Life360, Inc. (LIF)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations (MD&A) should be read in conjunction with our consolidated financial statements, related notes and other financial information appearing elsewhere in this Annual Report on Form 10-K. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements as a result of a variety of factors, including but not limited to those discussed in “Risk Factors” 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, 2024 compared to the year ended December 31, 2023 is presented below. A discussion of our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 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 29, 2024.

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.

56

Table of Contents

For the years ended December 31, 2024 and 2023, we generated:

•Total revenues of $371.5 million and $304.5 million, respectively, representing year-over-year growth of 22%;

•Subscription revenues of $277.8 million and $220.8 million, respectively, representing year-over-year growth of 26%;

•Hardware revenues of $57.6 million and $58.2 million, respectively, representing year-over-year decline of 1%;

•Other revenues of $36.0 million and $25.5 million, respectively, representing year-over-year growth of 41%;

•Gross profit of $279.2 million and $222.6 million, respectively, representing year-over-year growth of 25%; and

•Net loss of $4.6 million and $28.2 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, Jiobit and Tile brands. Our brand is trusted by approximately 80 million members as of December 31, 2024, 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.

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 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. Likewise, our acquisition of Jiobit enabled subscribers to track family members and pets wearing Jiobit devices via GPS-enabled trackers on the Jiobit app. We will continue to invest in and launch products where we see opportunities to grow our platform.

57

Table of Contents

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, 2024, we had approximately 455 full-time employees and approximately 114 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 United States 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 (Black Friday and Cyber Monday) and December (Christmas and Hanukkah) in large part due to seasonal holiday demand. As the majority of revenue is generated within the United States, 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 and 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.

Key Components of Our Results of Operations

The following discussion describes certain line items in our Consolidated Statements of Operations and Comprehensive Loss.

The Company currently operates as one reportable and operating segment because its chief operating decision maker (“CODM”), which is its Chief Executive Officer, reviews its financial information on a consolidated basis for purposes of making decisions regarding allocating resources and assessing performance. The Company has no segment managers who are held accountable by the CODM for operations, operating results, and planning for levels of components below the consolidated unit level.

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, Jiobit 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 the Jiobit and Tile hardware tracking devices and related accessories. For hardware and accessories, revenue is recognized at the time products are delivered. We sell hardware tracking devices and accessories through a number of channels including our websites, brick and mortar retail and online retail.

58

Table of Contents

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.

Cost of Revenue and Gross Margin

Cost of Subscription Revenue

Cost of subscription revenue primarily consists of expenses related to hosting our services and providing support to our free and paying subscribers. These expenses include personnel-related costs associated with our cloud-based infrastructure and our customer support organization, third-party hosting fees, software, and maintenance costs, outside services associated with the delivery of our subscription services, amortization of acquired intangibles and allocated overhead, such as facilities, including rent, utilities, depreciation on equipment shared by all departments, credit card and transaction processing fees, and shared information technology costs. Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel.

We plan to continue increasing the capacity and enhancing the capability and reliability of our infrastructure to support member growth and increased use of our platform. We expect that cost of revenue will increase in absolute dollars in future periods.

Cost of Hardware Revenue

Cost of hardware revenue consists of product costs, including hardware production, contract manufacturers for production, shipping and handling, packaging, fulfillment, personnel-related expenses, manufacturing and equipment depreciation, warehousing, tariff costs, customer support costs, credit card and transaction processing fees, warranty replacement, and write-downs of excess and obsolete inventory. Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel.

Cost of Other Revenue

Cost of other revenue includes cloud-based hosting costs, as well as costs of product operations functions and personnel-related costs associated with our data and advertising platforms. Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel.

Gross Profit and Gross Profit Margin

Our gross profit has been, and may in the future be, influenced by several factors, including timing of capital expenditures and related depreciation expense, increases in infrastructure costs, component costs, 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.

59

Table of Contents

Sales and Marketing

Our sales and marketing expenses consist primarily of commissions to the Company’s third-party platforms (each a “Channel Partner”), personnel-related costs, brand marketing costs, lead generation costs, sales incentives, sponsorships and amortization of acquired intangibles, and bad debt expense. Commission payments to Channel Partners in connection with annual subscription sales of the Company’s mobile application on third-party store platforms are considered to be incremental and recoverable costs of obtaining a contract with a customer and are deferred and typically amortized over an estimated period of benefit of two to three years depending on the subscription type.

We plan to continue to invest in sales and marketing to grow our member base and increase our brand awareness, including marketing efforts to continue to drive our business model. We expect that sales and marketing expenses will increase in absolute dollars in future periods and will fluctuate as a percentage of revenue. The trend and timing of sales and marketing expenses will depend in part on the timing of marketing campaigns.

General and Administrative

Our general and administrative expenses consist primarily of employee-related costs for our legal, finance, human resources, and other administrative teams, as well as certain executive officers. In addition, general and administrative expenses include allocated overhead, outside legal, accounting and other professional fees, change in fair value of contingent consideration for business combinations, and non-income-based taxes. We expect our general and administrative expenses will increase in absolute dollars as our business grows.

Other Income (Expense)

Convertible Notes Fair Value Adjustment

The Company issued convertible notes to investors in July 2021 (the “July 2021 Convertible Notes”), and as part of the purchase consideration related to the acquisition of Jiobit in September 2021 (the “September 2021 Convertible Notes” and together with the July 2021 Convertible Notes, the “Convertible Notes”). The September 2021 Convertible Notes were recorded at fair value and revalued at each reporting period prior to their conversion to common stock in April 2024.

Derivative Liability Fair Value Adjustment

Derivative liability fair value adjustment relates to the change in the fair value of the embedded conversion and redemption features associated with the July 2021 Convertible Notes prior to their conversion to common stock in June 2024.

Gain on Change in Fair Value of Investment

Gain on change in fair value of investment relates to the revaluation of a warrant held to purchase shares of preferred stock of a data revenue partner in connection with an observable price change.

Gain on Settlement of Derivative Liability

Gain on settlement of the 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.

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.

Other Income (Expense), net

Other income (expense), net consists of interest income earned on our cash and cash equivalents balances, foreign currency exchange (losses)/gains related to the remeasurement of certain assets and liabilities of our foreign subsidiaries that are denominated in currencies other than the functional currency of the subsidiary and foreign exchange transactions gains/(losses) and interest expense primarily related to the Convertible Notes, and our U.S. IPO transaction costs.

60

Table of Contents

Provision for (Benefit from) Income Taxes

Provision for (benefit from) income taxes consists of U.S. federal and state income taxes and foreign income taxes in jurisdictions in which we conduct business. We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized.

Results of Operations

The following tables set forth our consolidated statement of operations and comprehensive loss for the years ended December 31, 2024, 2023, and 2022 (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.

____________________

(1)Includes stock-based compensation expense as follows:

61

Table of Contents

The following table sets forth our results of operations as a percentage of revenue:

62

Table of Contents

Comparison of the years ended December 31, 2024 and 2023:

Revenue

Subscription revenue increased $57.1 million, or 26%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to a 19% growth in total subscriptions and a 25% growth in Paying Circles. Additionally, subscription revenue in the current period benefited from the impact of price increases for existing U.S. Android Life360 subscriptions, which were fully implemented during the three months ended June 30, 2023.

Hardware revenue decreased $0.6 million, or 1%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to a $4.6 million decrease in retail sales driven by a delay in a new product launch, which led to lower sales volume. This decline was partially offset by a $4.0 million decrease in discounts and returns.

Other revenue increased $10.5 million, or 41%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, due to a $5.5 million increase in partnership revenue, which includes advertising revenue, and a $5.0 million increase in data revenue, which was primarily attributable to the Amended and Restated Data Services and License Agreement with Placer.ai we entered into in July 2024 (the “A&R Placer Agreement”).

Cost of Revenue, Gross Profit, and Gross Margin

Cost of subscription revenue increased $10.0 million, or 32%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily related to increases of $4.0 million in technology expenses, $1.9 million in costs related to premium membership offerings, and $1.8 million benefit related to the discontinuation of certain battery related membership benefits recognized in 2023. The Company also saw increases of $1.8 million in personnel-related and stock-based compensation costs and $0.5 million in other cost of subscription revenue expenses, attributable to Company growth.

Subscription gross margin decreased to 85% during the year ended December 31, 2024 from 86% during the year ended December 31, 2023, primarily due to the discontinuation of certain battery-related membership benefits that positively impacted 2023.

63

Table of Contents

Cost of hardware revenue decreased by $0.2 million, remaining relatively flat during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to a decrease of $1.2 million in hardware product costs related to the reduced number of units sold and $0.7 million in costs related to the discontinuation of certain battery related membership benefits which took place in 2023. These decreases were partially offset by an increase of $1.1 million in hardware freight costs related to a shift in channel mix and $0.6 million in other fixed costs attributable to Company growth.

Hardware gross margin decreased to 18% during the year ended December 31, 2024 from 19% during the year ended December 31, 2023, primarily due to an increase in freight costs associated with the shift in channel mix, a decrease in units sold, and an increase in fixed hardware costs in line with Company growth.

Cost of other revenue increased by $0.6 million, or 16%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, due to an increase of $0.3 million in technology related expenses to support the existing customer base and $0.3 million in other costs associated with the growth in partnership revenue, which includes advertising revenue.

Other gross margin increased to 89% during the year ended December 31, 2024 from 86% during the year ended December 31, 2023, primarily due to revenue outpacing the increase in costs.

