Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements based upon current plans, expectations, and beliefs that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements as a result of a variety of factors, including but not limited to those discussed in “Item 1A. Risk Factors” and “Forward-Looking Statements” in this Annual Report on Form 10-K.
A discussion of our financial condition and results of operations for the year ended December 31, 2025 compared to the year ended December 31, 2024 is presented below. A discussion of our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 is included under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within our Form 10-K filed with the SEC on February 27, 2025.
48
Table of Contents
Overview
Life360 is a leading technology platform used to locate the people, pets, and things that matter most to families. Life360 is creating a new category at the intersection of family, technology, and safety to help keep families connected and safe. Our core offering, the Life360 mobile application, includes features that range from communications to driving safety and location sharing. The Life360 mobile application operates under a “freemium” model where its core offering is available to members at no charge, with three membership subscription options that are available but not required. We also generate revenue through hardware subscription services and the sale of hardware tracking devices. By offering devices and integrated software to members, we have expanded our addressable market to provide members of all ages with a vertically integrated, cross-platform solution of scale. We also generate other revenue from partnerships, including through the placement of ads within our platform, and the sale of aggregated, non-personally identifiable data for data insight purposes.
For the years ended December 31, 2025 and 2024, we generated:
•Total revenues of $489.5 million and $371.5 million, respectively, representing year-over-year growth of 32%;
•Subscription revenues of $369.3 million and $277.8 million, respectively, representing year-over-year growth of 33%;
•Hardware revenues of $51.8 million and $57.6 million, respectively, representing year-over-year decline of 10%;
•Other revenues of $68.4 million and $36.0 million, respectively, representing year-over-year growth of 90%;
•Gross profit of $380.8 million and $279.2 million, respectively, representing year-over-year growth of 36%;
•Net income of $150.8 million and net loss of $4.6 million, respectively; and
•Operating cash flows of $88.6 million and $32.6 million, respectively.
Key Factors Affecting Our Performance
As we focus on growing our customers and revenue, and achieving profitability while investing for the future and managing risk, expenses and capital, the following factors and others identified in the section of this Annual Report on Form 10-K titled “Item 1A. Risk Factors” have been important to our business and we expect them to impact our operations in future periods:
Ability to Retain Trusted Brand. We strongly believe in our vision to become the indispensable safety membership for families, with a suite of safety services that span every life stage of the family. Our business model and future success are dependent on the value and reputation of the Life360 and Tile by Life360, Inc. (“Tile”) brands. Our brand is trusted by approximately 96 million members as of December 31, 2025, and because we know the value of trust is immeasurable, we will continue to work tirelessly to provide useful, reliable, trustworthy, and innovative products and services.
Attract, Retain, and Convert Members. Our business model is based on attracting new members to our platform, converting free members to subscribers, and retaining and expanding subscriptions over time. Our continued success depends in part on our ability to offer compelling new products and features to our members, and to continue providing a quality user experience to convert and retain paying subscribers. We will also seek to increase brand awareness and customer adoption of our platform through various programs and digital and broad-scale advertising.
Maintaining Efficient Member Acquisition. Our investment in developing effective services and devices creates an efficient member acquisition model which drives strong unit economics. Our member acquisition model is complemented by our word-of-mouth and freemium models. We accelerate our organic member acquisition with strategic and targeted paid marketing spend. We expect to continue to invest in product and marketing, while balancing growth with strong unit economics. As we continue to expand internationally, we may increase our targeted marketing investments.
Ability to Attract New and Repeat Purchasers of Our Hardware Tracking Devices. Attracting new and repeat purchasers depends on our ability to design and release compelling smart trackers and market them effectively. Additionally we face increasing competition from better funded global companies. We pioneered the finding category and we continue to invest in the development of hardware products, assessing new and existing technologies with a priority on providing a great member finding experience.
49
Table of Contents
Growth in Average Revenue Per Paying Circle. Our business model is dependent upon our ability to grow and maintain a large member base, including growing the number of Paying Circles. We have a sophisticated understanding of our members, and as a result, the services we provide are core to families and hard to switch. We continue to develop new monetization features leveraging our core technologies to offer additional services, expand into more stages of families and enter new verticals to increase adoption. Many factors will affect the Average Revenue per Paying Circle (“ARPPC”) including the number of Paying Circles, mix of monetization offerings on our platform, as well as demographic shifts and geographic differences across these variables.
Expanding the Offerings on Our Platform. We are continually evaluating new product offerings that are aligned with our core competencies and the needs of families across the life stage continuum. For example, our acquisition of Tile gave our members the ability to seamlessly leverage Bluetooth wireless technology enabled smart trackers, which can equip nearly any item—such as wallets, keys or remotes—with location-based finding technology. In addition, the launch of our Life360 Pet GPS trackers in October 2025 enables families to seamlessly monitor the location of pets directly within the Life360 mobile application. We will continue to invest in and launch products where we see opportunities to grow our platform.
Attracting and Retaining Talent. We compete for talent in the technology industry. Our business relies on the ability to attract and retain talent, including engineers, data scientists, designers and software developers. As of December 31, 2025, we had approximately 547 full-time employees and approximately 95 contractors. Our core values are aimed at simplifying safety for families and we believe there are people who want to work at a values-driven company like Life360. We believe that our ability to recruit talent is aided by our reputation.
Seasonality. We experience seasonality in our member growth, engagement, Paying Circles growth, and monetization on our platform. Life360 has historically experienced member and subscription growth in the U.S. in the third quarter of each calendar year, driven by the back to school period for many of our members. Hardware sales have historically experienced comparatively higher seasonal growth in the fourth quarter of each calendar year, which includes the important selling periods in November and December largely driven by holiday demand. As the majority of revenue is generated within the U.S., our seasonality primarily relates to U.S. events. Accordingly, an unexpected decrease in sales over those traditionally high-volume selling periods may impact our revenue, result in surplus inventory, and could have a disproportionate effect on our operating results for the entire fiscal year. Seasonality in our business can also be affected by introductions of new or enhanced products and services, including the costs associated with such introductions.
International Expansion. We believe our global opportunity is significant, and to address this opportunity, we intend to continue to invest in sales and marketing efforts, infrastructure, and personnel to support our international expansion. Our growth will depend in part on the adoption and sales of our products and services in international markets.
Growth and Monetization of Advertising Offerings. Advertising represents an additional revenue opportunity for our business, and our ability to grow and effectively monetize our advertising offerings will impact our operating results. Our success in this area will depend on our ability to successfully integrate acquired technology, operations, and personnel, scale advertiser demand, maintain advertiser relationships, and balance monetization opportunities with a positive member experience. Advertising revenue may also be affected by macroeconomic conditions, changes in advertiser spending, competition, and evolving privacy and data protection regulations.
50
Table of Contents
Key Components of Our Results of Operations
The following discussion describes certain line items in our consolidated statements of operations and comprehensive income (loss).
Revenue
The Company generates revenue from direct and indirect streams. Direct revenue includes subscription and hardware revenue, while indirect revenue consists of all other revenue sources, such as data and partnership, which includes advertising.
Subscription Revenue
We generate revenue primarily from sales of subscriptions on our platform, including Life360 and Tile. Revenue is recognized ratably over the related contractual term generally beginning on the date that our platform is made available to a customer. Our subscription agreements typically have monthly or annual contractual terms. Our agreements are generally non-cancellable during the contract term. We typically bill in advance for monthly and annual contracts. Amounts that have been billed are initially recorded as deferred revenue until the revenue is recognized.
Hardware Revenue
We generate our hardware revenue from the sale of hardware tracking devices and related accessories. For hardware and accessories, revenue is recognized at the time products are delivered. We sell hardware tracking devices and accessories through a number of channels including our website, brick and mortar retail, and online retail.
Other Revenue
Other revenue consists of data and partnership revenue, which includes advertising revenue. We generate data revenue primarily through an arrangement with a key data partner that provides location-based analytics to customers in the retail and real estate sectors, municipalities, and other private and public organizations. The agreement permits commercialization of certain aggregated and de-identified data and provides for fixed and variable monthly revenue amounts. We generate partnership revenue through agreements with third parties which grant them access to anonymized data insights or advertising on the Company’s mobile platform, and through the recognition of revenue related to a warrant to purchase common stock of a related party (“Related Party Warrant”).
Cost of Revenue and Gross Margin
Cost of Subscription Revenue
Cost of subscription revenue primarily consists of expenses related to hosting our services and providing support to our free and paying subscribers. These expenses include personnel-related costs associated with our cloud-based infrastructure and our customer support organization, third-party hosting fees, software and maintenance costs, outside services associated with the delivery of our subscription services, amortization of acquired intangibles and allocated overhead, such as facilities, including rent, utilities, depreciation on equipment shared by all departments, credit card and transaction processing fees, and shared information technology costs. Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel.
We plan to continue increasing the capacity and enhancing the capability and reliability of our infrastructure to support member growth and increased use of our platform. We expect that cost of revenue will increase in absolute dollars in future periods.
Cost of Hardware Revenue
Cost of hardware revenue consists of product costs, including hardware production, contract manufacturers for production, shipping and handling, packaging, fulfillment, personnel-related expenses, manufacturing and equipment depreciation, warehousing, tariff costs, customer support costs, credit card and transaction processing fees, warranty replacement, write-downs of excess and obsolete inventory, allocated overhead, such as facilities, including rent and utilities, and shared information technology costs. Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel.
51
Table of Contents
Cost of Other Revenue
Cost of other revenue includes cloud-based hosting costs, software and technology costs, amortization of acquired intangibles, costs of product operations functions, and personnel-related costs associated with our data and advertising platforms. Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel.
