription revenue guidance is implying sort of mid-single-digit percentage increases in the fourth quarter versus third quarter? If that's the case, like you said, there's a 13% increase, right? If you're assuming mid-single-digit uplift in the fourth quarter, do we assume like most of the benefit comes in 4Q 2026 and then 1Q 2027, i.e., two quarters, i.e., very similar to the 2022 example where you also had two quarters? Sorry, just one quick follow-up on advertising. I think, Russell, you said before that we shouldn't take Nativo $60 million of revenues because you've exited some divisions.
If we assume like Nativo revenues were in the 50s and you're guiding to $100 million of advertising this year, and last year was $31 million, it sort of implies your organic advertising growth is $15 million, or you're guiding to about $15 million in FY 2026. Is that the right math? If so, based on all Lauren's comments just then, do you expect a better result than that into FY 2027? Thank you.
Yeah. Thanks, Eric. To take those one at a time. In Q4, our guidance is a combination of the momentum that's being driven by the strong paying circle growth throughout the year, really, and the price increase. As I mentioned earlier, the price increase will start to see the impact in the latter part of the quarter. What we're projecting in our guidance for subscription revenue is a combination of those two pieces and just reflects the continuing strong growth in that business. In terms of advertising, I think broadly, the way you characterize it is correct. If you look at organic growth structured that way, it's likely in the early sort of 20% range in terms of growth. As we've said, what we're seeing in the business now is really starting to build more.
As Lauren just went through, there are a number of elements that are really starting to come into play there. We would definitely expect that to grow a bit more strongly next year.
Thank you so much, Russell.
Thanks, Eric. Next up, we have Reily Radosevich from Canaccord. Please go ahead, Reily.
Hi, this is Reily on for Maria Ripps . Thank you for taking our question. Broadly speaking, as you look to capture a greater share of advertising budgets in 2027 and beyond, what are some of the longer-term product and investment priorities as you continue to build out the advertising platform? As you think about areas like measurement, attribution, and self-service capabilities, where do you see the biggest opportunities to unlock incremental advertiser spend?
In terms of where we expect growth in advertising, both on app and off app, we see a tremendous opportunity. On app, it really is about creating the formats and the placements to engage in the app, and we've been doing a lot of work to evolve our core experience to create more space for advertisers to show up. An example is with our driving reports. That's something that's very attractive to people in the auto industry, and they're looking for ways to have content and experiences within the app that they can engage with. If you think about extensions that we're doing into Pets and things like that's a major area where we see an opportunity to grow on app.
Off app, it really is about building our sales motion and some of the tools that we've developed, some of the technologies we've developed over the last year that allows us to get higher match rates and deliver more scaled results as we reach out to audiences across the markets that we're operating in.
Just to add on to that, just as an example, part of the reason for this really contributing to our uplift in Q4 is a slight change in mix towards both on app and those special services, including things like measurement. That's starting to come into play, and we expect that to be a continuing feature.
Thank you very much.
Thanks, Reily. Next up, we have Lindsay Bettiol from Goldman Sachs. Lindsay, please unmute yourself and go ahead.
Thanks, Yolande, and hi, everybody. Question on your MAU growth. If I just look at how you segment it, you have 1.8 million added in the U.S., 1 million added in your Triple Tier regions, but then you had a really strong other international MAU period. I'm presuming that's driven by the new regions you've launched recently, but could you just talk about maybe dissect that a little bit and just help us understand where those 2.5 million other international MAUs have come from? Thanks.
Yeah. Other international can be a little bit unpredictable. We did have some benefits from the kind of activities that happened in regions that were not as active in, combined with benefits in the regions that we're focused in, like Mexico and Brazil. So, we saw benefits from really distributed across multiple places. I think across all of them, we're seeing benefit from optimization in our funnel. So things that we've done like social sign-in, Google sign-in, that makes it more likely that somebody who tries to sign up with us actually gets through and becomes an active user. Those things are benefiting all regions.
Right. Thanks.
Thanks, Lindsay. Next up, we have Rob Sanderson from Loop. Rob, please unmute yourself and go ahead.