Research and Development

Research and development expenses increased $12.1 million, or 12%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023. This was primarily due to increases of $11.5 million in personnel-related and stock-based compensation costs, $4.1 million in technology and other expenses, $2.3 million in contractor spend, and $0.3 million in professional and outside services, attributable to Company growth. The increases were partially offset by a $4.3 million increase in capitalized costs related to internal use software, a $0.9 million increase related to a raw material inventory write-off which negatively impacted the year ended December 31, 2023, and a $0.9 million increase in capitalized construction in progress costs.

Sales and Marketing

Sales and marketing expenses increased $14.3 million, or 14%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023. This was primarily due to increases of $10.2 million in commissions to Channel Partners, which was inline with the 19% growth in subscriptions, $6.6 million in other marketing spend, $1.6 million in personnel-related and stock-based compensation costs, $0.7 million in technology and other expenses, and $0.4 million in professional and outside services, attributable to Company growth. The increases were partially offset by a $4.2 million decrease in paid user acquisition costs due to planned shifts in the allocation of spend to other marketing and a $1.0 million decrease in contractor spend.

General and Administrative

64

Table of Contents

General and administrative expense increased $8.1 million, or 15%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023. This was primarily due to increases of $3.6 million in personnel-related and stock-based compensation costs and $1.0 million in technology expenses, attributable to Company growth. In addition, the Company saw a $3.5 million increase in professional and outside service costs driven by public company compliance costs in connection with the U.S. IPO, ongoing public company compliance costs, and corporate and strategic matters.

Convertible Notes Fair Value Adjustment

For the years ended December 31, 2024 and 2023, the Company recorded losses associated with the convertible notes fair value adjustment of $0.6 million and $0.7 million, respectively. The changes in fair value were primarily driven by the share price volatility and reduction in time to convert.

Derivative Liability Fair Value Adjustment

For the years ended December 31, 2024 and 2023, the Company recorded losses associated with the derivative liability fair value adjustment of $1.7 million and $0.1 million, respectively. The changes were due to the revaluation of the derivative liability at each reporting period and are related to embedded redemption features bifurcated from the July 2021 Convertible Notes issued to investors.

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. A loss of $0.4 million associated with the settlement of the Convertible Notes was recorded for the year ended December 31, 2024. There were no such transactions during the year ended December 31, 2023.

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. A gain of $1.9 million associated with the settlement of the derivative liability was recorded for the year ended December 31, 2024. There were no such transactions during the year ended December 31, 2023.

Gain on Change in Fair Value of Investments

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. No such gains were recorded for the year ended December 31, 2023.

Other Income (Expense), Net

Other income (expense), net includes transaction costs, interest income, dividend income, foreign exchange losses, and interest expense associated with the July 2021 Convertible Notes. Other income (expense), net decreased $4.4 million, or 137%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023. The decrease was primarily driven by a $5.6 million increase in transaction costs incurred in connection with our U.S. IPO and $2.1 million increase due to unfavorable changes in the impact of currency revaluation. The increase in expenses were partially offset by a $3.0 million increase in dividend and interest income resulting from higher average gross yields primarily due to an increased cash and cash equivalents balance.

Provision for (Benefit from) Income Taxes

An income tax benefit of $0.1 million and an income tax provision of $0.6 million was recorded for the years ended December 31, 2024 and 2023, respectively. We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized.

65

Table of Contents

Key Performance Indicators

We review several operating metrics, including the following key performance indicators, to evaluate our business, measure our performance, identify trends affecting our business, develop financial forecasts and make strategic decisions. We believe these key performance indicators are useful to investors because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making, and they may be used by investors to help analyze the health of our business. Key operating metrics are presented in millions, except ARPPC, Average Revenue per Paying Subscription (“ARPPS”) and Average Sales Price (“ASP”), however percentage changes are calculated based on actual results. As a result, percentage changes may not recalculate based on figures presented due to rounding. Please refer to “Results of Operations” for additional metrics management reviews in conjunction with the consolidated financial statements.

Key Operating Metrics

1.Excludes revenue related to bundled Life360 subscription and hardware offerings of $(4.6) million for the year ended December 31, 2024, and $(3.1) million for the year ended December 31, 2023.

2.Excludes revenue related to bundled Life360 subscription and hardware offerings of $4.3 million for the year ended December 31, 2024, and $3.7 million for the year ended December 31, 2023.

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, 2024, and 2023 was $367.6 million and $274.1 million, respectively, representing an increase of 34% year-over-year.

Monthly Active Users

We have a large and growing global member base as of December 31, 2024. 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, 2024 and 2023, we had approximately 79.6 million and 61.4 million MAUs on the Life360 Platform, respectively, representing an increase of 30% 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.

66

Table of Contents

As of December 31, 2024 and 2023, we had approximately 2.3 million and 1.8 million paid subscribers to services under our Life360 brand, respectively, representing an increase of 25% year-over-year. We grow the number of Paying Circles by increasing our free member base, converting free members to subscribers, and retaining them over time with the provision of high-quality family and safety services.

Average Revenue per Paying Circle

We define Average Revenue per Paying Circle (“ARPPC”) as annualized subscription revenue recognized and derived from the Life360 mobile application, excluding revenue related to bundled Life360 subscription and hardware offerings, for the reported period, divided by the Average Paying Circles during the same period. Average Paying Circles are calculated by adding the number of Paying Circles as of the beginning of the period to the number of Paying Circles as of the end of the period, and then dividing by two.

For the years ended December 31, 2024 and 2023, our ARPPC was $128.00 and $121.09, respectively, representing a 6% increase year-over-year.

ARPPC is a key indicator utilized by Life360 to determine our effectiveness at monetizing Paying Circles through tiered product offerings. U.S. ARPPC has benefited from price increases for existing U.S. Android Life360 subscriptions that took effect during the three months ended June 30, 2023 as well as a shift in product mix towards higher priced products. International ARPPC has benefited from price increases for existing subscribers in August 2024 followed by the launch of dual tier memberships in September 2024 across all non-triple tier countries. In addition, price increases for existing subscribers began in January 2024 in the United Kingdom (“UK”) and March 2024 in ANZ, while the triple tier memberships launched in October 2023 and April 2024, respectively. The positive impacts seen from the price increases were partially offset by an increase in international subscribers, which overall, have lower priced subscriptions.

Subscriptions

We define Subscriptions as the number of paying subscribers associated with the Life360, Tile and Jiobit brands who have been billed as of the end of the period.

As of December 31, 2024 and 2023, we had approximately 2.9 million and 2.4 million paid subscribers to services under Life360, Tile, and Jiobit brands, respectively, representing an increase of 19% year-over-year.

We grow the number of Subscriptions by selling hardware units and increasing our free member base, converting free members to subscribers, and retaining them over time with the provision of location tracking and high-quality family and safety services.

Average Revenue per Paying Subscription

We define ARPPS as annualized total subscription revenue recognized and derived from Life360, Tile and Jiobit subscriptions, excluding revenue related to bundled Life360 subscription and hardware offerings, for the reported period divided by the average number of paying subscribers during the same period. The average number of paying subscribers is calculated by adding the number of paying subscribers as of the beginning of the period to the number of paying subscribers as of the end of the period, and then dividing by two. Paying subscribers represent subscribers who have been billed as of the end of the period.

ARPPS for the years ended December 31, 2024 and 2023 was $106.16 and $99.53, respectively, representing an increase of 7% year-over-year.

ARPPS has increased year over year as a result of the growth in subscriptions following price increases for existing U.S. Android Life360 subscriptions that took effect during the three months ended June 30, 2023 and a shift in product mix towards higher priced products in the U.S. Price increases in non-triple tier countries for existing subscribers were implemented in August 2024 and dual tier memberships launched in September 2024. In addition, price increases for existing subscribers began in January 2024 in the UK and March 2024 in ANZ, while the triple tier memberships launched in October 2023 and April 2024, respectively. The positive impacts seen from the price increases were partially offset by an increase in international subscribers, which overall, have subscriptions priced at lower prices.

67

Table of Contents

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 users eligible for a Tile or Jiobit subscription.

For the years ended December 31, 2024 and 2023, Life360 sold approximately 3.9 million and 4.0 million, respectively, representing a 4% decrease year-over-year. The decrease was primarily driven by a delay in our new product launch which took place during the third quarter of 2024.

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, 2024 and 2023, the net ASP of a unit was $13.72 and $13.48, respectively, representing a 2% increase year-over-year. The increase was primarily driven by fewer returns and discounts offered.

Liquidity and Capital Resources

On June 6, 2024, we completed our U.S. IPO, selling a total of 3,703,704 shares of common stock and raising net proceeds of $93.0 million after deducting underwriting discounts and commissions. An additional $5.5 million of expenses were paid on behalf of selling securityholders.

As of December 31, 2024, we had cash and cash equivalents of $159.2 million and restricted cash of $1.2 million. As of December 31, 2023, we had cash and cash equivalents of $69.0 million and restricted cash of $1.7 million.

We believe our existing cash and cash equivalents and cash provided by sales of our subscriptions and hardware devices will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. We may from time to time seek to raise additional capital based on a variety of factors, including our capital requirements and the relative favorability of conditions in the capital markets. If we are unable to raise additional capital on terms acceptable to us or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, financial condition and results of operations.

Our cash flow activities were as follows for the periods presented (in thousands):

Operating Activities

Our largest source of operating cash is cash collection from our paying members for subscriptions to our platform and hardware device sales. Our primary uses of cash from operating activities are for employee-related expenditures, costs to acquire inventory, infrastructure-related costs, commissions paid to Channel Partners and other marketing expenses.

