Life360, Inc.LIF
Life360, Inc. Stock Compensation Disclosure
13. Equity Incentive Plan
2011 Equity Incentive Plan
The Company’s 2011 Stock Plan was originally adopted by the Company’s Board of Directors on July 27, 2011 and the Company’s stockholders on October 11, 2011, and most recently amended and restated, and adopted by the Board of Directors on March 10, 2020 and the Company’s stockholders on July 21, 2020 (as restated, the “Plan”). The Plan allows the Company to grant restricted stock units (“RSUs”), performance-based restricted stock units (“PRSUs”), restricted stock and stock options to employees and consultants of the Company and any of the Company’s parent, subsidiaries, or affiliates, and to the members of the Board of Directors. Options granted under the Plan may be either incentive stock options or nonqualified stock options. Incentive stock options (“ISOs”), may be granted only to employees of the Company or any of the Company’s parent or subsidiaries (including officers and directors who are also employees). Nonqualified stock options (“NSOs”), may be granted to any person eligible for grants under the Plan.
The Board of Directors or the Compensation Committee of the Board of Directors determines the period over which options vest and become exercisable. Options issued under the Plan generally are exercisable for periods not to exceed ten years and generally vest over a 4-year period with 25% vesting after one year and the remainder vesting monthly thereafter in equal installments.
The Board of Directors or the Compensation Committee of the Board of Directors also determines the term of options, provided the maximum term for ISOs granted to a 10% stockholder must be no longer than 5 years from date of grant and the maximum term for all other options must be no longer than 10 years from date of grant. If an option holder’s service terminates, options generally terminate 3 months from the date of termination except under certain circumstances such as death or disability.
The following summary of stock option activity for the periods presented is as follows (in thousands, except share and per share data):
| Number of Shares Underlying Outstanding Options | Weighted Average Exercise Price per Share | Weighted Average Remaining Contractual Life (in Years) | Aggregate Intrinsic Value | ||||||||||||||||||||
| Balance as of December 31, 2023 | 6,625,812 | $ | 6.57 | 4.68 | $ | 59,957 | |||||||||||||||||
| Options granted | — | — | |||||||||||||||||||||
| Options exercised | (758,101) | 7.62 | |||||||||||||||||||||
| Options cancelled/forfeited | (193,764) | 14.54 | |||||||||||||||||||||
| Balance as of December 31, 2024 | 5,673,947 | 6.16 | 3.89 | 199,239 | |||||||||||||||||||
| Exercisable as of December 31, 2024 | 5,296,299 | $ | 5.72 | 3.82 | $ | 188,261 | |||||||||||||||||
As of December 31, 2024, there was total unrecognized compensation cost for outstanding stock options of $2.1 million to be recognized over a period of approximately 1.1 years.
As of December 31, 2024, the Company had 23,588,338 shares reserved for issuance and 12,815,029 shares available for issuance under the Plan. There were no stock options granted during the years ended December 31, 2024 and 2023. Stock options granted during the year ended December 31, 2022 had a weighted average grant date fair value of $8.33.
The intrinsic values of outstanding, vested, and exercisable options were determined by multiplying the number of shares by the difference in exercise price of the options and the fair value of the common stock as of December 31, 2024, 2023, and 2022 of $41.27, $15.46, and $9.94 per share, respectively. The intrinsic value of the options exercised represents the difference between the exercise price and the fair market value on the date of exercise. The total intrinsic value of the options exercised during the years ended December 31, 2024, 2023, and 2022 was $18.2 million, $7.7 million, and $4.1 million, respectively.
Performance-based Restricted Stock Units
The Company granted 115,403 PRSUs (“the Target Grant”) to certain executive officers during the year ended December 31, 2024. No PRSUs were granted to executive officers during the year ended December 31, 2023 or 2022. The number of PRSUs that may vest depends on the extent to which the performance goals for the award are achieved over a one-year performance period, as determined by the Compensation Committee of the Board, up to a maximum of 200% of the Target Grant. The performance goals for the PRSUs consist of the following two metrics, each with a weighting of 50%: (1) a revenue metric for the year ended December 31, 2024; and (2) an Adjusted EBITDA metric for the year ended December 31, 2024. Each of the metrics are within the Company’s published revenue and Adjusted EBITDA guidance described in the Company’s press release furnished within Exhibit 99.1 of the Company’s Current Report on Form 8-K filed with the SEC on February 29, 2024.
The PRSU awards vest over a four-year period with 1/4th of the shares vesting after the first year and 1/16th of the shares vesting each quarter thereafter, subject to continuous service with the Company. The Company uses the grant date fair value of the common stock to measure compensation expense for PRSU awards. Compensation expense is recognized over the vesting period of the PRSU award using the graded-vesting attribution method and shares attained over target upon vesting will be recognized as awards granted in the period.
As of December 31, 2024, the performance goals for the PRSU awards have been achieved at 135% and only the service conditions remain. No PRSU shares have vested as of December 31, 2024, in accordance with the vesting schedule of the awards.