Gross Profit and Gross Profit Margin
Our gross profit has been, and may in the future be, influenced by several factors, including timing of capital expenditures and related depreciation expense, increases in infrastructure costs, component costs, tariffs, contract manufacturing and supplier pricing, and foreign currency exchange rates. Gross profit and gross profit margin may fluctuate over time based on the factors described above.
Operating Expenses
Our operating expenses consist of research and development, selling and marketing, and general and administrative expenses.
Research and Development
Our research and development expenses consist primarily of personnel-related costs for our engineering, product, and design teams, material costs of building and developing prototypes for new products, mobile app development, and allocated overhead. We believe that continued investment in our platform is important for our growth. We intend to continue to invest in research and development to bring new customer experiences and devices to market and expand our platform capabilities.
Sales and Marketing
Our sales and marketing expenses consist primarily of commissions to the Company’s Channel Partners, personnel-related costs, brand marketing costs, lead generation costs, sales incentives, sponsorships, amortization of acquired intangibles, bad debt expense, and allocated overhead. Commission payments to Channel Partners in connection with annual subscription sales of the Company’s mobile application on third-party store platforms are considered to be incremental and recoverable costs of obtaining a contract with a customer and are expensed as incurred or deferred and amortized over an estimated period of benefit of three years depending on the subscription type.
We plan to continue to invest in sales and marketing to grow our member base and increase our brand awareness, including marketing efforts to continue to drive our business model. We expect that sales and marketing expenses will increase in absolute dollars in future periods and will fluctuate as a percentage of revenue. The trend and timing of sales and marketing expenses will depend in part on the timing of marketing campaigns.
General and Administrative
Our general and administrative expenses consist primarily of employee-related costs for our legal, finance, human resources, and other administrative teams, as well as certain executive officers. In addition, general and administrative expenses include allocated overhead, outside legal, accounting and other professional fees, and non-income-based taxes. We expect general and administrative expenses will increase in absolute dollars as our business grows.
Other Income (Expense)
Convertible Notes Fair Value Adjustment
The Company issued convertible notes to investors in July 2021 (the “July 2021 Convertible Notes”), and as part of the purchase consideration related to the acquisition of Jiobit in September 2021 (the “September 2021 Convertible Notes” and together with the July 2021 Convertible Notes, the “Convertible Notes”). The September 2021 Convertible Notes were recorded at fair value and revalued at each reporting period prior to their conversion to common stock in April 2024.
52
Table of Contents
Derivative Liability Fair Value Adjustment
Derivative liability fair value adjustment relates to the change in the fair value of the embedded conversion and redemption features associated with the July 2021 Convertible Notes prior to their conversion to common stock in June 2024.
Loss on Settlement of Convertible Notes
Loss on settlement of convertible notes relates to the conversion of the July 2021 Convertible Notes into common stock, which resulted in a loss recognized upon settlement.
Gain on Settlement of Derivative Liability
Gain on settlement of derivative liability relates to the conversion by the holders of the July 2021 Convertible Notes, which settled the embedded share-settled redemption features bifurcated from the Company’s July 2021 Convertible Notes.
Gain on Change in Fair Value of Investments
The Company measures certain non-marketable equity securities and warrant investments at fair value on a nonrecurring basis in accordance with ASC 321, Investment - Equity Securities. In April 2025, the SAFE investment in a related party (the “Related Party SAFE”) converted into shares of preferred stock (the “Related Party Investment”), as a result of an observable price change. Additionally, the Company measures and reports certain assets at fair value each reporting period. In May 2025, the Company entered into a series of transactions with Aura Consolidated Group, Inc. (“Aura”), which included a convertible note investment by the Company into Aura (“Convertible Note Investment”). The Company elected to apply the fair value option in accordance with ASC 825, Financial Instruments.
Gain on change in fair value of investments relates to the change in fair value associated with the Convertible Note Investment and the observable price change upon the conversion of the Related Party SAFE into the Related Party Investment.
Interest Income
Interest income consists of interest earned on our cash and cash equivalents balances received from bank deposits and our investments in money market funds.
Other Income (expense), net
Other income (expense), net consists of foreign currency exchange gains/(losses) related to the remeasurement of certain assets and liabilities of our foreign subsidiaries that are denominated in currencies other than the functional currency of the subsidiary, foreign exchange transactions gains/(losses), and interest expense primarily related to convertible notes.
Provision for (Benefit from) Income Taxes
Provision for (benefit from) income taxes consists of U.S. federal and state income taxes and foreign income taxes in jurisdictions in which we conduct business. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
53
Table of Contents
Results of Operations
The following tables set forth our consolidated statement of operations and comprehensive income (loss) for the years ended December 31, 2025, 2024, and 2023 (in thousands, except percentages). We have derived this data from our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. This information should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. The results of historical periods are not necessarily indicative of the results of operations for any future period.
Year Ended December 31,
Operating expenses(1):
Other income (expense):
Convertible notes fair value adjustment — (608) (684)
Derivative liability fair value adjustment — (1,707) (116)
Loss on settlement of convertible notes — (440) —
Gain on settlement of derivative liability — 1,924 —
Gain on change in fair value of investments 609 5,389 —
Provision for (benefit from) income taxes (118,173) (71) 616
Change in foreign currency translation adjustment 4 35 15
____________________
(1)Includes stock-based compensation expense as follows:
54
Table of Contents
Year Ended December 31,
Cost of other revenue 8 4 100 %
The following table sets forth our results of operations as a percentage of revenue:
Year Ended December 31,
Subscription revenue 75 % 75 % 73 %
Hardware revenue 11 % 16 % 19 %
Other revenue 14 % 10 % 8 %
Cost of subscription revenue 10 % 11 % 10 %
Cost of hardware revenue 10 % 13 % 16 %
Cost of other revenue 1 % 1 % 1 %
Total cost of revenue 22 % 25 % 27 %
Operating expenses:
Research and development 26 % 30 % 33 %
Sales and marketing 32 % 31 % 33 %
General and administrative 16 % 16 % 17 %
Total operating expenses 74 % 77 % 83 %
Income (loss) from operations 4 % (2) % (10) %
Other income (expense):
Convertible notes fair value adjustment — % — % — %
Derivative liability fair value adjustment — % — % — %
Loss on settlement of convertible notes — % — % — %
Gain on settlement of derivative liability — % 1 % — %
Gain on change in fair value of investments — % 1 % — %
Interest income 3 % 2 % 1 %
Other income (expense), net — % (2) % — %
Total other income (expense), net 3 % 1 % 1 %
Income (loss) before income taxes 7 % (1) % (9) %
Provision for (benefit from) income taxes (24) % — % — %
Net income (loss) 31 % (1) % (9) %
Change in foreign currency translation adjustment — % — % — %
Total comprehensive income (loss) 31 % (1) % (9) %
55
Table of Contents
Comparison of the years ended December 31, 2025 and 2024:
Revenue
Year Ended December 31, Change
(in thousands, except percentages) 2025 2024 $ %
Subscription revenue increased $91.4 million, or 33%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024, primarily due to 26% growth in Paying Circles and 17% growth in total subscriptions. Additionally, subscription revenue in the current period benefited from a 7% uplift in ARPPC. Please refer to the “Key Performance Indicators” section for definitions of key performance indicators (“KPIs”).
Hardware revenue decreased $5.8 million, or 10%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024. Although net hardware units shipped increased 7%, contributing to $6.3 million of revenue, this increase was more than offset by an $8.5 million increase in discounts and a $3.6 million reduction in revenue related to bundled offerings.
Other revenue increased $32.4 million, or 90%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024. This was primarily due to a $26.3 million increase in partnership revenue, which includes advertising revenue, and reflects growth in advertising activity from both existing arrangements and an increased number of partners. In addition, data revenue increased $6.1 million, primarily attributable to the Amended and Restated Data Services and License Agreement with Placer.ai entered into in July 2024, and increased data volumes resulting from user growth.
Cost of Revenue, Gross Profit, and Gross Margin
Year Ended December 31, Change
(in thousands, except percentages) 2025 2024 $ %
Gross margin:
Subscription 86 % 85 %
Hardware 1 % 18 %
Cost of subscription revenue increased $10.0 million, or 24%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024, primarily due to increases of $4.1 million in personnel-related and stock-based compensation costs, $3.1 million in technology expenses, $2.6 million in amortization of internally developed software related to the release of new features and significant updates on our platform, all attributable to Company growth, and $0.2 million in costs associated with premium membership offerings.
Subscription gross margin increased to 86% during the year ended December 31, 2025 from 85% during the year ended December 31, 2024, primarily due to price increases for new and existing Life360 subscriptions implemented during the second half of 2024 and continuing into 2025, consistent with the increase in ARPPC. Subscription gross margin also benefited from ongoing technology efficiency initiatives implemented by the Company. Please refer to “Key Performance Indicators” for definitions of KPIs.
56
Table of Contents
Cost of hardware revenue increased by $4.0 million, or 8%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024. This was driven by increases of $3.9 million in tariff costs due to increases in tariff rates and changes in product mix, and $0.5 million in product and other costs due to a 7% increase in net hardware units shipped. Additional increases include $2.5 million in personnel-related and stock-based compensation costs, attributable to Company growth. The increases were partially offset by decreases of $1.7 million in freight costs and $1.2 millionin fulfillment costs, both related to a shift in channel mix.
Hardware gross margin decreased to 1% during the year ended December 31, 2025 from 18% during the year ended December 31, 2024, primarily due to an increase in discounts and tariff costs.
Cost of other revenue increased by $2.4 million, or 59%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024, due to an increase of $2.4 million in technology and other related expenses.
Other gross margin increased to 91% during the year ended December 31, 2025 from 89% during the year ended December 31, 2024, primarily due to revenue outpacing the increase in costs.