A number of our members pay in advance for annual subscriptions, while a majority pay in advance for monthly subscriptions. Deferred revenue consists of the unearned portion of customer billings, which is recognized as revenue in accordance with our revenue recognition policy. As of December 31, 2024 and 2023, we had deferred revenue of $45.2 million and $35.8 million, respectively, of which $39.9 million and $33.9 million is expected to be recorded as revenue in the next 12 months, respectively, provided all other revenue recognition criteria have been met.

68

Table of Contents

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 during this period 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 $42.3 million of stock-based compensation expense, $9.8 million of depreciation and amortization, and $5.4 million of gain on 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.

For the year ended December 31, 2023, net cash provided by operating activities was $7.5 million. The primary factors affecting our operating cash flows during this period were our net loss of $28.2 million, impacted by $49.1 million of non-cash charges, and $13.4 million of cash used by changes in our operating assets and liabilities. The non-cash charges primarily consisted of $38.5 million in stock-based compensation and $9.1 million of depreciation and amortization. The cash used by changes in our operating assets and liabilities was primarily due to an increase of $9.1 million in accounts receivable, net, a decrease of $7.9 million in accounts payable, and an increase of $6.7 million in prepaid expenses and other assets. These amounts were partially offset by a decrease of $5.8 million in inventory, an increase of $4.6 million in deferred revenue, and an increase of $2.2 million in accrued expenses and other liabilities.

Investing Activities

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 internal use 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.

For the year ended December 31, 2023, net cash used in investing activities was $2.2 million, which related to $1.7 million of capitalization of internal use software costs in accordance with ASC 350-40, Intangibles - Goodwill and Other, Internal-Use Software and $0.5 million of purchases of property and equipment.

Financing Activities

For the year ended December 31, 2024, net cash provided by financing activities was $67.3 million, which primarily related to net proceeds of $93.0 million after deducting underwriting discounts and commissions from our U.S. IPO, and $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.

For the year ended December 31, 2023, net cash used in financing activities was $25.0 million, which primarily related to $13.1 million of released funds placed in an indemnity escrow fund for general representations and warranties related to the Tile acquisition, $14.0 million of taxes paid related to net settlement of equity awards, and $3.9 million of repayment of notes due to affiliates, offset by $5.8 million of proceeds from the exercise of options.

Obligations and Other Commitments

Our principal commitments consist of operating leases for office space, and other purchase commitments. Information regarding our non-cancellable lease and other purchase commitments as of December 31, 2024, can be found in Note 7, "Balance Sheet Components" and Note 10, "Commitments and Contingencies" to our consolidated financial statements.

69

Table of Contents

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 judgement 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.

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.

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.

70

Table of Contents

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations (MD&A) should be read in conjunction with our consolidated financial statements, related notes and other financial information appearing elsewhere in this Annual Report on Form 10-K. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements as a result of a variety of factors, including but not limited to those discussed in “Risk Factors” and “Forward-Looking Statements” in this Annual Report on Form 10-K.

57

Table of Contents

A discussion of our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 is presented below. A discussion of our financial condition and results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021 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 March 23, 2023.

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. The Company’s 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 users at no charge, with three membership subscription options that are available but not required. Our platform recently entered a new era of location tracking services with the successful acquisitions of Jiobit and Tile. 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.

For the years ended December 31, 2023 and 2022, Life360 generated:

•Total revenues of $304.5 million and $228.3 million, respectively, representing year-over-year growth of 33%;

•Subscription revenues of $220.8 million and $153.3 million, respectively, representing year-over-year growth of 44%;

•Hardware revenues of $58.2 million and $47.9 million, respectively, representing year-over-year growth of 21%;

•Other revenues of $25.5 million and $27.1 million, respectively, representing year-over-year decline of 6%;

•Gross profit of $222.6 million and $148.6 million, respectively, representing year-over-year growth of 50%; and

•Net loss of $28.2 million and $91.6 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, Jiobit and Tile brands. Our brand is trusted by approximately 61 million members as of December 31, 2023, and because we know the value of trust is immeasurable, we will continue to work tirelessly to ensure that we 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.

58

Table of Contents

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.

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 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 gives our members the ability to seamlessly leverage Bluetooth-enabled smart trackers, which can equip nearly any item—such as wallets, keys or remotes—with location-based finding technology. Likewise, our acquisition of Jiobit allows subscribers to track family members and pets wearing Jiobit devices via GPS-enabled trackers on the Jiobit app. 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, 2023, we had approximately 508 employees and 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 user growth, engagement, Paying Circles growth and monetization on our platform. Life360 has historically experienced member and subscription growth seasonality in the third quarter of each calendar year, which includes the return to school 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 (Black Friday and Cyber Monday) and December (Christmas and Hanukkah) in large part due to seasonal holiday demand. As the majority of revenue is generated within the United States, 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 and infrastructure and personnel to support our international expansion, including undertaking initiatives such as the international launch of our subscription offerings in United Kingdom for the year ended December 31, 2023. Our growth will depend in part on the adoption and sales of our products and services in international markets.

Key Components of Our Results of Operations

The following discussion describes certain line items in our Consolidated Statements of Operations and Comprehensive Loss.

The Company currently operates as one reportable and operating segment because its chief operating decision maker (“CODM”), which is its Chief Executive Officer, reviews its financial information on a consolidated basis for purposes of making decisions regarding allocating resources and assessing performance. The Company has no segment managers who are held accountable by the CODM for operations, operating results, and planning for levels of components below the consolidated unit level.

59

Table of Contents

Revenue

Subscription Revenue

We generate revenue from sales of subscriptions on our platforms. 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 websites, brick and mortar retail and online retail.

Other Revenue

We also generate revenue through data monetization arrangements with certain third parties through data acquisition and license agreements for data collected from our member base for purposes of targeted advertising, research, analytics, attribution, and other commercial purposes. In January 2022, we executed a new partnership agreement with a key data partner, a prominent provider of aggregated analytics for the retail ecosystem. The agreement includes fixed monthly revenue amounts for access to aggregated data for the duration of the three-year agreement. Other revenue also includes partnership revenue.

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 user growth and increased use of our platform. We expect that cost of revenue will increase in absolute dollars in future periods.

Cost of Hardware Revenue

Cost of hardware revenue consists of product costs, including hardware production, contract manufacturers for production, shipping and handling, packaging, fulfillment, personnel-related expenses, manufacturing and equipment depreciation, warehousing, tariff costs, customer support costs, credit card and transaction processing fees, warranty replacement, and write-downs of excess and obsolete inventory. Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel.

Cost of Other Revenue

Cost of other revenue includes cloud-based hosting costs, as well as costs of product operations functions and personnel-related costs associated with our data platform. Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel.

60

Table of Contents

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, 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 personnel-related costs, brand marketing costs, lead generation costs, sales incentives, sponsorships and amortization of acquired intangibles. Revenue-share payments to third parties in connection with annual subscription sales of the Company’s mobile application on third-party store platforms are considered to be incremental and recoverable costs of obtaining a contract with a customer and are deferred and typically amortized over an estimated period of benefit of two to three years depending on the subscription type.

We plan to continue to invest in sales and marketing to grow our member base and increase our brand awareness, including marketing efforts to continue to drive our business model. We expect that sales and marketing expenses will increase in absolute dollars in future periods and will fluctuate as a percentage of revenue. The trend and timing of sales and marketing expenses will depend in part on the timing of marketing campaigns.

General and Administrative

Our general and administrative expenses consist primarily of employee-related costs for our legal, finance, human resources, and other administrative teams, as well as certain executives. In addition, general and administrative expenses include allocated overhead, outside legal, accounting and other professional fees, change in fair value of contingent consideration for business combinations, and non-income-based taxes. We expect our general and administrative expenses will increase in absolute dollars as our business grows.

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 Company’s acquisition of Jiobit (the “Jiobit Acquisition”) in September 2021 (the “September 2021 Convertible Notes” and together with the July 2021 Convertible Notes, the “Convertible Notes”). The September 2021 Convertible Notes are recorded at fair value and are revalued at each reporting period.

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.

Other Income (Expense), net

Other income (expense), net consists of interest income earned on our cash and cash equivalents balances, foreign currency exchange (losses)/gains related to the remeasurement of certain assets and liabilities of our foreign subsidiaries that are denominated in currencies other than the functional currency of the subsidiary and foreign exchange transactions gains/(losses) and interest expense primarily related to the Convertible Notes.

61

Table of Contents

Provision for (Benefit from) Income Taxes

Provision for (benefit from) income taxes consists of U.S. federal and state income taxes in jurisdictions in which we conduct business. We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized.

Results of Operations

The following tables set forth our consolidated statement of operations and comprehensive loss for the years ended December 31, 2023, 2022, and 2021. 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.

____________________

(1)Includes stock-based compensation expense as follows:

62

Table of Contents

The following table sets forth our results of operations as a percentage of revenue:

___________________

(1)Includes stock-based compensation expense as follows:

63

Table of Contents

Comparison of the years ended December 31, 2023 and 2022:

Revenue

Total revenue increased $76.2 million, or 33%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

Subscription revenue increased $67.5 million, or 44%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to an increase in the number of paid subscriptions. Additionally, subscription revenue in the current period benefited from the impact of the monthly subscription price increases (over 50%) for U.S. Life360 subscriptions, which were implemented beginning in August 2022.