Yes, excuse me. Good evening, good afternoon, good morning. I have a couple of questions on user growth as well. You are reiterating the 17%-20% guide. The question is really, what could get you to the higher end of the range? You have a lot of things going on internationally. It sounds like LATAM, you are doing a little bit of retooling here on localization. Fourth quarter is not usually your strongest, and I think Lauren suggested you are likely to see fewer additions in the fourth quarter. I just want to make sure I got all that correct. Curious about the potential for 20%, w hy is that still on the table? Commentary suggests that it may not be, so I just want to make sure I understand that.
Second question also on users, as you look in regions beyond Germany, Brazil, Mexico, what are other larger regions you have got your eye on that are coming close to that 3% tipping point that seems to be an inflection on adoption? Thank you.
You understand it very well. I think really from where we started to see those technical issues and had to focus attention on that, we continue to trend toward that lower end of the range. We have kept the range as is because of the unpredictability of events that have often driven spikes in the past. We do not really want to focus on what we guide to. We want to look at the overall trajectory of where we are going. What was the second part of the question?
Next regions that are maybe at that tipping point or getting close. Yeah.
Yeah. The real insight that we've had this quarter is that we've really thought about going into regions as monolithic. We go into a region and we look at product and marketing, and that made a lot of sense when we were going into the Anglo markets, which looked a lot like the U.S., and we already had really strong market fit. When we were looking at product and marketing there together, it made sense. What has been interesting this year, as we've been doing work in Germany, Brazil, and Mexico, is that we're seeing differences in those markets where we go in. Germany, it has that stronger retention, and having product and marketing focused together makes sense.
But in places like Mexico and Brazil, the learning is that we actually want to pull back on some of the marketing efforts, some of the acquisition efforts, and laser focus on getting the product right so that when we acquire people, we're keeping them at higher rates. Moving forward, you're going to see us do, I think, a lot deeper focus on Latin America while we get that strong. Then from there, we'll use that playbook to expand to more regions.
Thanks, Lauren.
Thanks, [Rob]. Next up we have Siraj Ahmed from Citigroup. Siraj, please unmute yourself and go ahead.
Thanks. Maybe last two as well. Russell, just as a sort of implied full-year guide or the Q4 guide in the guidance, just a bit surprised that the midpoint has been kept the same when you have actually increased higher margin subscription and other revenue sources coming higher. Is there something else that is offsetting it? I mean, typically OpEx is lower in the fourth quarter from a marketing standpoint. Could you just help in terms of the building blocks? Secondly, Lauren, in terms of advertising, good color as to what has happened. Given now you have a combined business that is close to $100 million of revenue, do you think, Russell sort of mentioned that you should expect organic growth picking up from the 20% this year. Is that combined business of $100 million that you think growth can be more than 20%?
Would really appreciate some color on that as well. Thanks.
To the first question, there is a few elements there. Yes, we have raised subscription revenue guidance given the really strong momentum there. The advertising revenue that is coming down does have a —the incremental revenue has a high margin. You are largely sort of focused in the on-app area, which we have, as we talked about earlier. That flows through at a high margin. When you look at the overall guidance, we have definitely raised subscription revenue. You need to take into account the sort of commission element of that in operating expenses, because that flows through. We have brought down advertising revenue and hardware revenue, as I said, with the advertising revenue at a high margin. Then there is a couple of other elements in operating expenses, relatively small impact, but we have talked about our investment in Pets in Q4 as well.
Looking at the overall advertising growth, we do expect stronger growth going into next year, both on-app and off-app.
Lauren, just a follow-up on this. In terms of, and to Russell's mention about in-app being lower, right? Did you sort of see, because like you said, you're focusing on member experience, did you sort of see some disengagement or something from members or from users because of the ads that were there? I mean, interesting that you were saying quality of ads was a key focus for you.