Research and Development
Year Ended December 31, Change
(in thousands, except percentages) 2025 2024 $ %
Research and development expenses increased $15.3 million, or 14%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024. This was primarily due to increases of $13.2 million in personnel-related and stock-based compensation costs, $4.1 million in technology and other expenses, and $0.9 millionin professional and outside services, all attributable to Company growth. The increases were partially offset by higher capitalized costs of $2.2 million for internally developed software related to the development of new features and significant updates to our platform, and higher capitalized construction in progress costs of $0.7 million, in line with our product development roadmap.
Sales and Marketing
Year Ended December 31, Change
(in thousands, except percentages) 2025 2024 $ %
Sales and marketing expenses increased $41.6 million, or 37%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024. This was primarily due to increases of $16.8 million in commissions to the Company’s Channel Partners, in line with the increase in subscription revenue, and $14.4 million in growth media spend to support strategic initiatives. Additional increases include $7.9 million in personnel-related and stock-based compensation costs, $1.3 million in marketing and other spend related to production and public relations, and $1.2 million in technology expenses, all attributable to Company growth.
General and Administrative
Year Ended December 31, Change
(in thousands, except percentages) 2025 2024 $ %
57
Table of Contents
General and administrative expenses increased $17.9 million, or 30%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024. This was primarily due to increases of $12.2 million in personnel-related and stock-based compensation costs, $1.0 million in technology expenses, and $0.7 million in insurance and other costs, all attributable to Company growth. Additional increases include $2.0 million in professional and outside services spend, primarily driven by transaction costs incurred related to acquisitions, $1.3 million for travel and entertainment costs primarily related to the Company’s annual event, and $0.7 million in warehouse relocation costs related to the move of certain hardware manufacturing operations.
Convertible Notes Fair Value Adjustment
In April and June 2024, the September 2021 Convertible Notes and the July 2021 Convertible Notes, respectively, were converted to common stock. As a result, the Company recorded no gain or loss associated with the Convertible Notes fair value adjustment for the year ended December 31, 2025. The Company recorded a $0.6 million loss associated with the Convertible Notes fair value adjustment for the year ended December 31, 2024.
Derivative Liability Fair Value Adjustment
In June 2024, the holders of the July 2021 Convertible Notes converted their notes and accrued interest to common stock and the embedded derivative liability was settled as a result of the conversion. As a result, the Company recorded no gain or loss and a $1.7 million loss associated with the derivative liability fair value adjustment for the years ended December 31, 2025 and 2024, respectively.
Loss on Settlement of Convertible Notes
In April and June 2024, the September 2021 Convertible Notes and the July 2021 Convertible Notes, respectively, were converted to common stock. As a result, the Company recorded no gain or loss related to the settlement of the September 2021 Convertible Notes and July 2021 Convertible Notes for the year ended December 31, 2025. The Company recorded a $0.4 million loss associated with the settlement of the July 2021 Convertible Notes and the September 2021 Convertible Notes for the year ended December 31, 2024.
Gain on Settlement of Derivative Liability
In June 2024, the holders of the July 2021 Convertible Notes converted their notes and accrued interest to common stock and the derivative liability was settled as a result of the conversion. As a result, the Company recorded no gain or loss related to the settlement of the derivative liability for the year ended December 31, 2025. The Company recorded a $1.9 million gain related to the settlement of the derivative liability upon conversion of the July 2021 Convertible Notes for the year ended December 31, 2024.
Gain on Change in Fair Value of Investments
In April 2025, an observable price change related to the conversion of the Related Party SAFE into the Related Party Investment took place. As a result, a $0.9 million gain related to the observable price change was recognized during the year ended December 31, 2025.
In addition, in May 2025, the Company entered into a series of transactions with Aura, which included a $25.0 million convertible note investment by the Company into Aura. The Company elected to apply the fair value option in accordance with ASC 825, Financial Instruments. As a result, a $0.3 million loss related to the revaluation of the Convertible Note Investment was recognized during the year ended December 31, 2025.
In July 2024, an observable price change related to our investment in a warrant held to purchase shares of preferred stock of a data revenue partner took place. The observable price change resulted in a fair value adjustment and gain of $5.4 million recorded for the year ended December 31, 2024.
Interest Income
Interest income increased $7.7 million, or 128%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024, resulting from higher average gross yields attributable to an increased cash and cash equivalents balance.
58
Table of Contents
Other Income (Expense), Net
Other income (expense), net includes U.S. IPO transaction costs, foreign exchange gains and losses, and interest expense associated with the July 2021 Convertible Notes and the convertible notes issued to investors in June 2025 (the “June 2025 Convertible Notes”).
Other income (expense), net increased $6.7 million, or 93%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024. This was primarily driven by a $5.6 million decrease in transaction costs incurred in the prior period in connection with our U.S. IPO, a $1.9 million increase in foreign exchange gains, and a $0.3 million decrease in other costs. This was partially offset by a $1.1 million increase in interest expense related to the June 2025 Convertible Notes.
Provision for (Benefit from) Income Taxes
We recognized an income tax benefit of $118.2 million during the year ended December 31, 2025, compared to an income tax benefit of $0.1 million during the year ended December 31, 2024.
Our income tax benefit consisted primarily of a $118.4 million benefit related to the release of a valuation allowance on our U.S. deferred tax assets during the year ended December 31, 2025. We regularly assess the need for a valuation allowance on our deferred tax assets. In making this assessment, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all the deferred tax assets will not be realized. As of December 31, 2025, based on all available positive and negative evidence, having demonstrated sustained U.S. profitability, which is objective and verifiable, and taking into account anticipated future earnings, we have concluded it is more likely than not that we will realize our U.S. federal and states deferred tax assets, with the exception of California state and Canadian tax credits. We continue to maintain a valuation allowance against these deferred tax assets as they have not met the “more likely than not” realization criterion.
Key Performance Indicators
We review several operating metrics, including the following KPIs, to evaluate our business, measure our performance, identify trends affecting our business, develop financial forecasts, and make strategic decisions. We believe these KPIs are useful to investors because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making, and they may be used by investors to help analyze the health of our business. Key operating metrics are presented in millions, except ARPPC, Average Revenue per Paying Subscription (“ARPPS”) and Average Sales Price (“ASP”), however percentage changes are calculated based on actual results. As a result, percentage changes may not recalculate based on figures presented due to rounding. Please refer to “Results of Operations” for additional metrics management reviews in conjunction with the consolidated financial statements.
59
Table of Contents
Key Operating Metrics
As of and for the year ended December 31,
(in millions, except ARPPC, ARPPS and ASP)
Net hardware units shipped 4.2 3.9 7 %
(1) Excludes revenue related to bundled Life360 subscription and hardware offerings of $(0.8) million for the year ended December 31, 2025, and $(4.6) million for the year ended December 31, 2024.
(2) Excludes revenue related to bundled Life360 subscription and hardware offerings of $0.7 million for the year ended December 31, 2025, and $4.3 million for the year ended December 31, 2024.
Annualized Monthly Revenue
We use Annualized Monthly Revenue (“AMR”) to identify the annualized monthly value of active customer agreements at the end of a reporting period. AMR includes the annualized monthly value of subscription, data and partnership agreements. All components of these agreements that are not expected to recur are excluded. This does not represent revenue under GAAP on an annualized basis, as the operating metric can be impacted by start and end dates and renewal rates. AMR as of December 31, 2025, and 2024 was $478.0 million and $367.6 million, respectively, representing an increase of 30% year-over-year, which is largely attributable to continued subscriber growth as well as an increase in other recurring revenue.
Monthly Active Users
We have a large and growing global member base as of December 31, 2025. A Life360 monthly active user (“MAU”) is defined as a unique member who engages with our Life360 branded services each month, which includes both paying and non-paying members, and excludes certain members who have a delayed account setup. As of December 31, 2025 and 2024, we had approximately 95.8 million and 79.6 millionMAU on the Life360 platform, respectively, representing an increase of 20% year-over-year. We believe this has been driven by continued strong new member growth and retention.
Paying Circles
We define a Paying Circle as a group of Life360 members with a paying subscription who have been billed as of the end of period. Each subscription covers all members in the payor’s Circle so everyone in the Circle can utilize the benefits of a Life360 membership, including access to premium location, driving, digital and emergency safety insights and services.
As of December 31, 2025 and 2024, we had approximately 2.8 millionand 2.3 million paid subscribers to services under our Life360 brand, respectively, representing an increase of 26% year-over-year. We grow the number of Paying Circles by increasing our free member base, converting free members to subscribers, and retaining them over time with the provision of high-quality family connectivity and safety services.
Average Revenue per Paying Circle
We define ARPPC as annualized subscription revenue recognized and derived from the Life360 mobile application, excluding revenue related to bundled Life360 subscription and hardware offerings, for the reported period, divided by the Average Paying Circles during the same period. Average Paying Circles are calculated by adding the number of Paying Circles as of the beginning of the period to the number of Paying Circles as of the end of the period, and then dividing by two.
60
Table of Contents
For the years ended December 31, 2025 and 2024, our ARPPC was $136.63 and $128.00, respectively, representing a 7% increase year-over-year.
ARPPC is a key indicator utilized by the Company to determine our effectiveness at monetizing Paying Circles through tiered product offerings. The year-over-year growth in ARPPC primarily reflects U.S. price increases for new and existing annual subscribers implemented in the second half of 2024 and continuing into 2025, a shift in product mix toward higher-priced offerings, and the introduction of higher-priced membership tiers across select international markets throughout 2024 and 2025.
Subscriptions
We define subscriptions as the number of paying subscribers associated with the Life360 and Tile brands who have been billed as of the end of the period.