RSU, including PRSU, activity for the periods presented is as follows:
| Number of Shares | Weighted average grant date fair value | ||||||||||
| Balance as of December 31, 2023 | 6,182,543 | $ | 12.67 | ||||||||
| RSUs & PRSUs granted | 2,572,091 | 27.36 | |||||||||
| RSUs vested and settled | (3,195,162) | 31.61 | |||||||||
| RSUs cancelled/forfeited | (467,871) | 14.37 | |||||||||
| Balance as of December 31, 2024 | 5,091,601 | $ | 19.22 | ||||||||
As of December 31, 2024, there was unrecognized compensation cost for outstanding restricted stock awards, including PRSUs, of $86.6 million to be recognized over a period of approximately 2.8 years.
The number of RSUs vested and settled includes shares of common stock that the Company withheld on behalf of employees to satisfy the minimum statutory tax withholding requirements. RSUs and PRSUs granted during the years ended December 31, 2024, 2023, and 2022 had a weighted average grant date fair value of $27.36, $13.15, and $12.13 per share, respectively. The total fair value of shares vested during the years ended December 31, 2024, 2023, and 2022 was $101.0 million, $39.2 million, and $12.0 million, respectively.
Stock Options Granted to Employees
The fair value of the employee stock options granted is estimated using the Black-Scholes option-pricing model, based on the following assumptions:
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Expected terms (in years) | N/A | N/A | 3.87 | ||||||||||||||
| Expected volatility | N/A | N/A | 65 | % | |||||||||||||
| Risk-free interest rate | N/A | N/A | 2.22 | % | |||||||||||||
| Expected dividend rate | N/A | N/A | 0 | % | |||||||||||||
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 conditional 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 in 2022, 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. As of 2024, expected term assumptions are all historical data for the Company’s common stock.
Risk-Free Interest Rate: The risk-free interest rate is based on U.S. Treasury constant maturity rates with remaining terms similar to the expected term of the options.
Expected Dividend Rate: The Company has never paid any dividends and does not plan to pay dividends in the foreseeable future, and, therefore, an expected dividend rate of zero is used in the valuation model.
Equity Awards Issued in Connection with Business Combinations
Tile, Inc.
In connection with the Tile Acquisition in January 2022, the Company issued 1,499,349 shares of retention RSUs with an aggregate fair value of $29.6 million. Of the 1,499,349 shares of retention restricted stock units, 787,446 shares valued at $15.6 million contained performance vesting criteria based on the achievement of certain company milestones during the three months ended March 31, 2022, and vest over a two year period. As of March 31, 2022, the vesting criteria had not been met and all 787,446 restricted stock units were forfeited. The remaining 711,903 retention restricted stock units vest over a to four year period. As of December 31, 2024, there was $0.3 million of unrecognized compensation expense related to the retention restricted stock units which is expected to be recognized over the remaining weighted average life of 1.0 year. As of December 31, 2023, there was $0.7 million of unrecognized compensation expense related to the retention restricted stock units which is expected to be recognized over the remaining weighted average life of 1.9 years.
The Company also issued 38,730 vested common stock options to Tile employees as stock-based compensation on the acquisition date. The aggregate fair value of $0.4 million was recognized as compensation expense on the date of acquisition.
A total of 694,672 shares of common stock with an aggregate fair value of $13.7 million were issued to Tile shareholders as part of purchase consideration. All $13.7 million was included within purchase consideration.
A total of 1,561 shares of common stock with an aggregate fair value of $30.8 thousand were issued to a key employee, the vesting of which is subject to continued employment over a 30-month period. As of December 31, 2024 and 2023, there was an immaterial amount of unrecognized compensation expense related to unvested restricted stock units which is expected to be recognized over the remaining 0 years and 0.5 years, respectively.
A total of 84,524 shares of common stock were issued as part of consideration transferred and were placed in an indemnity escrow fund to be held for fifteen months after the acquisition date for general representations and warranties. The aggregate fair value of $1.7 million was included within purchase consideration. All 84,524 shares of common stock were released from escrow in April 2023 as scheduled.
Stock-Based Compensation
Stock-based compensation expense was allocated as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Cost of revenue | |||||||||||||||||
| Subscription costs | $ | 730 | $ | 651 | $ | 684 | |||||||||||
| Hardware costs | 798 | 1,096 | 514 | ||||||||||||||
| Other costs | 4 | 43 | 237 | ||||||||||||||
| Total cost of revenue | 1,532 | 1,790 | 1,435 | ||||||||||||||
| Research and development | 25,457 | 22,015 | 19,431 | ||||||||||||||
| Sales and marketing | 3,344 | 3,059 | 3,834 | ||||||||||||||
| General and administrative | 11,936 | 11,648 | 9,980 | ||||||||||||||
| Total stock-based compensation expense | $ | 42,269 | $ | 38,512 | $ | 34,680 | |||||||||||
There was $0.7 million of capitalized stock-based compensation costs during the year ended December 31, 2024. There was an immaterial amount of capitalized stock-based compensation costs during the years ended December 31, 2023 and 2022.
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About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.