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Annual Report For personal use only 2020 Contents Chairman’s Report 1 CEO’s Report 3 Corporate Social Responsibility Report 7 Directors’ Report 11 For personal use only Consolidated Financial Statements 29 Independent Auditor’s Report 31 Shareholder Information 61 Feel free, together Family love is universal, and we are all connected by the need to keep loved ones safe. That’s why Life360 is trusted by over 26 million members worldwide across 13 languages – and counting. We are the world’s leading family safety service. For personal use only Life360 is listed on the Australian Securities Exchange (ASX:360) and is a constituent of the S&P/ASX 300 index. CY20 User Highlights Connecting families and saving lives Letter from 2,038,768 the Chairman Help alerts sent John Philip Coghlan 2020 was a uniquely challenging year for Life360 and the 52,957,392,571 world, and we appreciate the continued support of our Miles driven with Life360 shareholders. Despite the worsening impact of COVID-19 crash detection over the course of the year, the business exhibited remarkable resilience. Revenue growth remained strong, and the next important step in our strategy - the launch of our Membership model - was implemented without missing a beat. 14,209 2020 Performance Worldwide Paying Circles increased Ambulances dispatched 8% year-on-year, with a 12% uplift Life360 delivered 2020 statutory in the US benefiting from the revenue of $80.7 million, a 37% launch of the Membership offering. year-on-year uplift. This was a tremendous outcome given the Strategy backdrop of COVID-19. 11,269,693,552 The mid-year launch of our Safe arrival notifications Underlying EBITDA loss (excluding family safety Membership model Stock Based Compensation) of significantly expands the value $(7.0) million improved significantly Life360 can provide to families at CY20 Financial from $(22.9) million in 2019. every life stage. This important Statutory EBITDA loss of $(16.0) step in our growth strategy was Highlights million and statutory net loss of achieved with the entire team $(16.3) million both improved 44% working remotely. Building and monetising year-on-year. our user base We are optimistic that the Life360 finished 2020 with a cash additional features will expand the balance of $56.6 million and no relevance of our services to a wider debt. The strength of our balance range of families, and drive long sheet and the flexibility of our term growth in revenue and value. +39% +69% discretionary expense model have Following the successful launch YoY increase Improvement been particularly important in the of the Membership model, in normalised in underlying context of the rapid change in the the company is focused on * * revenue to EBITDA loss to operating environment brought on delivering the three strands $81.6 million $(7.0) million by the pandemic. of our growth strategy: Our financial performance was • Build a large base of engaged supported by resilient operational mobile users For personal use only metrics. US Monthly Active Users • Grow Membership to disrupt +68% $56.6m (MAU) increased 4% year-on-year; legacy incumbents Improvement cash balance international MAU returned to in underlying with no debt • Expand reach and revenue ** growth in the second half following net loss to through launch of additional lead $(7.3) million COVID-related declines in the first gen and new services. half. Australia was a stand-out * includes non-recurring adjustment of approximately performer with MAU of 658,000, Additional detail is contained in the $0.9 million in relation to deferral of subscription revenue ** excluding Stock Based Compensation and non-recurring adjustment up 15% year-on-year. CEO’s report. 1 Letter from the Chairman Strategic Review The Board has announced that it is conducting a review of strategic alternatives to significantly increase shareholder value. This has been undertaken in response to current valuations in the US for high growth technology companies, and inbound interest received for Life360’s business. There is no certainty that the growing Facebook in review will result in any transaction its early days from an or any changes to current listing intimate community to the arrangements. global social network it Your Company is today, and for creating Facebook Live. Randi’s Life360 recognises the importance expertise will prove invaluable of progressing our Environmental, “Australia was a as we scale the business for Social and Governance (ESG) its next phase of growth. stand-out performer practices to reflect our responsibility to the communities we serve. On behalf of the Board I would with Monthly Active The Corporate Social Responsibility like to thank our talented Users of 658,000, section of the Annual Report colleagues for their dedication provides details of initiatives and hard work, particularly in up 15% year-on-year. already in place and planned the challenging circumstances for the future. brought about by COVID-19. I’d Worldwide Paying