As of December 31, 2025 and 2024, we had approximately 3.4 million and 2.9 million paid subscribers to services under Life360 and Tile brands, respectively, representing an increase of 17% year-over-year.
We grow the number of subscriptions by selling hardware units and increasing our free member base, converting free members to subscribers, and retaining them over time with the provision of location tracking and high-quality family and safety services.
Average Revenue per Paying Subscription
We define ARPPS as annualized total subscription revenue recognized and derived from Life360 and Tile subscriptions, excluding revenue related to bundled Life360 subscription and hardware offerings, for the reported period divided by the average number of paying subscribers during the same period. The average number of paying subscribers is calculated by adding the number of paying subscribers as of the beginning of the period to the number of paying subscribers as of the end of the period, and then dividing by two. Paying subscribers represent subscribers who have been billed as of the end of the period.
ARPPS for the years ended December 31, 2025 and 2024 was $118.17 and $106.16, respectively, representing an increase of 11% year-over-year.
ARPPS has increased year-over-year as a result of U.S. price increases for new and existing annual subscribers implemented in the second half of 2024 and continuing into 2025, a shift in product mix towards higher-priced offerings, and the introduction of higher-priced membership tiers across select international markets throughout 2024 and 2025.
Net Hardware Units Shipped
Net hardware units shipped represents the number of tracking devices sold during a period, excluding certain hardware units related to bundled Life360 subscription and hardware offerings, net of returns by our retail partners and directly to consumers. Selling units contributes to hardware revenue and ultimately increases the number of members eligible for a subscription.
For the years ended December 31, 2025 and 2024, Life360 sold approximately 4.2 million and 3.9 million, respectively, representing a 7% increase year-over-year. The increase in net hardware units shipped was primarily due to an increase in online retail sales.
Net Average Sales Price
To determine the net ASP of a unit, we divide hardware revenue recognized, excluding revenue related to bundled Life360 subscription and hardware offerings, for the reported period by the number of net hardware units shipped during the same period. ASP is largely driven by the price we charge customers, including the price we charge our retail partners, net of customer allowances, and directly to consumers.
For the years ended December 31, 2025 and 2024, the net ASP of a unit was $12.25 and $13.72, respectively, representing an 11% decrease year-over-year. The decrease in net ASP was primarily due to a shift in channel mix and an increase in discounts.
61
Table of Contents
Liquidity and Capital Resources
As of December 31, 2025, we had cash and cash equivalents of $494.3 million and restricted cash of $1.6 million. As of December 31, 2024, we had cash and cash equivalents of $159.2 million and restricted cash of $1.2 million. The increase in cash and cash equivalents was primarily related to the issuance of the June 2025 Convertible Notes and positive net cash provided by operating activities for the year ended December 31, 2025.
We believe our existing cash and cash equivalents, together with cash generated from subscriptions, hardware tracking devices, partnerships, including through the placement of ads within our platform, and the sale of aggregated, non-personally identifiable data for data insight purposes will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. We may from time to time seek to raise additional capital based on a variety of factors, including our capital requirements and the relative favorability of conditions in the capital markets. If we are unable to raise additional capital on terms acceptable to us or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, financial condition and results of operations.
Our cash flow activities were as follows for the periods presented (in thousands):
Year Ended December 31,
Operating Activities
Our primary sources of operating cash are cash collections from our paying members for subscriptions to our platform, hardware tracking device sales, partnership revenue, which includes advertising, and revenue generated from the sale of aggregated, non-personally identifiable data for data insight purposes. Our primary uses of cash from operating activities are for employee-related expenditures, costs to acquire inventory, infrastructure-related costs, commissions paid to Channel Partners, and other marketing expenses.
A number of our members pay in advance for annual subscriptions, while a majority pay in advance for monthly subscriptions. Deferred revenue consists of the unearned portion of customer billings, which is recognized as revenue in accordance with our revenue recognition policy. As of December 31, 2025 and 2024, we had deferred revenue of $50.7 million and $45.2 million, respectively, of which $46.4 million and $39.9 million is expected to be recorded as revenue in the next 12 months, respectively, provided all other revenue recognition criteria have been met.
For the year ended December 31, 2025, net cash provided by operating activities was $88.6 million. The primary factors affecting our operating cash flows during this period were our net income of $150.8 million, impacted by $47.6 million of non-cash adjustments, and $14.6 million of cash used by changes in our operating assets and liabilities. The non-cash adjustments primarily consisted of stock-based compensation expense, and depreciation and amortization. The cash used by changes in our operating assets and liabilities was primarily due to increases in accounts receivable and prepaid expenses and other current assets. These cash outflows were offset by increases in accounts payable, inventory, and accrued expenses and other current liabilities.
For the year ended December 31, 2024, net cash provided by operating activities was $32.6 million. The primary factors affecting our operating cash flows were our net loss of $4.6 million, impacted by $48.4 million of non-cash adjustments, and $11.2 million of cash used by changes in our operating assets and liabilities. The non-cash adjustments primarily consisted of stock-based compensation expense, depreciation and amortization, and gain on the change in fair value of investment. The cash used by changes in our operating assets and liabilities was primarily due to an increase in accounts receivable, net, an increase in costs capitalized to obtain contracts with customers, and an increase in inventory. These amounts were partially offset by an increase in deferred revenue, and an increase in accrued expenses and other liabilities.
62
Table of Contents
Investing Activities
For the year ended December 31, 2025, net cash used in investing activities was $35.3 million, which primarily related to the $25.0 million Convertible Note Investment. Net cash used in investing activities also included capitalization of internally developed software costs in accordance with ASC 350-40, Intangibles - Goodwill and Other, Internal-Use Software, and cash paid for an acquisition. Refer to Note 6, "Business Combinations" for additional information on the acquisition.
For the year ended December 31, 2024, net cash used in investing activities was $10.1 million, which primarily related to the Related Party SAFE of $5.0 million, the capitalization of internally developed software costs of $3.9 million in accordance with ASC 350-40, Intangibles - Goodwill and Other, Internal-Use Software, and purchases of property and equipment of $1.2 million.
Financing Activities
For the year ended December 31, 2025, net cash provided by financing activities was $282.1 million, which primarily related to net proceeds of $320.0 million from the issuance of the June 2025 Convertible Notes offset by payments of $10.9 million for debt issuance costs. In connection with the issuance of the June 2025 Convertible Notes, the Company paid $33.7 million in capped call transactions. Refer to Note 8, "Convertible Notes" for more information on the June 2025 Convertible Notes and the June 2025 Capped Calls. Financing activities also included $62.8 million of employee taxes paid for the net settlement of equity awards, offset by $69.5 million of proceeds related to employee tax withholdings on restricted stock settlements and the exercise of stock options and warrants.
For the year ended December 31, 2024, net cash provided by financing activities was $67.3 million. This was primarily related to net proceeds of $93.0 million after deducting underwriting discounts and commissions from our U.S. IPO, which closed on June 6, 2024 and involved the sale of 3,703,704 shares of common stock. Additionally, financing activities also included $14.6 million of proceeds from the exercise of options and warrants and restricted stock settlements, offset by $34.0 million of taxes paid for the net settlement of equity awards, and $6.3 million in payments related to the U.S. IPO.
Obligations and Other Commitments
Our principal commitments consist of obligations under our operating leases for office space, and other purchase commitments. Information regarding our non-cancellable lease and other purchase commitments as of December 31, 2025, can be found in Note 7, "Balance Sheet Components" and Note 10, "Commitments and Contingencies" to our consolidated financial statements.
Critical Accounting Policies and Significant Management Estimates
We prepare our consolidated financial statements in accordance with GAAP. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected. We believe that of our significant accounting policies, which are described in Note 2, "Summary of Significant Accounting Policies" to our consolidated financial statements, the following accounting policies, and specific estimates involve a greater degree of judgment and complexity.
Revenue Recognition
We derive revenue from subscription fees, the sale of hardware tracking devices and accessories, and other revenue. We sell subscriptions to our platform through arrangements that are generally monthly to annual in length. Our arrangements are generally non-cancellable and non-refundable. Our subscription arrangements do not provide customers with the right to take possession of the software supporting the platform and, as a result, are accounted for as service arrangements.
63
Table of Contents
While most of our sales arrangements contain standard terms and conditions, certain arrangements contain non-standard terms and conditions and include promises to transfer multiple goods or services. As a result, significant interpretation and judgment are sometimes required to determine the appropriate accounting for these transactions, including: (1) whether related performance obligations are considered distinct and should be accounted for separately versus together, (2) how the price should be allocated among separate performance obligations, and when to recognize revenue for each performance obligation; (3) developing an estimate of the stand-alone selling price (“SSP”), of each distinct performance obligation; and (4) estimating and accounting for variable consideration, which may include sales incentives and investment.
Some of our contracts with customers contain multiple performance obligations, primarily hardware and subscription services for hardware tracking devices. For arrangements with multiple performance obligations where the contracted price differs from the SSP for any distinct good or service, we may be required to allocate the transaction price to each performance obligation using our best estimates for the SSP. Our process for determining the SSP considers multiple factors including consumer behaviors, our internal pricing model, and cost-plus margin, and may vary depending upon the facts and circumstances related to each performance obligation. For business-to-business hardware sales, we will estimate the expected consideration amount after credits and discounts.
We provide our customers with incentives through various programs including promotional agreements and marketing development agreements. Sales incentives are considered variable consideration, which we estimate and record as a reduction to revenue. Incentives are influenced by historical experience, projected sales data, and contractual terms.
Any change in judgments with respect to these assumptions and estimates could impact the timing or amount of revenue recognition.