Hardware revenue increased $10.3 million, or 21%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, due to an increased number of net hardware units shipped, lower returns, and benefits of bundled Life360 subscription and hardware offerings.

Other revenue decreased $1.6 million, or 6%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, due to the short-term impacts of our strategic shift to focus on a single aggregated data partner and the terms associated with the arrangement.

Cost of Revenue, Gross Profit, and Gross Margin

Cost of subscription revenue increased $0.3 million, or 1%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily related to increases of $1.2 million in technology expenses, $1.0 million in contractor expenses, and $0.1 million in depreciation and amortization associated with our growth. The increases were partially offset by a decrease of $1.5 million in personnel-related and stock-based compensation costs attributable to our integration with Tile and the restructuring of the combined workforce. We also saw a decrease of $1.8 million in membership offering costs as a result of the discontinuation of certain battery replacement related membership benefits, partially offset by a $1.3 million increase in other membership offering costs in line with the increase in revenue.

64

Table of Contents

Subscription gross margin increased to 86% during the year ended December 31, 2023 from 80% during the year ended December 31, 2022, primarily due to the subscription price increases for U.S. Life360 subscriptions, which were implemented beginning in August 2022, and a decrease in membership offering costs related to the discontinuation of certain battery related membership benefits.

Cost of hardware revenue increased by $1.9 million, or 4%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to an increase of $4.4 million in product, freight and battery expenses in line with the increased number of units sold. We also saw an increase of $0.8 million in personnel-related and stock-based compensation costs attributable to the increased volume of stock-based awards granted throughout the year ended December 31, 2023, and an increase of $0.3 million in professional and outside services and contractor spend to support our growth. The increases were offset by a $2.3 million decrease in fulfillment, logistics, and other expenses largely reflecting the efficiencies achieved post Tile Acquisition, a $1.1 million decrease in technology expenses related to improved efficiencies post-acquisition with Tile, and a $0.4 million decrease in membership offering costs related to the discontinuation of certain battery related membership benefits. The remaining increase of $0.2 million is attributable to other cost of hardware revenue associated with our growth.

Hardware gross margin increased to 19% during the year ended December 31, 2023 from 5% during the year ended December 31, 2022, primarily due to efficiencies achieved within the Company as decreased fulfillment and logistics costs were incurred as a percentage of revenue during the year ended December 31, 2023 as compared to the year ended December 31, 2022. The improvement in hardware gross margin was also due to a release of reserve for hardware returns recorded in the three months ended June 30, 2023.

Cost of other revenue decreased by $0.1 million, or 2%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to a decrease of $0.3 million in personnel-related expenses and stock-based compensation costs associated with the reduction in workforce which took place during the three months ended March 31, 2023. The decrease was partially offset by an increase of $0.2 million in technology expenses, to support the existing customer base.

Other gross margin decreased slightly to 86% during the year ended December 31, 2023 from 87% during the year ended December 31, 2022, primarily due to costs outpacing the decreased other revenue.

Research and Development

Research and development expenses decreased $1.5 million, or 1%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022. The decrease was primarily due to decreases of $2.6 million in technology expenses, $1.8 million in professional and outside services spend, and $1.1 million in contractor spend, due to our decreased need as a result of the Tile and Jiobit businesses being fully integrated. These decreases were offset by an increase of $2.8 million in personnel-related and stock-based compensation, primarily related to an increased volume of stock grants awarded to employees and an increase of $0.9 million related to a raw materials inventory write-off. The remaining increase of $0.3 million is attributable to other research and development expenses.

Sales and Marketing

65

Table of Contents

Sales and marketing expenses increased $6.7 million, or 7%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022. The increase was primarily due to a $10.1 million increase in marketing expenses consisting of increases of $11.3 million in Channel Partner commission charges due to increased subscription sales and $2.1 million in paid user acquisition spend, partially offset by a $3.3 million decrease in other marketing spend. The increases were partially offset by a decrease of $2.4 million in professional and outside services and contractor spend due to our decreased need as a result of the Tile and Jiobit businesses being fully integrated. We also saw a decrease of $0.7 million in personnel and related costs and stock-based compensation primarily due to the reduction in workforce which took place during the three months ended March 31, 2023. The remaining decrease of $0.3 million is attributable to other sales and marketing expenses.

General and Administrative

General and administrative expense increased $4.5 million, or 9%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022. The increase was primarily due to a $5.3 million gain on revaluation of contingent consideration related to the Jiobit Acquisition recorded during the year ended December 31, 2022 and a $0.1 million increase in technology costs. The increase was partially offset by a $0.3 million decrease in personnel and related costs and stock-based compensation primarily due to the reduction in workforce which took place during the three months ended March 31, 2023, and a decrease of $1.6 million in professional and outside services due to continued operational efficiencies. The remaining increase of $1.0 million is attributable to other general and administrative expenses.

Convertible Notes Fair Value Adjustment

For the years ended December 31, 2023 and 2022, the Company recorded a loss associated with the convertible notes fair value adjustment of $0.7 million and a gain of $1.8 million, respectively. The changes in fair value are primarily driven by the share price volatility and reduction in time to convert.

Derivative Liability Fair Value Adjustment

For the years ended December 31, 2023 and 2022, the Company recorded a loss associated with the derivative liability fair value adjustment of $0.1 million and a gain of $1.3 million, respectively. The changes are due to the revaluation of the derivative liability at each reporting period and are related to embedded redemption features bifurcated from the July 2021 Convertible Notes issued to investors.

Other Income (Expense), Net

Other income (expense), net increased $3.2 million, or 24,731%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022. The increase was driven by an increase in dividend income earned due to a higher average gross yield and favorable currency revaluation impacts in the current periods compared to the same periods in the prior year. Other income (expense) includes interest income, dividend income, foreign exchange losses, and interest expense associated with the July 2021 Convertible Notes.

Provision for (Benefit from) Income Taxes

The provision for (benefit from) income taxes increased $0.3 million, or 97%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

66

Table of Contents

Key Performance Indicators

We review several operating metrics, including the following key performance indicators, to evaluate our business, measure our performance, identify trends affecting our business, develop financial forecasts and make strategic decisions. We believe these key performance indicators are useful to investors because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making, and they may be used by investors to help analyze the health of our business. Key operating metrics are presented in millions, except ARPPC, Average Revenue per Paying Subscription (“ARPPS”) and Average Sales Price (“ASP”), however percentage changes are calculated based on actual results. As a result, percentage changes may not recalculate based on figures presented due to rounding. Please refer to “Results of Operations” for additional metrics management reviews in conjunction with the consolidated financial statements.

Key Operating Metrics

__________

1 Metrics presented as of and for the periods ended December 31, 2022 have been recast to reflect the calculations under a revised metric definition. We previously calculated Subscriptions and Paying Circles by including subscribers who had been billed as well as whose billing status was pending as of the end of the period. We have since revised our definition of these metrics to exclude subscribers whose billing status was pending as of the end of the period. Although the difference between the two methodologies does not result in any material changes, we have changed the definition of the metric because we believe it provides a better reflection of our results during a given period.

2 Metrics presented for the year ended December 31, 2022 are adjusted to include pre-acquisition data for Tile related to periods before the acquisition of Tile on January 5, 2022.

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, 2023, and 2022 was $274.1 million and $224.4 million, respectively, representing an increase of 22% year-over-year.

Monthly Active Users

We have a large and growing global member base as of December 31, 2023. A Life360 monthly active user (“MAU”) is defined as a unique user who engages with our Life360 branded services each month, which includes both paying and non-paying members. As of December 31, 2023 and 2022, we had approximately 61.4 million and 48.6 million MAUs on the Life360 Platform, respectively, representing an increase of 26% year-over-year. We believe this has been driven by continued strong new user growth and retention.

Paying Circles

We define a Paying Circle as a group of Life360 users with a paying subscription who has 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.

67

Table of Contents

As of December 31, 2023 and 2022, we had approximately 1.8 million and 1.5 million paid subscribers to services under our Life360 brand, respectively, representing an increase of 21% 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 and safety services. Below is a comparison of Paying Circles as of December 31, 2022 using the current and prior definitions (in millions).

Average Revenue per Paying Circle

We define Average Revenue per Paying Circle (“ARPPC”) as subscription revenue derived from the Life360 mobile application, excluding certain revenue adjustments 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 based on adding the number of Paying Circles as of the beginning of the period to the number of Paying Circles as of the end of the period, and then dividing by two.

For the years ended December 31, 2023 and 2022, our ARPPC was $121.09 and $96.95, respectively, representing a 25% increase year-over-year. The year-over-year increase in ARPPC is a result of subscription price increases for U.S. Life360 subscriptions, which were implemented beginning in August 2022.

ARPPC is a key indicator utilized by Life360 to determine the effective penetration of our tiered product offering for Paying Circles. The increase in pricing for new Paying Circles beginning in August 2022 has led to subscribers signing up for higher price products over time, increasing ARPPC.

Below is a comparison of ARPPC for the year ended December 31, 2022 using the current definitions.

Subscriptions

We define Subscriptions as the number of paying subscribers associated with the Life360, Tile and Jiobit brands who have been billed as of the end of the period. As of December 31, 2023 and 2022, we had approximately 2.4 million and 2.1 million paid subscribers to services under Life360, Tile, and Jiobit 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.

Below is a comparison of Subscriptions as of December 31, 2022 using the current and prior definitions (in millions).

68

Table of Contents

Average Revenue per Paying Subscription

We define ARPPS as total subscription revenue recognized, excluding certain revenue adjustments 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, 2023 and 2022 was $99.53 and $80.63, respectively, representing an increase of 23% year-over-year. ARPPS has increased year-over-year as a result of the U.S. Life360 subscription price increases, which were implemented beginning in August 2022.