like to acknowledge the astute Life360’s most powerful contribution Circles increased 8% leadership of Chris Hulls who to the community is to bring families steered the company through year-on-year, closer, by ensuring that loved ones uncharted territory, delivering the with a 12% uplift are safe and secure. Our premium Membership model on time, and services quite literally save lives, positioning the company for the in the US benefiting and during 2020 we dispatched growth opportunities ahead. more than 14,000 ambulances. from the launch of Life360 is well placed to I would like to thank my fellow deliver on our mission to bring the Membership Board members for the contribution families closer, with smart features offering.” they make to Life360. Shareholders For personal use only designed to protect and connect greatly benefit from their expertise the people who matter most. and wise counsel, particularly through turbulent times such as 2020. I’d like to welcome our newest Director, Ms Randi Zuckerberg, who joined the Board in January. Randi brings a depth of experience to John Philip Coghlan the company, including her work Chairman Annual Report 2020 2 Letter from the CEO Chris Hulls A global pandemic in 2020 was certainly not anything we planned for, and while the operating environment was challenging, we’re extremely proud of the results we achieved. We maintained growth, proved our ability to generate positive cash flow, and delivered on our strategy roadmap. We believe Life360 is well positioned to accelerate our performance in the back half of 2021 when the world returns to normalcy. Key Achievements than purchasing individual developing markets which make Our Membership launch was subscriptions. As consumers an insignificant contribution to our marquee new product recognise the substantial value revenue. Interestingly, countries development of 2020. Our ability we provide, we will prove to like Australia that managed the be highly disruptive to legacy to leverage our user base and COVID crisis well, saw significant incumbents. advantageous mobile economics outperformance during Q2. Total allows us to provide access to a The impact of COVID-19 saw international MAU returned to set of safety and security features a meaningful decline in new growth in the second half, with at a far lower cost than our global registrations in the early even better performance in competitors. And we have now days of the pandemic. Despite countries which managed COVID For personal use only moved beyond location sharing this, US Monthly Active Users more successfully. This bodes well and driving, to a much broader (MAU) held stable in the first for our return to faster growth feature set that includes identity half of 2020, with growth later in the year as the vaccine protection, travel, disaster, and returning in the second half. rolls out globally. Throughout medical assistance, to name just The impact on international the crisis, we saw a very positive a few of the new benefits we users was more significant, with performance from our returning offer. We provide this offering an MAU decline in Q2, although users or RMAU, testament to the at a considerably lower cost this impact was concentrated in value we provide to families. 3 “...we maintained net subscriber revenue retention above 100%, reflecting the strength of Life360’s freemium model, and our success in driving free users to paid subscriptions, and paid subscribers into higher price point plans.” Our business exhibited impressive Revenue Performance our core focus. Performance was resilience, with an 8% year-on- Subscription revenue (“direct assisted by the deferral to 2021 year growth in Paying Circles, and revenue”) increased 35% year- of any potential changes to the 39% year-on-year normalised on-year to a normalised $59.4 Identifier for Advertisers (or IDFA) revenue growth. Remarkably, million, contributing 73% of previously considered for iOS we maintained net subscriber total revenue. Performance in 14. However we do expect some revenue retention above 100%, the US was particularly strong, level of negative impact when the reflecting the strength of supported by the Membership changes are implemented. Life360’s freemium model, and launch. Paying Circles increased Our auto insurance lead our success in driving free users 8% year-on-year to 889,000, an to paid subscriptions, and paid generation partnership impressive performance in the subscribers into higher price with Allstate made a steady context of very low levels of paid point plans. Our disciplined contribution, with COVID-19 acquisition spend. spending approach during the impacting the pace of expansion. pandemic underpinned a higher Average Revenue Per Paying While we would have liked to gross margin, and a substantial Circle (ARPPC) increased around have made more progress on improvement in underlying 11% in the US, benefiting from the the user experience, we see EBITDA loss, which outperformed higher priced new Membership significant upside opportunity our guidance.