Income Taxes
Management is required to exercise judgment in determining our provision for income taxes. The provision for income taxes is determined by taking into account guidance related to uncertain tax positions. Judgment is required in assessing the timing and amounts of deductible and taxable items.
Deferred tax assets are amounts available to reduce income taxes payable on taxable income in future years and are initially recognized at enacted tax rates. We regularly assess the need for a valuation allowance against our deferred tax assets. In making that assessment, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets as well as the nature of the deferred tax attribute to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized. For the year ended December 31, 2025, the valuation allowance was released on U.S. and state deferred tax assets, with the exception of California state and Canadian tax credits, due to positive evidence that the assets are more likely than not to be realized in future years. The Company will continue to assess all available evidence during future periods to evaluate any changes to the realization of its deferred tax assets. All of the factors that the Company considers in evaluating whether and when to establish or release all or a portion of the deferred tax asset valuation allowance involve significant judgment.
Although we believe that we have adequately reserved for our uncertain tax positions, we can provide no assurance that the final tax outcome of these matters will not be materially different. We make adjustments to these reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences may affect the provision for income taxes in the period in which such determination is made and could have a material impact on our financial condition and results of operations.
Recent Accounting Pronouncements
See Note 2, "Summary of Significant Accounting Policies" to our consolidated financial statements included in Item 8 of Part II hereof for a discussion of recent accounting pronouncements.
64
Table of Contents
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates.
Interest Rate Risk
As of December 31, 2025 and December 31, 2024, we had $494.3 million and $159.2 million, respectively, of cash and cash equivalents invested in money market funds. Our cash and cash equivalents are held for working capital purposes. As of December 31, 2025 and December 31, 2024, a hypothetical 10% relative change in interest rates would not have a material impact on our consolidated financial statements.
Foreign Currency Exchange Risk
Our reporting currency and functional currency is the U.S. dollar. The majority of our sales are denominated in U.S. dollars, and therefore our revenue is not currently subject to significant foreign currency risk. Our operating expenses are denominated in the currencies of the countries in which our operations are located, which is primarily in the U.S. Our consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. To date, we have not entered into any active hedging arrangements with respect to foreign currency risk or other derivative financial instruments, although we may choose to do so in the future. We do not believe that a hypothetical 1,000 basis-point increase or decrease in the relative value of the U.S. dollar to other currencies would have a material effect on our operating results.
Inflation Risk
We do not believe that inflation has had a material effect on our business, results of operations, or financial condition. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability or failure to do so could harm our business, results of operations, or financial condition.
Item 8. Financial Statements and Supplementary Data.
Index to Consolidated Financial Statements
Page
Financial Statements
Consolidated Balance Sheets 68
Consolidated Statements of Operations and Comprehensive Income (Loss) 69
Consolidated Statements of Stockholders’ Equity 70
Consolidated Statements of Cash Flows 71
Notes to Consolidated Financial Statements 73
65
Report of Independent Registered Public Accounting Firm
To the stockholders and the Board of Directors of Life360, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Life360, Inc. and subsidiaries (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive income (loss), stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 2, 2026, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Subscription revenue — Refer to Note 2 to the financial statements
Critical Audit Matter Description
The Company derives a significant amount of its revenue from subscription sales. Subscriptions are considered single combined performance obligations and the subscription fees are fixed and recognized on a straight-line basis over the non-cancellable contractual term of the agreement. During the year ended December 31, 2025, the Company recognized subscription revenue of $369.3 million.
We identified subscription revenue as a critical audit matter given the significant volume of transactions. This required an increased extent of audit effort in performing procedures and evaluating audit evidence relating to the accuracy and occurrence of subscription revenue.
66
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company's subscription revenue included the following, among others:
•We tested the effectiveness of controls relating to the subscription revenue recognition process, including controls over the accuracy and occurrence of subscription revenue recognized.
•We tested the internal listing of subscriptions sold used by the Company to calculate subscription revenue by comparing the subscriptions sold to third-party information and cash receipts.
•We recalculated the amount of subscription revenue recorded using the internal listing of subscriptions sold.
/s/ Deloitte & Touche LLP
San Francisco, California
March 2, 2026
We have served as the Company's auditor since 2023.
67
Table of Contents
Life360, Inc.
Consolidated Balance Sheets
(Dollars in U.S. $, in thousands, except share and per share data)
Assets
Current Assets:
Costs capitalized to obtain contracts, net 1,211 1,098
Prepaid expenses and other current assets 20,050 14,599
Costs capitalized to obtain contracts, noncurrent 869 1,049
Prepaid expenses and other assets, noncurrent(2)(3) 48,480 21,611
Operating lease right-of-use asset 335 683
Deferred tax assets, net 126,418 —
Liabilities and Stockholders’ Equity
Current Liabilities:
Accrued expenses and other current liabilities 42,002 32,015
Convertible notes, net, noncurrent 310,386 —
Other liabilities, noncurrent — 359
Commitments and Contingencies (Note 10)
Stockholders’ Equity
Accumulated other comprehensive income 48 44
Total Liabilities and Stockholders’ Equity $ 959,688 $ 441,580
(1) Includes related party receivables of $3 and $55 as of December 31, 2025 and December 31, 2024, respectively.
(2) Includes $24,726 and zero measured using the fair value option as of December 31, 2025 and December 31, 2024, respectively, related to the Convertible Note Investment. Refer to Note 5, "Fair Value Measurements" for additional information.
(3) The balance as of December 31, 2025 includes the $5,882 Related Party Investment and the $3,898 Related Party Warrant. The balance as of December 31, 2024 includes the $5,000 Related Party SAFE and the $3,898 Related Party Warrant. Refer to Note 5, "Fair Value Measurements" and Note 15, "Related-Party Transactions" for additional information.
(4) Includes related party deferred revenue, current of $780 and $877 as of December 31, 2025 and December 31, 2024, respectively.
(5) Includes related party deferred revenue, noncurrent of $2,242 and $3,021 as of December 31, 2025 and December 31, 2024, respectively.
See accompanying notes to the consolidated financial statements.
68
Table of Contents
Life360, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Dollars in U.S. $, in thousands, except share and per share data)
Year Ended December 31,
Operating expenses:
Other income (expense):
Convertible notes fair value adjustment — (608) (684)
Derivative liability fair value adjustment — (1,707) (116)
Loss on settlement of convertible notes — (440) —
Gain on settlement of derivative liability — 1,924 —
Gain on change in fair value of investments(4) 609 5,389 —
Provision for (benefit from) income taxes (118,173) (71) 616
Net income (loss) per share, basic (Note 17) $ 1.95 $ (0.06) $ (0.42)
Net income (loss) per share, diluted (Note 17) $ 1.77 $ (0.06) $ (0.42)
Comprehensive income (loss)
Change in foreign currency translation adjustment 4 35 15
(1) Includes related party revenue of $195, $55, and zero for the years ended December 31, 2025, 2024, and 2023, respectively.
(2) Includes related party revenue of $890, zero, and zero for the years ended December 31, 2025, 2024, and 2023, respectively.
(3) Includes related party cost of revenue of $137, zero, and zero for the years ended December 31, 2025, 2024, and 2023, respectively.
(4) Includes a related party gain of $882, zero, and zero for the years ended December 31, 2025, 2024, and 2023, respectively.
(5) Includes related party other expense of zero, $5,498, and zero for the years ended December 31, 2025, 2024, and 2023, respectively.
See accompanying notes to the consolidated financial statements.
69
Table of Contents
Life360, Inc.
Consolidated Statements of Stockholders’ Equity
(Dollars in U.S. $, in thousands, except share and per share data)
Shares Amount
Vesting of restricted stock units 1,980,980 2 (2) — — — —
Repayment of notes due from affiliate — — 78 274 — — 352
Stock-based compensation expense — — 38,512 — — — 38,512
Interest accrued relating to notes due from affiliates — — — 40 — — 40
Change in foreign currency translation adjustment — — — — — 15 15
Vesting of restricted stock units 2,315,587 2 (1) — — — 1
Stock-based compensation expense — — 42,983 — — — 42,983
Change in foreign currency translation adjustment — — — — — 35 35
Exercise of warrants 7,205 — — — — — —
Vesting of restricted stock units 2,379,350 2 (2) — — — —
Stock-based compensation expense — — 56,781 — — — 56,781
Shares issued in connection with an acquisition 22,252 — 1,000 — — — 1,000
Change in foreign currency translation adjustment — — — — — 4 4
70
Table of Contents
Life360, Inc.
Consolidated Statements of Cash Flows
(Dollars in U.S. $, in thousands)
Year Ended December 31,
Cash Flows from Operating Activities:
Amortization of costs capitalized to obtain contracts 1,297 1,268 2,125
Amortization of operating lease right-of-use asset 348 331 842
Compensation expense in connection with revesting notes — — 73
Convertible notes fair value adjustment — 608 684
Derivative liability fair value adjustment — 1,707 116
Loss on settlement of convertible notes — 440 —
Gain on settlement of derivative liability — (1,924) —
Gain on change in fair value of investments(1) (609) (5,389) —
Provision for credit losses 799 300 —
Inventory write-off — — 916
Adjustment in connection with membership benefit — — (2,172)
Deferred income taxes (118,354) — —
Changes in operating assets and liabilities, net of acquisition:
Costs capitalized to obtain contracts, net (1,231) (1,571) (1,905)
Accrued expenses and other current liabilities 9,312 4,504 2,193
Other liabilities, noncurrent (359) (364) (498)
Cash Flows from Investing Activities:
Cash paid for acquisition (2,825) — —
Purchase of property and equipment (1,792) (1,187) (506)
Related Party SAFE — (5,000) —
Convertible note investment (25,000) — —
Cash Flows from Financing Activities:
Indemnity escrow payment in connection with an acquisition — — (13,128)
Taxes paid related to net settlement of equity awards (62,836) (33,995) (14,033)
Payments of U.S. initial public offering issuance costs — (6,292) —
Proceeds from repayment of notes due from affiliates — — 314
71
Table of Contents
Life360, Inc.