Below is a comparison of ARPPS as of December 31, 2022 using the current and prior definitions.

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 users eligible for a Tile or Jiobit subscription. For the year ended December 31, 2023, Life360 sold approximately 4.0 million units, up approximately 12% as compared to the 3.6 million units sold during the year ended December 31, 2022, reflecting higher sales and lower returns compared to the prior period.

Net Average Sales Price

To determine the net average sales price (“ASP”) of a unit, we divide hardware revenue recognized, excluding certain revenue adjustments related to bundled Life360 subscriptions 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 year ended December 31, 2023, the net ASP of a unit was $13.48, which is largely flat compared to $13.47 during the year ended December 31, 2022.

Liquidity and Capital Resources

As of December 31, 2023, we had cash and cash equivalents of $69.0 million and restricted cash of $1.7 million. As of December 31, 2022, we had cash and cash equivalents of $75.4 million and restricted cash of $14.9 million.

We believe our existing cash and cash equivalents and cash provided by sales of our subscriptions and hardware devices will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. Our future capital requirements will depend on many factors and as a result, we may be required to seek additional capital. 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.

69

Table of Contents

On March 10, 2023, we had a banking relationship with SVB. As of the closure of SVB on March 10, 2023, we held $6.1 million in direct deposits with SVB, which represented approximately 6.4% of our total cash and cash equivalents as of that date. We also held $75.4 million in shares of money market mutual funds managed by Morgan Stanley, Blackrock and Western Asset, for which SVB acted as custodian. SVB was closed on March 10, 2023 by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver. On March 12, 2023, the U.S. Treasury, Federal Reserve, and FDIC announced that SVB depositors will have access to all of their money starting March 13, 2023. On March 13, 2023, we regained access to our funds held in SVB accounts. On May 1, 2023 JPMorgan Chase acquired the substantial majority of assets and assumed certain liabilities of SVB from the FDIC. While we did not experience any losses in such accounts, the recent failure of SVB exposed us to credit risk as it relates to our direct deposits in excess of the FDIC insured limits, prior to the completion by the FDIC of the resolution of SVB in a manner that fully protected all depositors. We have transferred more than 80% of our accounts to one or more alternate depository institutions, the financial position of which management believes does not expose our company to credit risk or jeopardize our liquidity. Additionally, we may be impacted by adverse developments which affect financial institutions, transactional counterparties, other companies in the financial services industry, or the financial services industry generally, which have in the past and may in the future threaten our ability to access our existing cash and cash equivalents and could have a material adverse effect on our business and financial condition.

Our cash flow activities were as follows for the periods presented:

Operating Activities

Our largest source of operating cash is cash collections from our paying users for subscriptions to our platform and hardware device sales. Our primary uses of cash from operating activities are for employee-related expenditures, inventory, infrastructure-related costs, commissions and other marketing expenses. Net cash provided by (used in) operating activities is impacted by our net loss adjusted for certain non-cash items, including depreciation and amortization expenses, amortization of costs capitalized to obtain contracts, change in fair value of convertible notes, derivative liability, and contingent consideration, and stock-based compensation, as well as the effect of changes in operating assets and liabilities.

A number of our users 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, 2023 and 2022, we had deferred revenue of $35.8 million and $32.8 million, respectively, of which $33.9 million and $30.1 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, 2023, net cash provided by operating activities was $7.5 million. The primary factors affecting our operating cash flows during this period were our net loss of $28.2 million, impacted by $49.1 million of non-cash adjustments, and $13.4 million of cash used by changes in our operating assets and liabilities. The non-cash adjustments primarily consisted of $38.5 million of stock-based compensation expense and $9.1 million of depreciation and amortization. The cash used by changes in our operating assets and liabilities was primarily due to an increase of $9.1 million in accounts receivable, net, a decrease of $7.9 million in accounts payable, and an increase of $6.7 million in prepaid expenses and other assets. These amounts were partially offset by a decrease of $5.8 million in inventory, an increase of $4.6 million in deferred revenue, and an increase of $2.2 million in accrued expenses and other liabilities due to increasing activity in line with the Company growth.

70

Table of Contents

For the year ended December 31, 2022, net cash used in operating activities was $57.1 million. The primary factors affecting our operating cash flows during this period were our net loss of $91.6 million, impacted by $37.3 million of non-cash charges, and $2.8 million of cash provided by changes in our operating assets and liabilities. The non-cash charges primarily consisted of $34.7 million in stock-based compensation, $9.2 million of depreciation and amortization, $5.3 million gain on revaluation of contingent consideration, $2.9 million of amortization of costs capitalized to obtain contracts, $1.8 million gain in convertible notes fair value adjustment, $1.5 million non-cash revenue from affiliate, and $1.3 million gain in derivative liability fair value adjustment. The cash provided by changes in our operating assets and liabilities was primarily due to a $10.6 million decrease in prepaid expenses and other assets, a $6.5 million decrease in accounts receivable, net, and a $4.7 million increase in deferred revenue. These amounts were partially offset by a $12.7 million decrease in accounts payable, a $7.7 million decrease in accrued expenses and other liabilities, a $3.3 million increase in costs capitalized to obtain contracts, a $0.5 million increase in inventory, and a $0.3 million increase in other noncurrent liabilities.

Investing Activities

For the year ended December 31, 2023, net cash used in investing activities was $2.2 million, which primarily relates to $1.7 million of capitalization of internal use software costs in accordance with ASC 350-40, Intangibles - Goodwill and Other, Internal-Use Software and $0.5 million of purchases of property and equipment.

For the year ended December 31, 2022, net cash used in investing activities was $111.6 million, which relates to $110.9 million of cash paid for the Tile Acquisition, net of cash acquired and $0.7 million related to the capitalization of internal use software costs.

Financing Activities

For the year ended December 31, 2023, net cash used by financing activities was $25.0 million, which primarily relates to the $13.1 million of released funds placed in an indemnity escrow fund for general representations and warranties related to the Tile acquisition, $14.0 million of taxes paid related to net settlement of equity awards, and $3.9 million of repayment of notes due to affiliates; offset by $5.8 million of proceeds from the exercise of options.

For the year ended December 31, 2022, net cash provided by financing activities was $27.7 million, which primarily relates to $32.2 million of proceeds from a capital raise, $2.4 million of proceeds from the exercise of options, and $0.6 million of proceeds from the repayment of notes due from affiliates, partially offset by $4.1 million of taxes paid related to net settlement of equity awards and $3.5 million of repayment of convertible notes.

Obligations and Other Commitments

Our principal commitments consist of obligations under our convertible notes, operating leases for office space, and other purchase commitments. Our obligations under our convertible notes are described in Note 6, "Fair Value Measurements" and Note 9, "Convertible Notes" to our consolidated financial statements. Information regarding our non-cancellable lease and other purchase commitments as of December 31, 2023, can be found in Note 8, "Balance Sheet Components" and Note 11, "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 judgement and complexity.

71

Table of Contents

Revenue Recognition

We derive revenue from subscription fees (which include support 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.

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.

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.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations (MD&A) should be read in conjunction with our consolidated financial statements, related notes and other financial information appearing elsewhere in this Annual Report on Form 10-K. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements as a result of a variety of factors, including but not limited to those discussed in “Risk Factors” 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, 2022 compared to the year ended December 31, 2021 is presented below. A discussion of our financial condition and results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020 is included under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within our Form 10.

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. The Company’s 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 users at no charge, with three membership subscription options that are available but not required. Our platform recently entered a new era of location tracking services with the successful acquisitions of Jiobit and Tile. 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.

For the years ended December 31, 2022 and 2021, Life360 generated:

•Total revenues of $228.3 million and $112.6 million, respectively, representing year-over-year growth of 103%;

•Subscription revenues of $153.3 million and $86.6 million, respectively, representing year-over-year growth of 77%;

•Hardware revenues of $47.9 million and $1.0 million, respectively, representing year-over-year growth of 4,930%;

•Other revenues of $27.1 million and $25.1 million, respectively, representing year-over-year growth of 8%;

•Gross profit of $148.6 million and $89.9 million, respectively, representing year-over-year growth of 65%; and

•Net loss of $91.6 million and $33.6 million, respectively.

53

Table of Contents

Impact of COVID-19

The COVID-19 pandemic had an initial impact on our operations and financial performance, as we saw decreased engagement and member growth in the early phase of the pandemic. To adapt to the COVID-19 impact, we paused the majority of paid user acquisition spend and implemented other expense management initiatives. Once past the early phase of COVID-19, we saw a resumption of rapid growth and we experienced two successive quarters of record Paying Circle additions in the second half of 2021. Paying circles have continued to increase each quarter through December 31, 2022. The extent of the impact of the COVID-19 pandemic on our operational and financial performance going forward will depend on future developments, including the duration and spread of the outbreak, new information about additional variants, the availability and efficacy of vaccine, additional or renewed actions by government authorities and private businesses to contain the pandemic or respond to its impact and altered consumer behavior, impact on our customers and our sales cycles, impact on our business operations, impact on our customer, employee or industry events, and effect on our vendors and other business partners, all of which are uncertain and cannot be predicted. Such developments have had and may continue to have adverse impacts on global economic conditions, including disruptions of the supply chain globally, labor shortages and consumer confidence and spending, and could materially adversely affect demand, or subscribers’ ability to pay, for our products and services. We considered the impact of COVID-19 on the assumptions and estimates used by management in the preparation of the consolidated financial statements and determined there were no material adverse impacts for the year ended December 31, 2022. As events related to COVID-19 continue to evolve, our assumptions and estimates may change materially in future periods.