We didn't. We didn't. It's good that you sort of call this out. We have our own internal sense of what is the bar for member experience, and we hold a very high bar out ahead of where members may be. We didn't want to jeopardize trust and wait till we saw potential signals. We saw some ads getting through that we weren't comfortable with and decided to really put another layer of control in place to make sure that ads that didn't feel like they were appropriate or ideal for our audience weren't getting through. So that was just a self-imposed bar-raising activity that we did.
Thank you.
Thanks, Siraj. Next up we have Stephen Ju from UBS. Stephen, please unmute yourself and go ahead.
All right, thank you. Lauren, Russell, I think you talked about auto, finance, retail, and CPG. For some of these categories like auto and CPG, you seem to be bucking the headwinds that we've had, we have heard about for the sector. Can you talk about the relative wins here and the steps you will be taking with Donna now in the building to become a larger line item with brands and agencies? There is definitely a much larger ad market out there beyond these verticals that you cited. Thank you.
Because we're new in the market, our scale is still building. We're sort of on the smaller side, so we're not necessarily subject to some of the broader trends that are impacting advertisers that are already at scale. For us, the engagement we're seeing are new and growing, and we're building up evidence really in all of those categories with great proof points. I think that sets Donna and her team up well to shape that strategy. She's been at the company just a few weeks, so we're going to give her a little bit of time to build that strategy before I start announcing whatever that is to the world.
Fair enough. Thank you.
Thanks, Stephen. Next up we have James Bales from Morgan Stanley. James, please unmute yourself and go ahead.
Yeah, thank you. Another question on advertising. If you are aiming for 20%+ growth in FY 2027, can you maybe talk to the limiting constraints that you see? Is it the number of active advertisers or publishers? Is it the ability to expand inventory or to manage user experience? Secondly, you called out AI having the potential to drive greater direct billing long term. Can you maybe talk to where you think you might be able to take that?
Okay. Let me start, then I am going to turn it over to Russell to add some color. With advertising, I think that the two things that are our biggest limiting factors as we are driving growth are building out the right in-app experiences, which we have made huge progress on this year, then building awareness of the brand as a B2B brand. Life360 is well-known and well-established as a consumer brand, but we are very new as an advertising brand, so we are early in that journey. I know, Russell, you wanted to add some color there.
Yeah. When we talked about it before, it was 20%+, so yeah, I think we should keep that in mind. You asked about AI and as it is impacting billing for us, and that is something we are really excited about. These AI tools are giving us the ability within the funnel to make almost instantaneous decisions of whether there would be friction created by taking someone off to web billing. So, we are starting to see some real success there. That is starting to build, and I think that will be an opportunity for us going forward.
Great. Thanks, guys.
Thanks, James. Next up we have Julian Mulcahy from RBC. Julian, please unmute yourself and go ahead.
Thanks, Yolande. Just a couple for me. Firstly, with the sales and marketing spend was up quite a bit on last year and also on the previous quarter. Would you say that it's actually delivering the MAUs you expected for those campaigns, or is it just getting a little bit harder to bring in new MAUs? Secondly, on the advertising thing, how far down the track are you getting the brands to actually value the location data and the sort of profiling you have on your users? Thanks.
Starting in terms of how to think about the advertising that we do, our focus really is on building awareness so that when people encounter Life360, they're more likely to act. It's not quite the same as performance marketing where we expect immediate ROI, and we're seeing good progress on that. The second question was about. Repeat the second question.
Yeah. Do you think that the brands are anywhere near valuing the information you actually have on your users in terms of profile interactions, where they go, that sort of thing?
Yeah, absolutely. We are getting a lot of attention for this, and we are starting to build the proof points that actually show that we are able to physically move people who are seeing ads to show up in stores and things like that. There is a lot of interest in it, and increasingly, there is a lot of proof points that show what we can do, and what's special about having that location-based targeting.
Right. I will back up on the first one. The number of MAUs you added, is that what you expected for such a spend on sales and marketing in that quarter?
I would say that the momentum that we see in MAU is from a lot of things. It is not primarily driven by our marketing spend. I think marketing spend supports it. We are happy with our ROI, but it is not the main thing that is driving MAU results in the quarter.
Okay. Thanks, Lauren.