Repayment of convertible notes — — (3,919)
Proceeds from issuance of convertible senior notes 320,000 — —
Payments of debt issuance costs (10,884) — —
Purchase of capped calls (33,728) — —
Supplemental disclosure:
Cash paid during the period for interest — 46 640
Non-cash investing and financing activities:
Liability incurred in connection with the acquisition of Fantix, Inc. 675 — —
Conversion of September 2021 Convertible Notes to common stock — 3,548 —
Stock-based compensation included in internally developed software 1,321 714 —
Related Party Warrant — 3,898 —
Conversion of Related Party SAFE to Related Party Investment 5,000 — —
(1) Includes a related party gain of $882, zero, and zero for the years ended December 31, 2025, 2024, and 2023, respectively.
The following table presents the cash, cash equivalents, and restricted cash reported within the consolidated statements of cash flows shown above:
See accompanying notes to the consolidated financial statements.
72
Table of Contents
Life360, Inc.
Notes to Consolidated Financial Statements
1. Nature of Business
Life360, Inc. (the “Company”) is a leading technology platform connecting millions of people throughout the world to the people, pets, and things they care about most. The Company has created a new category at the intersection of family, technology, and safety to help keep families connected and safe. The Company’s core offering, the Life360 mobile application, includes features like communications, driving safety, digital safety, and location sharing. Beyond the everyday, Life360 also provides much-needed protection and saves lives, which is crucial for families in emergency situations such as natural disasters, vehicle collisions, physical property theft, and digital identity theft. The Life360 mobile application operates under a “freemium” model where its core offering is available to members at no charge, with additional membership subscription options that are available but not required.
In addition to the Life360 mobile application, the Company also offers hardware tracking devices through the sale of Tile by Life360, Inc. (“Tile”) and Life360 Pet GPS products to keep members close to the people, pets, and things they care about most. The Company’s suite of product and service offerings, including the Life360 and Tile mobile applications, and related third-party services, is system and platform-agnostic, allowing its products and services to work seamlessly for its members, regardless of the devices they use.
The Company also generates revenue through partnerships, including through the placement of ads within our platform, and the sale of aggregated, non-personally identifiable data for data insight purposes.
Management and Board of Directors Transitions
On August 11, 2025, the Company announced that its Board of Directors appointed Lauren Antonoff, then Chief Operating Officer, as the Company’s Chief Executive Officer and a member of the Company’s Board of Directors, and Chris Hulls, the Company’s Co-Founder and then Chief Executive Officer, as Executive Chairman of the Board.
Effective the same date, the Company’s Board of Directors appointed Mark Goines as Lead Independent Director.
U.S. Initial Public Offering (“U.S. IPO”)
On June 6, 2024, the Company completed its U.S. IPO and began trading on the Nasdaq Global Select Market under the trading symbol “LIF”. The Company issued and sold 3,703,704 shares of common stock and certain selling securityholders sold 2,908,796 shares of common stock (including 862,500 shares sold pursuant to the underwriters’ full exercise of their option to purchase additional shares) in each case at an offering price of $27.00 per share. The Company received net proceeds of $93.0 million after deducting underwriting discounts and commissions of $7.0 million. An additional $5.5 million of expenses were paid on behalf of selling securityholders. Refer to Note 15, "Related-Party Transactions" for further details. The Company did not receive any proceeds from the sale of shares of common stock by the selling securityholders.
In connection with the U.S. IPO, the Company restated its certificate of incorporation to increase the authorized number of shares of its common stock from 100,000,000 shares to 500,000,000 shares.
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The consolidated financial statements and accompanying notes have been prepared in accordance with generally accepted accounting principles in the U.S., or (“GAAP”), are presented in U.S. dollars unless otherwise stated, and include the accounts of the Company and its wholly owned subsidiaries.All inter-company transactions and balances have been eliminated.
During the current period, the Company revised its presentation of Interest income in the consolidated statements of operations and comprehensive income (loss) to provide more meaningful information to financial statement users. Previously, Interest income was included within Other income (expense), net. Comparative prior period amounts have been reclassified to conform to the current period presentation. The reclassification had no impact on net income (loss).
73
Table of Contents
Life360, Inc.
Notes to Consolidated Financial Statements
Use of Estimates
The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, net revenue, and expenses. Significant items subject to such estimates, judgments, and assumptions include:
•revenue recognition, including the determination of selling prices for distinct performance obligations sold in multiple performance obligation arrangements, the period over which revenue is recognized for certain arrangements, and estimated delivery dates for orders with title transfer upon delivery;
•allowance for credit losses and product returns;
•promotional and marketing allowances;
•inventory valuation;
•average useful customer life;
•valuation of stock-based awards, including market-based restricted stock units (“MRSUs”);
•achievement of performance-based restricted stock units (“PRSUs”);
•legal contingencies;
•impairment of long-lived assets and goodwill;
•valuation of non-cash consideration, contingent consideration, investments, convertible notes, and embedded derivatives;
•useful lives of long-lived assets; and
•income taxes including valuation allowances on deferred tax assets.
The Company bases its estimates and judgments on historical experience and on various assumptions that it believes are reasonable under the circumstances. Actual results could differ significantly from those estimates.
Recently adopted accounting pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The updates in this ASU are effective for annual periods beginning after December 15, 2024, and can be applied either retrospectively or prospectively. The Company adopted the ASU and has opted for retrospective application to our income tax disclosures as presented in Note 14, "Income Taxes". The adoption of this ASU did not have a material impact on the Company’s financial position or results of operations. Prior-year income tax disclosures for 2024 and 2023 have been updated to conform to the current period presentation.
Accounting pronouncements not yet adopted
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270) Narrow-Scope Improvements. The ASU clarifies and reorganizes interim reporting guidance, including disclosure requirements related to events occurring since the end of the most recent annual reporting period, and improves the presentation and usability of interim financial statement disclosures. The ASU is effective for interim reporting periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its interim financial reporting and does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.
In September 2025, the FASB issued ASU 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract. The ASU narrows the scope of derivative accounting by excluding certain non-exchange-traded contracts whose terms are based on the normal operations or activities of one of the parties, and clarifies that share-based noncash consideration received from a customer in a revenue contract should be accounted for under ASC 606 until the right to the consideration becomes unconditional. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within those annual periods, with early adoption permitted. The Company does not expect the adoption of this ASU to have a material impact on its financial position or results of operations.
74
Table of Contents
Life360, Inc.
Notes to Consolidated Financial Statements
In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The ASU eliminates project stages and requires software cost capitalization to begin after management has authorized and committed to funding the software project and it is probable the project will be completed and used to perform the function intended. The ASU also requires additional property, plant and equipment disclosures for all capitalized software costs. The ASU is effective for annual periods beginning after December 15, 2027, and interim periods within those years, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The ASU introduces a practical expedient for estimating expected credit losses on current accounts receivable and current contract assets arising from revenue transactions from contracts with customers. The ASU is effective for annual periods beginning after December 15, 2025, and interim periods within those annual periods, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation (Subtopic 220-40): Disaggregation of Income Statement Expenses. The ASU requires the disclosure of additional information related to certain costs and expenses, including amounts of inventory purchases, employee compensation, and depreciation and amortization included in each income statement line item. The ASU is effective for the Company beginning in fiscal year 2027 and interim periods beginning in fiscal year 2028, with early adoption permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.
Revenue Recognition
The Company generates revenue from direct and indirect streams. Direct revenue includes subscription and hardware revenue, while indirect revenue consists of all other revenue sources, such as data and partnership, which includes advertising.
The Company recognizes revenue upon transfer of control of promised goods or services to customers at transaction price, an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. Transaction price is calculated as the net selling price of variable consideration, which may include estimates for future returns and sales incentives related to current period revenue. The Company determines revenue recognition through the following steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
Subscription Revenue
The Company’s subscription revenue is comprised of Life360 mobile application subscriptions and premium subscription service plans for hardware tracking devices. The Company’s subscription contracts with customers are established at the point of mobile application download and purchase as indicated through acceptance of the Company’s Terms of Use. The Company’s subscription agreements generally have monthly or annual contractual terms and are billed and paid in advance.
The cloud-based subscriptions are considered single combined performance obligations, consisting of multiple features that can be purchased separately, but which are bundled together and delivered to the customer as a combined output. The Company provides its customers with technical support along with unspecified updates and upgrades to the platform on an if and when available basis.
75
Table of Contents
Life360, Inc.
Notes to Consolidated Financial Statements
The premium subscription plan for hardware tracking devices is a distinct and separate performance obligation from the hardware. Subscription fees are fixed and recognized on a straight-line basis over the non-cancellable contractual term of the agreement, generally beginning on the date that the Company’s service is made available to the customer. The Company recognizes revenues on a straight-line basis because the customer receives and consumes the benefits of the service ratably throughout the contractual period. The Company’s contracts are generally non-cancelable and do not provide for refunds to customers in the event of cancellations.