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 “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, Jiobit and Tile brands. Our brand is trusted by approximately 49 million members as of December 31, 2022, and because we know the value of trust is immeasurable, we will continue to work tirelessly to ensure that we 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 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.

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 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.

54

Table of Contents

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 gives our members the ability to seamlessly leverage Bluetooth-enabled smart trackers, which can equip nearly any item—such as wallets, keys or remotes—with location-based finding technology. Likewise, our acquisition of Jiobit allows subscribers to track family members and pets wearing Jiobit devices via GPS-enabled trackers on the Jiobit app. 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, 2022, we had approximately 600 employees and 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 user growth, engagement, Paying Circles growth and monetization on our platform. Life360 has historically experienced member and subscription growth seasonality in the third quarter of each calendar year, which includes the return to school for many of our members. Hardware sales have historically experienced revenue seasonality in the fourth quarter of each calendar year, which includes the important selling periods in November (Black Friday and Cyber Monday) and December (Christmas and Hanukkah) in large part due to seasonal holiday demand. As the majority of revenue is generated within the United States, 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 and infrastructure and personnel to support our international expansion, including undertaking initiatives such as the first international launch of our subscription offering in Canada during the three months ended December 31, 2021. Our growth will depend in part on the adoption and sales of our products and services in international markets.

Key Components of Our Results of Operations

The following discussion describes certain line items in our Consolidated Statements of Operations and Comprehensive Loss.

The Company currently operates as one reportable and operating segment because its chief operating decision maker (“CODM”), which is its Chief Executive Officer, reviews its financial information on a consolidated basis for purposes of making decisions regarding allocating resources and assessing performance. The Company has no segment managers who are held accountable by the CODM for operations, operating results, and planning for levels of components below the consolidated unit level. In the future, the Company plans to integrate Life360, Tile and Jiobit into one platform.

Revenue

Subscription Revenue

We generate revenue from sales of subscriptions on our platforms. 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 a majority of our hardware revenue from the sale of the Tile and Jiobit hardware tracking devices and related accessories. For hardware and accessories, revenue is recognized at the time products are delivered. We sell hardware tracking devices and accessories through a number of channels including our websites, brick and mortar retail and online retail.

55

Table of Contents

Other Revenue

We also generate revenue through data monetization arrangements with certain third parties through data acquisition and license agreements for data collected from our member base for purposes of targeted advertising, research, analytics, attribution, and other commercial purposes. In January 2022, we executed a new partnership agreement with a key Data Partner, a prominent provider of aggregated analytics for the retail ecosystem. The agreement includes fixed monthly revenue amounts for access to aggregated data for the duration of the three-year agreement. Other revenue also includes partnership revenue.

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 employee-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, personnel-related expenses, 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 user growth and increased use of our platform. We expect the cost of revenue will increase in absolute dollars in future periods.

Cost of Hardware Revenue

Cost of hardware revenue consists of product costs, including hardware production, contract manufacturers for production, shipping and handling, packaging, fulfillment, personnel-related expenses, manufacturing and equipment depreciation, warehousing, tariff costs, customer support costs, credit card and transaction processing fees, warranty replacement, and write-downs of excess and obsolete inventory. Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel.

Cost of Other Revenue

Cost of other revenue includes cloud-based hosting costs, as well as costs of product operations functions and employee-related costs associated with our data platform. 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, 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 employee-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 expect our research and development expenses will increase in absolute dollars as our business grows.

56

Table of Contents

Sales and Marketing

Our sales and marketing expenses consist primarily of employee-related costs, brand marketing costs, lead generation costs, sales incentives, sponsorships and amortization of acquired intangibles. Revenue-share payments to third parties in connection with annual subscription sales of the Company’s mobile application on third-party store platforms are considered to be incremental and recoverable costs of obtaining a contract with a customer and are deferred and typically amortized over an estimated period of benefit of two to three years depending on the subscription type.

We plan to continue to invest in sales and marketing to grow our member base and increase our brand awareness, including marketing efforts to continue to drive our business model. We expect that sales and marketing expenses will increase in absolute dollars in future periods and will fluctuate as a percentage of revenue. The trend and timing of sales and marketing expenses will depend in part on the timing of marketing campaigns.

General and Administrative

Our general and administrative expenses consist primarily of employee-related costs for our legal, finance, human resources, and other administrative teams, as well as certain executives. In addition, general and administrative expenses include allocated overhead, outside legal, accounting and other professional fees, change in fair value of contingent consideration for business combinations, and non-income-based taxes. We expect our general and administrative expenses will increase in absolute dollars as our business grows.

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 Company’s acquisition of Jiobit (the “Jiobit Acquisition”) in September 2021 (the “September 2021 Convertible Notes” and together with the July 2021 Convertible Notes, the “Convertible Notes”). The September 2021 Convertible Notes are recorded at fair value and are revalued at each reporting period.

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.

Other Income (Expense), net

Other income (expense), net consists of interest income earned on our cash and cash equivalents balances, foreign currency exchange (losses)/gains related to the remeasurement of certain assets and liabilities of our foreign subsidiaries that are denominated in currencies other than the functional currency of the subsidiary and foreign exchange transactions gains/(losses) and interest expense primarily related to the Convertible Notes.

Provision (Benefit) for Income Taxes

Provision (benefit) for income taxes consists of U.S. federal and state income taxes in jurisdictions in which we conduct business. We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized.

Results of Operations

The following tables set forth our consolidated statement of operations and comprehensive loss for the years ended December 31, 2022 and 2021. 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.

57

Table of Contents

____________________

(1)Includes stock-based compensation expense as follows:

58

Table of Contents

The following table sets forth our results of operations as a percentage of revenue:

Comparison of the years ended December 31, 2022 and 2021.

Revenue

Total revenue increased $115.7 million, or 103%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021.

Subscription revenue increased $66.7 million, or 77%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021 due to a growth in total subscriptions, including 23% growth in Paying Circles, and to a lesser extent the price increases for Life360 subscriptions implemented during the quarter ended December 31, 2022. In addition, the increase was also partially attributable to the inclusion of Tile subscription services of $17.2 million and a full year contribution of Jiobit subscription revenue.

59

Table of Contents

Hardware revenue increased $46.9 million, or 4,930%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021 due to the inclusion of hardware sales related to Tile and a full year of Jiobit hardware sales.

Other revenue increased $2.0 million, or 8%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021, due to our strategic shift to focus on a single aggregated data arrangement and the transition period term overlap with legacy agreements.

Cost of Revenue, Gross Profit, and Gross Margin

Cost of subscription revenue increased by $12.9 million, or 72%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily due to $6.0 million in technology expenses as a result of the inclusion of costs related to cloud infrastructure associated with the Tile and Jiobit subscription offerings, an increase of $4.0 million related to volume growth for Life360 subscriptions, an increase of $0.9 million related to depreciation and amortization associated with the Tile and Jiobit acquisitions, $0.8 million in additional personnel-related costs and stock-based compensation due to increased headcount and an increase of $0.5 million due to an increase in professional and consulting fees. The remaining increase of $0.7 million is attributable to other related expenses associated with Company growth.

Subscription gross margin increased slightly to 80% during the year ended December 31, 2022 from 79% during the year ended December 31, 2021, primarily due to the subscription price increases implemented by the Company during the fourth quarter of the year ended December 31, 2022.

Cost of hardware revenue increased by $44.1 million, or 3,291%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily due to the inclusion of hardware costs of approximately $33.5 million related to Tile and a full year of Jiobit hardware costs, $4.3 million in additional personnel-related costs and stock-based compensation due to increased headcount, an additional $3.6 million related to depreciation and amortization associated with the Tile and Jiobit acquisitions, an additional $2.0 million in technology expenses and $0.4 million in professional and outside services due to higher contractor spend as a result of increased scaling of the combined business. The remaining increase of $0.3 million is attributable to other expenses associated with Company growth.

Hardware gross margin increased to 5% during the year ended December 31, 2022 as compared to the year ended December 31, 2021 due to the different profile of Tile hardware products that represent a significant portion of hardware sales in 2022, while 2021 included only Jiobit products. Margins were negatively impacted by the inclusion of amortization expense recognized on acquired technology related to intangible assets as well as additional personnel-related costs and stock-based compensation due to increased headcount.

Cost of other revenue decreased slightly for the year ended December 31, 2022 as compared to the year ended December 31, 2021. The Company saw a decline in other cost of revenues as a result of the transition to a single aggregated Data Partner, however this decline was offset by increased costs incurred during the transition period of legacy arrangements to the single Data Partner.

60

Table of Contents

Other gross margin increased to 87% during the year ended December 31, 2022 from 86% during the year ended December 31, 2021, primarily due to cloud infrastructure optimization.

Research and Development

Research and development expenses increased $51.5 million, or 101%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021. The increase was primarily due to an increase of $38.2 million in personnel-related costs and stock-based compensation due to headcount growth attributable to the Tile and Jiobit acquisitions, an increase of $7.8 million in technology expenses due to higher costs primarily related to increased cloud and data server infrastructure needs associated with the full year inclusion of Tile and Jiobit, an increase of $4.7 million in professional and outside services due to higher contractor spend as a result of increased scaling of the combined business, and an increase of $0.8 million in costs associated with increased expenses associated with headcount growth.