Thanks, Julian. Next up we have Andrew Gillies from Macquarie. Andrew, please unmute yourself and go ahead.
Morning, guys. Thanks for the opportunity. Just the first one, you mentioned some of the early retention benefits that you're seeing from the Pets bundle. What are those retention benefits? Can you put some numbers around it? Just a second one, maybe for Russell, just on cash conversion. Is this still sort of a seasonal quarter? Are there any differences in operating cycle or working capital requirements we should expect based on the changing revenue mix that you've given in the guidance? Thanks.
Yeah. Thanks, Andrew. In terms of Pets and retention, we're still in early days. There's a logical extrapolation here where someone that has a device, that's using it, that's engaged, is going to retain better. That said, we've seen very, very e arly results that indicate that retention is improving. It will be a little bit of a long-term view because we're, as part of the bundle, we're getting people to sign up for annual Silver subscriptions. In terms of the cash question, yes, it has changed a little bit. You're going into this time of year, in particular, there will be sort of an element of working capital as we build up receivables going into the holiday period. I think that's probably the biggest impact. Then clearly, we'll see that reverse in Q1 next year.
Okay. It is mostly timing-driven. It is not changing revenue mix. It is the working capital trends that you have flagged historically?
Exactly. It is mainly timely based.
Perfect. Thank you.
Thanks, Andrew. Next up, we have Benjamin Jones from JP Morgan. Ben, please unmute yourself and go ahead.
Thanks for taking the question, guys. I just want to unpack some of the product localization efforts that you're making in your international markets. Just curious on what exactly you've identified that you need to add to that platform. I guess you've called out the efforts in product localization. You mentioned you may be slowing some of the marketing investment in the near term. How should we think about the impact on, I guess, 2027 MAU growth if you're maybe pulling back on some of the marketing investment, pushing further on the product localization?
Two very good questions. First, on localization, I'll just use the example because Mexico is one of the places where we've been really engaged. We actually took some of the leadership team to meet with other businesses on the ground and customers on the ground in Mexico. It was really interesting talking to customers because the themes around safety and connection were exactly thematically what you'd hear in the U.S., except for all of the examples talked about safety without mentioning driving. In the U.S., when people talk about safety, they pretty much mean driving. All the examples are about what happens if they get in a car accident. The themes are the same, but the specific experiences are different.
When you think about what that means for the app experience, when we are doing things that are talking about driving, when you're getting a lot of messaging around that, and driving isn't what you're concerned about, it's a bit of a turnoff. It's not necessarily a bunch of new features and capabilities. It's really tuning the experiences so that the way that we're talking to customers about the value props we deliver on match their expectations. It may also include some new capabilities. We've talked about the Watch Over Me capability we introduced this year that is much more on personal safety as people move from one place to the other, having somebody else sort of watch you while you're in transit.
That's an example of a product enhancement, but it really is that end-to-end journey and what are the messages we give and sort of where we put importance in the experiences and interactions that people get.
I would just add to that on the growth element, these are the things that will help us drive that long-term growth. As we think about short-term growth, it is not likely to have an impact. Lauren mentioned earlier that many of the product changes and improvements that we have been flowing through globally have resulted in a pretty broad-based strong MAU growth.
Yeah.
Yeah.
I will just clarify one more thing. We are not really pulling back on international advertising. We are really shifting where we are putting that attention. Marketing is going to double down on those markets that already have the higher retention rates, markets like Germany, for example, instead of going into the markets where we need the localization first. There is a little bifurcation for us in terms of where marketing is focused, and where we are doing that product work. Then, as we see that product market fit get to that right point, then we will bring marketing back in. It is not how much marketing or the results we see, it is really where it is coming from that is going to shift a little bit.
Thanks, Ben. Next up we have Paul Graham from Ord Minnett. Paul, please unmute yourself and go ahead. Looks like Paul is no longer with us. Next up we have Annabel Khun from E&P. Annabel, please unmute yourself and go ahead.