Hardware Revenue
The Company’s hardware revenue consists of hardware and accessories, embedded software, customer support and unspecified upgrades and updates on a when and if-available basis, and includes amounts generated from a partnership with a related party, as described in Note 15, "Related-Party Transactions". The Company’s hardware and embedded operating system are considered one performance obligation as the embedded operation system is integral to the functionality of the hardware and only combined produce the essential functionality of the hardware. Revenue for the hardware and embedded software performance obligation is recognized when control is transferred to the customer. The allocated value of the unspecified updates and upgrades and customer support are recognized as hardware revenue ratably over the estimated economic life of the hardware. The Company offers certain rights of return and estimates return reserves based on historical experience, and the reserves are recorded as a reduction of revenue and an accrued liability. Amounts billed to customers for shipping and handling are classified as revenue, and the Company’s related shipping and handling costs incurred are classified as cost of revenue. Sales taxes collected from customers and remitted to respective governmental authorities are recorded as liabilities and are not included in revenue. The customers are billed upon shipment of hardware tracking devices.
The premium subscription service plans available for hardware tracking devices are separate and distinct from hardware performance obligations and are included in subscription revenue.
Other Revenue
The Company’s other revenue consists of data and partnership revenue, which includes advertising revenue.
Data revenue is generated primarily through an arrangement with a key data partner that provides location-based analytics to customers in the retail and real estate sectors, municipalities, and other private and public organizations (“Data Partner”). In January 2022, the Company announced a partnership agreement with a Data Partner, a prominent provider of aggregated analytics for the retail ecosystem, in which executives of the Company have an immaterial ownership interest through a passive investment vehicle. This agreement was amended and restated in August 2024, and the term was extended for a period of five years. As part of this partnership, the Data Partner will provide data processing and analytics services to the Company and will have the right to commercialize aggregated data related to place visits during the agreement term. The partnership agreement includes fixed and variable monthly revenue amounts, as well as quarterly minimum guarantees, for access to aggregated data for the duration of the five-year agreement. The Company has an obligation to provide aggregated user data over the term of the partnership agreement and recognizes revenue ratably over the performance period as data is delivered. In connection with the original agreement, the Data Partner issued the Company a warrant to purchase up to 5,100,167 shares of Series C Preferred Stock of the Data Partner (the “Data Revenue Partner Warrant”) at an exercise price of $4.90 per share. The Company estimates and includes variable consideration related to the Data Revenue Partner Warrant, in the transaction price at contract inception to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The partnership agreement has standard payment terms that require payment within 30 days.
The grant of the Data Revenue Partner Warrant is considered non-cash consideration, which the Company measured at fair value on the date of issuance. The warrant was valued using a Black-Scholes option pricing model, and the fair value at issuance of approximately $5.4 million has been included as variable consideration in the transaction price of the data partnership agreement, and is included in prepaid expenses and other assets, noncurrent and deferred revenue on the Company’s consolidated balance sheets. The fair value of the warrant included within deferred revenue is amortized to other revenue over the life of the agreement. Refer to the "Investments" section below for additional information regarding the Company's Data Revenue Partner Warrant.
76
Table of Contents
Life360, Inc.
Notes to Consolidated Financial Statements
Data revenue was $32.7 million, $26.6 million, and $21.6 million for the years ended December 31, 2025, 2024, and 2023, respectively.
Partnership revenue includes lead generation offerings and agreements with third parties that allow access to anonymized data insights or advertising on the Company’s mobile platform. Under these agreements, the Company may earn a percentage of the revenue generated from data insights or advertising spend. Revenue is recorded on a gross basis if the Company acts as the principal in the transaction, or a net basis if the Company acts as the agent. Variable amounts earned from partnership revenue arrangements are allocated to the month in which the partner’s related revenue is generated or advertising is delivered.
Partnership revenue also includes revenue related to the Company’s partnership with a related party. In 2024, the Company entered into a strategic partnership and series of transactions with a related party, including a partnership and revenue share agreement (the “Related Party Agreement”). Refer to Note 15, "Related-Party Transactions" for additional information. The Related Party Agreement includes revenue-share payments in which the related party will pay the Company a percentage of revenues earned from leveraging the new global location-tracking network service offering. In connection with the Related Party Agreement, the related party issued the Company a warrant to purchase up to 6,147,574shares of its common stock at an exercise price of $0.46 per share (the “Related Party Warrant”). The Company estimates and includes variable consideration related to the Related Party Warrant, in the transaction price at contract inception to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The Related Party Agreement has standard payment terms that require payment within 30 days.
The grant of the Related Party Warrant was considered non-cash consideration, which the Company measured at fair value on the date of issuance. The Related Party Warrant includes various performance-based vesting conditions based on revenue and operational milestones to be measured and assessed throughout the term of the agreement. As of December 31, 2025, 2,049,191 shares of the Related Party Warrant have vested. The warrant was valued using a Black Scholes option-pricing model, and the fair value of approximately $3.9 million has been included as consideration in the transaction price of the Related Party Agreement, and is also included in prepaid expenses and other assets, noncurrent and deferred revenue on the Company’s consolidated balance sheets. The fair value of the warrant included within deferred revenue is amortized to other revenue over the life of the agreement. The Company recognized $0.9 million, zero, and zeroin other revenue on the consolidated statements of operations and comprehensive income (loss) in connection with the Related Party Warrant during the years ended December 31, 2025, 2024, and 2023, respectively.
Partnership revenue was $35.7 million, $9.4 million, and $3.9 million for the years ended December 31, 2025, 2024, and 2023, respectively.
Performance Obligations
Some of the Company’s contracts with customers contain multiple performance obligations, primarily hardware and subscription services for hardware tracking devices and hardware bundles (bundled Life360 subscription and hardware offerings). For these contracts, the Company accounts for individual performance obligations separately if they are distinct and distinct within the context of the contract. The transaction price is allocated to the separate performance obligations on a relative stand-alone selling price (“SSP”) basis with the amounts allocated to ongoing services deferred and recognized over a period of time and amounts allocated to hardware tracking devices recognized at a point-in time with a portion of the consideration being allocated to application usage (maintenance) and support. The Company determines SSP based on observable, if available, prices for those related goods and services when sold separately. When such observable prices are not available, the Company determines SSP based on multiple factors including consumer behaviors, the Company’s internal pricing model, and relative costs incurred plus a normal margin. The factors may vary depending on the facts and circumstances related to each performance obligation.
77
Table of Contents
Life360, Inc.
Notes to Consolidated Financial Statements
Our hardware sales arrangements typically contain multiple performance obligations, consisting of the hardware sale, application usage, hardware support, and in some cases, premium subscriptions. The Company provides warranties of up to twelve months for products with manufacturing defects or hardware failures. As part of Tile Premium subscriptions, the Company offers warranties to end-users covering the contractual service period (up to 3 years) for products with manufacturing defects or hardware failures. The warranties are not sold separately and do not represent separate performance obligations. Payment terms and conditions vary by contract type and are billed either in advance or have a standard payment term generally requiring payment within 30 to 60 days. Therefore, such warranties are accounted for under ASC 460, Guarantees, and the estimated costs of warranty claims are generally accrued as cost of revenue in the period the related revenue is recorded.
Variable Consideration
The Company recognizes hardware revenue at the net sales price, which includes certain estimates for variable consideration with its customers. The Company’s variable consideration is primarily in the form of promotional agreements and marketing development fund agreements related to the hardware tracking devices.
These agreements are designed to enhance the sale of the Company’s products and consist of incentives to the Company’s customers. The Company estimates variable consideration using the expected value method. All forms of variable consideration are recorded as contra-revenue and a corresponding liability in its consolidated balance sheets. These estimates are based on the Company’s incentive program experience, historical and projected sales data and current contractual terms. The remaining portion of this liability is based on contractual amounts and does not require estimation.
Remaining Performance Obligations
Remaining performance obligations represent the amount of contracted future revenue not yet recognized as the amounts relate to undelivered performance obligations, including both deferred revenue and non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods. Revenue expected to be recognized in connection with remaining performance obligations was $207.1 million as of December 31, 2025, of which the Company expects 43% to be recognized over the next twelve months.
Cost of Revenue
Cost of subscription revenue primarily consists of expenses related to hosting the Company’s services and providing support to the Company’s free members and paying subscribers. These expenses include personnel-related costs associated with the Company’s cloud-based infrastructure and the Company’s customer support organization, third-party hosting fees, software and maintenance costs, outside services associated with the delivery of subscription services, amortization of acquired intangibles and allocated overhead, such as facilities, including rent, utilities, depreciation on equipment shared by all departments, credit card and transaction processing fees, and shared information technology costs. Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel.
Cost of hardware revenue consists of product costs, including hardware production, contract manufacturers for production, shipping and handling, packaging, fulfillment, personnel-related expenses, manufacturing and equipment depreciation, warehousing, tariff costs, customer support costs, credit card and transaction processing fees, warranty replacement, and write-downs of excess and obsolete inventory. Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel.
Cost of other revenue includes cloud-based hosting costs, as well as costs of product operations functions and personnel-related costs associated with the Company’s data and advertising platforms. Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel.
78
Table of Contents
Life360, Inc.
Notes to Consolidated Financial Statements
Costs Capitalized to Obtain Contracts
Costs capitalized to obtain contracts are comprised of commission payments in connection with annual subscription sales of the Company’s mobile application through a third-party store platform. These costs that are incremental and directly related to new customer sales contracts are accrued and capitalized upon execution of a non-cancelable customer contract, and subsequently expensed over the estimated period of benefit, which is currently estimated to be three years. The Company has elected the practical expedient under ASC 340-40 to expense incremental costs of obtaining a contract if the amortization periods is one year or less.
Accounts Receivable and Allowances
Accounts receivable are recorded at the invoiced amount, net of allowance for credit losses. The allowance for credit losses is based on the Company’s assessment of the collectibility of accounts by considering the age of each outstanding invoice, the collection history of each customer, and an evaluation of the current expected risk of credit loss based on current economic conditions and reasonable and supportable forecasts of future economic conditions over the life of the receivable. The Company assesses collectibility by reviewing accounts receivable on an aggregated basis where similar characteristics exist and on an individual basis when specific customers with collectibility issues are identified. As of December 31, 2025 and 2024, the allowance for credit losses was $0.1 million and $0.4 million, respectively. For the years ended December 31, 2025, 2024, and 2023, respectively, the provision for credit losses expense was $0.8 million, $0.3 million, and zero.