Sales and Marketing

Sales and marketing expenses increased $44.9 million, or 95%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021. This increase was primarily due to a $24.4 million increase in marketing expenses consisting of increases of $9.8 million in paid user acquisition spend, $9.5 million in Channel Partner commission charges, $4.1 million in television advertising spend, and $1.0 million in other marketing spend, respectively. The increase was also related to an additional $11.8 million in personnel and related costs and stock-based compensation due to increased headcount, an increase of $4.0 million in depreciation and amortization related to the amortization of intangible assets acquired from the Tile and Jiobit acquisitions, an increase of $2.4 million due to higher contractor spend as a result of increased scaling of the combined business, and a $2.3 million increase in technology and other expenses due to higher costs to support headcount growth.

General and Administrative

General and administrative expense increased $24.4 million, or 103%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021. As a result of our continued investment in headcount and acquisitions, personnel and related costs and stock-based compensation increased by $20.6 million. In addition, professional and outside services increased by $12.5 million primarily due to Tile Acquisition costs of approximately $5.0 million and increased expenses related to accounting, legal and advisory services in connection with the Company’s initial Form 10 filing in April 2022 and the subsequent SEC review process, which was completed in July 2022. These increases were partially offset by a change in the gain or loss on the contingent consideration between 2022 and 2021 related to the Jiobit Acquisition of approximately $8.9 million as it was determined a portion of the contingent consideration metrics would not be met. The remaining increase of $0.2 million is attributable to other general and administrative expenses associated with Company growth.

61

Table of Contents

Convertible Notes Fair Value Adjustment

For the years ended December 31, 2022 and 2021, the Company recorded a gain associated with the convertible notes fair value adjustment of $1.8 million and a loss of $0.5 million, respectively. The change in fair value is primarily driven by the share price volatility and reduction in time to convert.

Derivative Liability Fair Value Adjustment

The derivative liability fair value decreased by $1.3 million, or 93%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021. The changes are due to the revaluation of the derivative liability at each reporting period and are related to embedded redemption features bifurcated from the July 2021 Convertible Notes issued to investors.

Other Income (Expense), Net

Other income (expense), net increased $0.2 million, or 107%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021. Other income (expense) includes interest income, foreign exchange losses, and interest expense associated with the Convertible Notes.

Provision (Benefit) for Income Taxes

The provision (benefit) for income taxes increased $0.4 million, or 346%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021. The increases are primarily due to the tax effects related to the Tile Acquisition.

Key Performance Indicators

We review several operating metrics, including the following key performance indicators, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We believe these key performance indicators are useful to investors because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making, and they may be used by investors to help analyze the health of our business. Key operating metrics are presented in millions, except ARPPC, Average Revenue per Paying Subscription (“ARPPS”) and Net 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.

Key Operating Metrics

62

Table of Contents

Annualized Monthly Revenue

We use Annualized Monthly Revenue (“AMR”) to identify the annualized monthly value of active customer agreements for a particular 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. AMR as of December 31, 2022, and 2021 was $224.4 million and $139.8 million, respectively, representing an increase of 61% year-over-year.

Monthly Active Users

We have a large and growing global member base as of December 31, 2022. A Life360 Monthly Active User (“MAU”) is defined as a unique user who engages with our Life360 branded services each month, which includes both paying and non-paying members. As of December 31, 2022 and 2021, we had approximately 48.6 million and approximately 35.5 million MAUs on the Life360 Platform, respectively, representing an increase of 37% year-over-year. We believe this has been driven by continued strong organic member growth and retention.

Paying Circles

We define a Paying Circle as a group of Life360 users with a paying subscription. 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, 2022 and 2021, we had approximately 1.5 million and 1.2 million paid subscribers to services under our Life360 brand, respectively, representing an increase of 23% 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 and safety services. We have experienced strong recent growth in the number of paying subscribers.

Average Revenue per Paying Circle

We define Average Revenue per Paying Circle (“ARPPC”) as subscription revenue derived from the Life360 mobile application for the reported period divided by the Average Paying Circles during the same period. Average Paying Circles are calculated based on adding the number of Paying Circles as of the beginning of the period to the number of Paying Circles as of the end of the period, and then dividing by two.

For the years ended December 31, 2022 and 2021, our ARPPC was $95.40 and $80.20, respectively. As a result of an increase in Paying Circles combined with an increased mix of sales towards higher-priced subscription plans, we experienced an increase of 19% in our ARPPC year-over-year.

ARPPC is a key indicator utilized by Life360 to determine the effective penetration of our tiered product offering for Paying Circles. The increase in pricing for new Paying Circles in August 2022 has led to subscribers signing up for higher price products over time, increasing ARPPC.

Subscriptions

We define Subscriptions as the number of paying subscribers associated with the Life360, Tile and Jiobit brands as of the end of the period.

Average Revenue per Paying Subscription

We define ARPPS as total subscription revenue for the respective 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. ARPPS for the years ended December 31, 2022 and 2021 was $79.75 and $67.70, respectively, representing an increase of $12.05, or 18% year-over-year.

ARPPS has increased year over year as a result of the percentage of subscribers who select higher priced subscriptions, including Life360 membership tiers, has increased over time.

63

Table of Contents

Net Hardware Units Shipped

Net hardware units shipped represents the number of tracking devices sold during a period, net of returns by our retail partners and directly to consumers. Selling units contributes to hardware revenue and ultimately increases the number of users eligible for a Tile or Jiobit subscription. For the year ended December 31, 2022, Life360 sold approximately 3.6 million units, down approximately 42% as compared to the 6.2 million units sold during the year ended December 31, 2021, reflecting the backdrop of weaker consumer electronics category demand and high retail channel inventory levels.

Net Average Sales Price

To determine the net ASP of a unit, we divide hardware revenue recognized during a period by the number of net hardware units shipped (“ASP”) 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 year ended December 31, 2022, the net ASP of a unit was $13.47, a decrease of 10% compared to the year ended December 31, 2021, reflecting a change in product mix, increased promotional activity and higher levels of returns.

Liquidity and Capital Resources

We believe that our existing cash and cash equivalents and cash provided by sales of our subscriptions and hardware devices will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. Our future capital requirements will depend on many factors and as a result, we may be required to seek additional capital. 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.

On March 10, 2023, we had a banking relationship with SVB. As of the closure of SVB on March 10, 2023, we held $6.1 million in direct deposits with SVB, which represented approximately 6.4% of our total cash and cash equivalents as of that date. We also held $75.4 million in shares of money market mutual funds managed by Morgan Stanley, Blackrock and Western Asset, for which SVB acted as custodian. SVB was closed on March 10, 2023 by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver. On March 12, 2023, the U.S. Treasury, Federal Reserve, and FDIC announced that SVB depositors will have access to all of their money starting March 13, 2023. On March 13, 2023, we regained access to our funds held in SVB accounts. While we have not experienced any losses in such accounts, the recent failure of SVB exposed us to significant credit risk prior to the completion by the FDIC of the resolution of SVB in a manner that fully protected all depositors. We are in the process of transferring our accounts to one or more alternate depository institutions, the financial position of which management believes does not expose our company to significant credit risk or jeopardize our liquidity. Additionally, we may be impacted by adverse developments which affect financial institutions, transactional counterparties, other companies in the financial services industry, or the financial services industry generally, which have in the past and may in the future threaten our ability to access our existing cash and cash equivalents and could have a material adverse effect on our business and financial condition.

A number of our users 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, 2022 and 2021, we had deferred revenue of $32.8 million and $13.9 million, respectively, of which $30.1 million and $13.9 million is expected to be recorded as revenue in the next 12 months, provided all other revenue recognition criteria have been met.

Our cash flow activities were as follows for the periods presented:

64

Table of Contents

Operating Activities

Our largest source of operating cash is cash collections from our paying users for subscriptions to our platform and hardware device sales. Our primary uses of cash from operating activities are for employee-related expenditures, inventory, infrastructure-related costs, commissions and other marketing expenses. Net cash used in operating activities is impacted by our net loss adjusted for certain non-cash items, including depreciation and amortization expenses, amortization of costs capitalized to obtain contracts, change in fair value of convertible notes, derivative liability, and contingent consideration, and stock-based compensation, as well as the effect of changes in operating assets and liabilities.

For the year ended December 31, 2022, net cash used in operating activities was $57.1 million. The primary factors affecting our operating cash flows during this period were our net loss of $91.6 million, impacted by $37.3 million of non-cash charges, and $2.8 million of cash provided by changes in our operating assets and liabilities. The non-cash charges primarily consisted of $34.7 million in stock-based compensation, $9.2 million of depreciation and amortization, $5.3 million in gains on revaluation of contingent consideration, $2.9 million of amortization of costs capitalized to obtain contracts, $1.8 million gain in convertible notes fair value adjustment, $1.5 million non-cash revenue from affiliate, and $1.3 million gain in derivative liability fair value adjustment. The cash provided by changes in our operating assets and liabilities was primarily due to a $10.6 million decrease in prepaid expenses and other assets, a $6.5 million decrease in accounts receivable, net, and a $4.7 million increase in deferred revenue. These amounts were partially offset by a $12.7 million decrease in accounts payable, a $7.7 million decrease in accrued expenses and other liabilities, a $3.3 million increase in costs capitalized to obtain contracts, a $0.5 million increase in inventory, and a $0.3 million increase in other noncurrent liabilities.