Hey, guys. Thanks for taking the question. If I could just squeeze in two, that would be great. Maybe the first on Pets. Just wondering if you have any early feedback on the Pet Tags, and maybe some commentary around the ongoing pet strategy with the paid device and these initiatives more around not locking people into the device and expectations around paying circle contribution from Pets. On advertising, I know there has been a lot of questions on this, but just around the nature of the advertisers you are bringing onto the platform, is it more around them doing brand marketing and maybe looking at longer term spend through the Life360 platform, or is it more shorter term campaigns around performance marketing? Thanks.
Starting with Pets, the interest in tags has been good. We had to work through some issues with our initial release, where the signup flow had some glitches. We are seeing the reviews for that come up as we have improved that onboarding flow. The real opportunity that we are seeing is that the interest in families with pets is really, really high. We are looking for ways to bring that experience into the app so that every family with pets is likely to engage with us on Pets, not just those with devices or a tag. Those experiences you will see showing up quarter after quarter, really starting now. We have already introduced some care coordination, the ability to track who has walked the dog or things like that, even if you do not have a tracker on the dog.
What I am excited about in this are the things that people tend to forget, like remembering that it is flea and tick season and you have to put the right kind of repellents on your animal. Those kind of things are important for pet owners and hard to keep track of, and a place that we can really help out. We are doing that investment, and we are super excited about what that means for expanding the relevance in terms of MAU and the likely engagement in the app. That, of course, creates multiple new revenue channels. The second question was an ads question. Can you repeat that?
Yeah, sure. Just around the nature of the ad spend you guys have been able to attract so far, has that been more like the brand-style marketing spend where you might see advertising partners stay around longer term on the platform? Or is it more of that shorter duration, performance marketing spend that you are seeing come onto Life360 Ads?
We're seeing a mix. With early advertising on the Life360 platform, it was definitely more towards that brand awareness, not so much conversion-oriented. Now, we've gotten a little bit farther, and now we have a good mix with sort of examples like the 4x ROAS that we're able to return for a CPG brand. That's much more clearly a performance marketing campaign. So, I'd say we have a good mix now.
Thanks, guys.
Thanks, Annabel. Next up, we have Roger Samuel. Roger, please unmute yourself and go ahead.
Hello, [inaudible]. Thanks for taking my question. I've got a question on Family Intelligence. Just curious that you open up the platform to Muse. Are you not concerned that Muse may seep into your user base and offer something similar to Life360? Or perhaps there are things that you do to protect your moat without running the risk of being disrupted? Second part of that question, just on Family Intelligence as well. On slide 28, you mentioned that this Family Intelligence has resulted in doubling the share of new subs to Platinum. Can you explain more on that? Thanks.
Okay, I'll take the first question and then ask Russell to take the second. The interesting thing to remember is that the majority of our users are on iOS that have Find My today. If people just want to answer the question, where is somebody? There's a lot of alternatives that have not disrupted our business. We think of the onset of agents like that. It is something that is potentially complementary. I'll also say opening it up to Muse is a two-way door. If we find out that the experience isn't great for our members or isn't great for our business, we maintain control over that. The belief is that the kinds of questions that it's useful to ask an agent about are things that have to do with coordination and using third-party services.
For example, if you're on a trip with a bunch of people, where's a good meeting point for us all? That's not a substitute for opening the app and seeing that everybody's where they should be, or just that feeling that you get from seeing your family. It's a different complementary experience that makes it more valuable that you use Life360 in the first place. Our expectation is that as the usage of agents goes up, it makes the platform itself more valuable, because having that information makes everything else in your life easier.
Roger, the second part of your question was about moving people into Platinum. This is just another element of what we're so excited about in terms of the AI tools that we're deploying within the funnel. Probably relatively small by itself, not likely to move the needle, but we're definitely seeing twice the sort of flow into Platinum, and that's specifically directed. You can see in this quarter that the share of Platinum has sort of moved up to 5%. All of these things are cumulative, and we're excited about the potential for them going forward.
Great. Thanks, Roger. That's all we have time for today, so thanks so much for joining our call. If you have any follow-up questions, please reach out to investor relations. Have a great day.