Included in accounts receivable, net are unbilled receivables, which are amounts that have not yet been invoiced to customers as of the balance sheet date, but are contractually owed to the Company.. As of December 31, 2025 and 2024, unbilled receivables were $10.3 million and $5.5 million, respectively.
Inventory and Contract Manufacturing
Inventory is comprised of raw materials and finished goods related to hardware tracking devices and accessories. Inventory is stated at the lower of cost or net realizable value on a weighted average basis. The Company assesses the valuation of inventory and writes down the value for estimated excess and obsolete inventory based upon estimates of future demand and market conditions.
The Company outsources a significant portion of its manufacturing to an independent contract manufacturer in Asia. A significant portion of its cost of revenue consists of inventory purchased from this manufacturer. The Company’s inventory is held at third party warehouses and the contract manufacturer premises. The Company’s manufacturer procures components and manufactures the Company’s products based on the demand forecasts provided. These forecasts are based on estimates of future demand for the Company’s products, which are in turn based on historical trends and an analysis from the Company’s sales and marketing organizations, adjusted for overall market conditions. Shipments of inventory from the contract manufacturer are recorded as finished goods inventory upon shipment when title and the significant risks and reward of ownership have passed to the Company.
Concentrations of Risk and Significant Customers
The Company’s business, operations, and financial results are subject to various risks and uncertainties, including adverse global economic conditions and competition in the Company’s industry that could adversely affect the Company’s business, financial conditions, results of operations and cash flows. These important factors, among others, could cause actual results to differ materially from any future results.
Major Customers
The Company’s customers primarily consist of individual consumers, who subscribe to the Company’s product offerings through its third-party platforms (each a “Channel Partner”), data and partnership revenue customers, and retail partners, who purchase hardware tracking devices from the Company and resell them directly to individual consumers. Any changes in customer preferences and trends or changes in terms of use of Channel Partners’ platforms could have an adverse impact on the Company’s results of operations and financial condition.
79
Table of Contents
Life360, Inc.
Notes to Consolidated Financial Statements
The Company derives its accounts receivable from revenue earned from customers located in the U.S. and internationally. Channel and retail partners account for the majority of the Company’s revenue and accounts receivable for all periods presented.
The following tables set forth the information about Channel Partners that processed revenue transactions and retail partners who accounted for more than 10% of revenue or accounts receivable, respectively:
Percentage of Revenue
Year Ended December 31,
Channel Partner (Apple) 52 % 53 % 53 %
Channel Partner (Google) 19 % 18 % 16 %
* Represents less than 10%
Percentage of Gross Accounts Receivable
As of December 31,
Channel Partner (Apple) 48 % *
Channel Partner (Google) 10 % 49 %
Data Partner A * 11 %
Retail Partner A 17 % 17 %
* Represents less than 10%
Supplier Concentration
The Company currently outsources the manufacturing of its hardware devices to a sole contract manufacturer. Although there are a limited number of manufacturers, management believes that other suppliers could provide similar manufacturing services on comparable terms.
Research and Development Costs
The Company charges costs related to research and development which consist primarily of personnel-related costs for its engineering, product, and design teams, material costs of building and developing prototypes for new products, mobile app development, and allocated overhead.
Sales and Marketing Costs
The Company’s sales and marketing expenses consist primarily of commissions to Channel Partners, personnel-related costs, brand marketing costs, lead generation costs, sales incentives, sponsorships, amortization of acquired intangibles, bad debt expense, and allocated overhead. Commission payments to Channel Partners in connection with annual subscription sales of the Company’s mobile application on third-party store platforms are considered to be incremental and recoverable costs of obtaining a contract with a customer and are either expensed as incurred or deferred and amortized over an estimated period of benefit of three years depending on the subscription type.
Advertising Expense
Advertising expenses are recorded in the period in which cost is incurred, and are presented within sales and marketing expense on the consolidated statements of operations. Advertising expense was $36.1 million, $23.8 million, and $28.6 million for the years ended December 31, 2025, 2024 and 2023, respectively.
80
Table of Contents
Life360, Inc.
Notes to Consolidated Financial Statements
Cash and Cash Equivalents
The Company considers all highly liquid investment securities with remaining maturities at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include deposit and money market funds. Money market mutual funds are valued using quoted market prices and therefore are classified within Level 1 of the fair value hierarchy.
Restricted Cash
The restricted cash, noncurrent balance of $1.6 million and $1.2 million as of December 31, 2025 and December 31, 2024, respectively, relates to cash deposits restricted under letters of credit issued on behalf of the Company in support of indebtedness to trade creditors incurred in the ordinary course of business.
Fair Value of Financial Instruments
The Company measures and reports certain assets and liabilities at fair value each reporting period using a fair value hierarchy that prioritizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The Company measures certain non-marketable equity securities and warrant investments at fair value on a nonrecurring basis in accordance with ASC 321, Investment - Equity Securities. Instruments are remeasured to fair value when observable price changes in orderly transactions for an identical or a similar investment of the same issuer occur.
The three levels of inputs that may be used to measure fair value are as follows:
Level 1 – Observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Valuations based on unobservable inputs to the valuation methodology and including data about assumptions market participants would use in pricing the asset or liability based on the best information available under the circumstances.
The recorded carrying amounts of certain financial instruments, including cash and cash equivalents, prepaid expenses, accounts payable, and accounts receivable as of December 31, 2025 and December 31, 2024, approximate fair value due to their short-term maturities. Refer to Note 5, "Fair Value Measurements" and Note 7, "Balance Sheet Components" for additional information on the assets and liabilities measured at fair value.
Property and Equipment, net
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Equipment, computer software, furniture, and product manufacturing equipment, which includes construction-in-process that is capitalized and depreciated when placed into service, have estimated useful lives ranging from three to five years. Leasehold improvements are amortized on a straight-line basis over the lesser of the estimated useful life or the term of the lease with expected renewals.
Costs of maintenance and repairs that do not improve or extend the lives of the respective assets are expensed as incurred. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the balance sheets and the resulting gain or loss is reported in other income (expense), net in the period realized.
81
Table of Contents
Life360, Inc.
Notes to Consolidated Financial Statements
Internally Developed Software
For development costs related to internally developed software projects, including costs incurred in connection with the development of new features added to the Life360 app, the Company capitalizes costs incurred during the application development stage, which begins after the completion of the preliminary project phase and when it is probable that the project will be completed and used as intended. Capitalized costs include personnel and related expenses for employees and fees paid to third-party contractors and vendors directly involved in the development effort. The capitalization of costs stops once the software is substantially complete and ready for its intended use. Costs related to preliminary project activities and post implementation activities are expensed as incurred. Internally developed software is amortized to cost of subscription revenue on a straight-line basis over its estimated useful life, which is generally three years. The Company capitalized $7.0 million, $4.7 million, and $1.7 million during the years ended December 31, 2025, 2024 and 2023, respectively. Capitalized costs are included within intangible assets, net on the consolidated balance sheets.
Lease Obligation
Operating lease right-of-use (“ROU”) assets and lease liabilities are recognized at the present value of the future lease payments at commencement date. The interest rate implicit in the Company’s operating leases is not readily determinable, and therefore an incremental borrowing rate is estimated to determine the present value of future payments. The estimated incremental borrowing rate factors in a hypothetical interest rate on a collateralized basis with similar terms, payments, and economic environments. Operating lease ROU assets also include any prepaid lease payments and lease incentives. ROU assets are assessed for impairment in accordance with ASC 360 whenever events or changes in circumstances indicate the carrying value may not be recoverable. As of December 31, 2025, 2024, 2023, respectively, no impairment expense related to ROU assets has been recognized.
The operating lease agreement contains rent concession, rent escalation, and option to renew provisions. Rent concession and rent escalation provisions are considered in determining the straight-line single lease cost to be recorded over the lease term. Single lease cost is recognized on a straight-line basis over the lease term commencing on the date the Company has the right to use the leased property. The lease term includes the option to extend or terminate the lease. The Company generally uses the base, non-cancellable, lease term when recognizing the lease assets and liabilities, unless it is reasonably certain that the renewal option will be exercised.
In addition, the Company’s operating lease agreement contains tenant improvement allowances from its landlord. These allowances are accounted for as lease incentives and decrease the Company’s ROU asset and reduce single lease cost over the lease term. Refer to Note 7, "Balance Sheet Components" for additional lease disclosures.
Restructuring and Other Charges
Restructuring generally includes significant actions involving employee-related severance charges, facilities consolidation, and contract termination costs. Employee-related severance charges are largely based upon substantive severance plans, while some are mandated requirements in certain foreign jurisdictions. Severance costs generally include severance payments, outplacement services, health insurance coverage, and legal costs. These charges are reflected in the period when both the actions are probable, at the balance sheet date, and the amounts are reasonably estimable.
On January 12, 2023, the Company announced a workforce restructure which resulted in a reduction of the Company’s workforce of approximately 14%. The Company incurred $0.2 million, and $4.0 million in non-recurring personnel and severance related expenses in connection with the restructuring during the years ended December 31, 2024 and 2023 respectively. As of December 31, 2024, all expenses incurred had been paid.
The restructuring costs are recognized in the consolidated statements of operations for the years ended December 31, 2024 and 2023 are as follows (in thousands). The Company did not incur non-recurring personnel and severance related expenses during the year ended December 31, 2025.
82
Table of Contents