For the year ended December 31, 2021, net cash used in operating activities was $12.2 million. The primary factors affecting our operating cash flows during this period were our net loss of $33.6 million, impacted by $21.8 million non-cash charges and $0.4 million of cash used by changes in our operating assets and liabilities. The non-cash charges primarily consisted of $11.8 million in stock-based compensation, $4.0 million in amortization of costs capitalized to obtain contracts, $3.6 million loss on revaluation of contingent consideration, a $0.7 million loss attributable to the derivative liability fair value adjustment, and $0.9 million of depreciation and amortization. The cash used by changes in our operating assets and liabilities was primarily due to a $4.7 million increase in accrued expenses and other liabilities, a $1.7 million increase in deferred revenue, and a $0.6 million increase in accounts payable. These amounts were partially offset by a $2.7 million increase in accounts receivable, net, a $1.7 million increase in costs capitalized to obtain contracts, net, a $1.2 million decrease in other noncurrent liabilities, a $0.9 million increase in prepaid expenses and other assets, and a $0.9 million increase in inventory.

Investing Activities

For the year ended December 31, 2022, net cash used in investing activities was $111.6 million, which relates to $110.9 million of cash paid for the Tile Acquisition, net of cash acquired and $0.7 million related to the capitalization of internal use software costs.

For the year ended December 31, 2021, net cash used in investing activities was $7.1 million, which relates to a $4.0 million cash advance on convertible note receivable and $3.0 million of cash paid for the Jiobit Acquisition, net of cash acquired.

Financing Activities

For the year ended December 31, 2022, net cash provided by financing activities was $27.7 million, which relates to

$32.2 million of proceeds from a capital raise, $2.4 million of proceeds from the exercise of options, and $0.6 million of proceeds from the repayment of notes due from affiliates, partially offset by $4.1 million of taxes paid related to net settlement of equity awards and $3.5 million of repayment of convertible notes.

For the year ended December 31, 2021, net cash provided by financing activities was $194.0 million, which primarily related to $193.1 million of proceeds from a capital raise, $3.5 million of proceeds from the exercise of options, and $2.1 million in cash received associated with the issuance of convertible notes offset by $4.7 million of taxes paid related to net settlement of equity awards.

65

Table of Contents

Obligations and Other Commitments

Our principal commitments consist of obligations under our convertible notes, operating leases for office space, and other purchase commitments. Our obligations under our convertible notes are described in Notes 6 and 9 to our consolidated financial statements. Information regarding our non-cancellable lease and other purchase commitments as of December 31, 2022, can be found in Notes 8 and 11 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 the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. Critical accounting policies and estimates are those that we consider the most important to the portrayal of our financial condition and results of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The critical accounting estimates, assumptions, and judgments that we believe to have the most significant impact on our consolidated financial statements are described below. This discussion is provided to supplement the descriptions of our accounting policies contained in Note 2, “Summary of Significant Accounting Policies” to our consolidated financial statements and to our interim financial statements included elsewhere in this Annual Report on Form 10-K.

Revenue Recognition

We derive revenue from subscription fees (which include support fees), the sale of Tile and Jiobit hardware devices, and other data 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.

We determine revenue recognition through the following steps:

•Identification of the contract, or contracts, with a customer;

•Identification of the performance obligations in the contract;

•Determination of the transaction price;

•Allocation of the transaction price to the performance obligations in the contract; and

•Recognition of revenue when, or as, we satisfy a performance obligation.

Subscription Revenue

Subscription revenue, which includes support, is recognized on a straight-line basis over the non-cancellable contractual term of the arrangement, generally beginning on the date that our service is made available to the customer. We also generate revenue from the Tile Premium Subscription and Jiobit Subscription offerings. We consider delivery of services to have occurred as control is transferred.

Hardware Revenue

We derive a majority of our hardware revenue from sales of Tile and Jiobit hardware devices. We consider delivery of our products to have occurred once control has transferred and delivery of services to have occurred as control is transferred. We recognize revenue, net of estimated sales returns, sales incentives, discounts, and sales tax.

66

Table of Contents

Other Revenue

The majority of the Company’s traditional data partner contracts have been terminated in 2022 and as discussed herein, the Company is in the process of winding down the traditional data brokerage business and has moved toward an aggregated data sales model. In the meantime, other revenue includes agreements with third parties to provide access to and use of Life360 data as well as advertising on the Company’s mobile platform. The Company estimates and includes variable consideration 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. In estimating variable consideration in data arrangements, the Company considers historical experience and other external factors that may impact the expectation of future data usage. Access to the Company’s data represents a series of distinct services as the Company continually provides access to the data, fulfills its obligation to the customer over the non-cancelable contractual term, and the customer receives and consumes the benefit of the data throughout the contract period. The series of distinct services represents a single performance obligation that is satisfied over time.

Arrangements with Multiple Performance Obligations

Our hardware sales arrangements typically contain multiple performance obligations, consisting of the hardware sale, application usage, hardware support, and in some cases, subscriptions. For arrangements with multiple performance obligations where the contracted price differs from the stand-alone selling price (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 deliverable. For business-to-business hardware sales, we will estimate the expected consideration amount after credits and discounts.

Amounts allocated to the delivered hardware devices are recognized at the time of delivery, provided the other conditions for revenue recognition have been met, with a portion of the consideration being allocated to application usage (maintenance) and support. Amounts allocated to subscriptions are deferred and recognized ratably over the subscription term.

Sales Incentives

We offer sales incentives through various programs, consisting primarily of cooperative advertising and pricing promotions to retailers and distributors. We record advertising with customers as a reduction to revenue unless we receive a distinct benefit in exchange for credits claimed by the customer and can reasonably estimate the fair value of the distinct benefit received, in which case we record it as a marketing expense. We recognize a liability and reduce revenue for rebates or other incentives based on the estimated amount of rebates or credits that will be claimed by customers.

Product Warranty

We offer a standard product warranty that our products will operate under normal use for a period of one year from the date of original purchase. We also offer extended warranties generally for a period of three years for devices with replaceable batteries. We will either repair or replace the defective product. At the time revenue is recognized, an estimate of future warranty costs is recorded as a component of cost of revenues. Factors that affect the warranty obligation include product failure rates, service delivery costs incurred in correcting the product failures, and warranty policies. Our products are manufactured by contractor manufacturers, and in certain cases, we may have recourse to such contract manufacturers.

Inventory Valuation

Inventories consist of raw material and finished goods which are purchased from contract manufacturers. Inventories are stated at the lower of cost or net realizable value, with costs being computed on a weighted average basis. We assess the valuation of inventory and periodically write down the value for estimated excess and obsolete inventory based upon estimates of future demand and market conditions.

67

Table of Contents

Costs Capitalized to Obtain Contracts

Revenue-share payments to third parties in connection with initial 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. These costs are recognized and amortized over the average customer life, which was approximately two to three years depending on the subscription type. The Company determines the period of benefit by taking into consideration the average customer life based upon its assessment of historical data and other factors.

Stock-Based Compensation Expense

The Company has an equity incentive plan under which various types of equity-based awards including, but not limited to, incentive stock options, non-qualified stock options, and Restricted Stock Units (“RSUs”) may be granted to employees, non-employee directors, and non-employee consultants. Compensation expense is measured and recognized in the consolidated financial statements based on fair value. The fair value of each option award is estimated on the grant date using the Black-Scholes option pricing model. The fair value of stock options that are expected to vest is recognized as compensation expense on a straight-line basis over the requisite service period. The fair value of RSUs is based on the fair value of the common stock on the date of grant. The stock-based compensation expense is based on awards ultimately expected to vest. Forfeitures are recorded as they occur.

Our use of the Black-Scholes option pricing model requires the input of highly subjective assumptions, including the fair value of the underlying shares of our common stock, the expected term of the option, the expected volatility of the price of our common stock, risk-free interest rates and the expected dividend yield of our common stock. The assumptions used to determine the fair value of the awards represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment.

These assumptions and estimates are as follows:

•Fair Value of Common Stock. Since the listing of our CDIs on the ASX, the fair value of common stock is based on the closing price of our CDIs on the ASX as reported in Australian dollars, adjusted to reflect the CDI/per share of common stock ratio in effect, and translated to U.S. dollars based on the date of grant of our common stock.

•Expected Term. The expected term for employees is based on the simplified method, as the Company’s stock options have the following characteristics: (i) granted at-the-money; (ii) exercisability is conditioned upon service through the vesting date; (iii) termination of service prior to vesting results in forfeiture; (iv) limited exercise period following termination of service; and (v) options are non-transferable and non-hedgeable, or “plain vanilla” options, and the Company has limited history of exercise data. The expected term for non-employees is based on the remaining contractual term.

•Expected Volatility. Since we have limited trading history of CDIs, interests in our common stock, the expected volatility is determined based on the historical stock volatilities of our comparable companies, and the Company’s trading data since listing on the ASX. Comparable companies consist of public companies in our industry, which are similar in size, stage of life cycle and financial leverage. The Company will continue to analyze the historical stock price volatility and expected term assumptions as more historical data for the Company’s common stock becomes available.

•Risk-Free Interest Rate. We base the risk-free interest rate on the implied yield available on U.S. Treasury zero-coupon issues with a remaining term equivalent to that of the options for each expected term.

•Dividend Yield. The expected dividend assumption is based on our current expectations about our anticipated dividend policy. As we have no history of paying any dividends and have no plans to pay dividends in the foreseeable future, we used an expected dividend yield of zero.

The following table summarizes the assumptions used in the Black-Scholes option pricing model to determine the fair value of our stock options:

68

Table of Contents