Accelerating revenue growth fails to woo investors as Life360 hits a new 52-week low

Life360 (ASX: 360) has tried to turn things around in the March quarter after an abysmal February reporting season which triggered a -29% selloff on the day of the results.

For the uninitiated, Life360 operates a market leading app for families, with features that range from location sharing and communications for driving safety. The company acquired Jiobit, the maker of wearable location devices in September 2021 and Tile, a bluetooth tracking device company, in the same year. 

Quarter at a glance

• Revenue of US$52.7m, up 129%

• Earnings loss of -US$12.6m

  • Includes one-off US$11m of acquisition costs and payments

• Core Life360 Global Monthly Active User (MAU) base of 38.3m, up 36%

• Total subscriptions of 1.8m, up 38%

• Average revenue per subscription up 16%

• Cash of US$98.2m

Different period, same narrative

Sellers have taken control of Life360 after a -3% open snowballed into an -18% decline at noon.

For the most part, the March quarter was the same story as the company's full-year results - strong revenue growth, volatile cashflows, net losses, lingering bluetooth sales challenges and aspirations for profitability.

Revenue growth accelerated in the March quarter as the business added around 71,000 new subscribers, an increase of more than 160% compared to last year.

The reporting period incorporated Tile's earnings for the first time. Life360 explained that Tile has its highest cash burn in the first quarter due to the timing of supplier payments, followed by a peak fourth quarter sales period.

The Tile business was relatively muted in the March quarter, which is a seasonally soft period, but also weighed by media coverage of privacy concerns related to Apple Airtags.

Spending accelerates

Life360 said that paid user acquisition and TV channel spend increased from US$4.6m in the December quarter to US$6.7m.

Though, this largely reflected the addition of Tile as core paid user acquisition was US$2.4m, up from US$2.1m in the December quarter.

Finding a balance between growth and expenses will be key for Life360. Especially after February reporting season flagged a 49% jump in expenses to US$122m, underpinned by an increase in R&D, marketing and admin costs.

Closing in on profitability

Chief executive Chris Hulls said the company has adjusted its strategic plan in light of market conditions, moving ahead its plans for cash flow breakeven to the first quarter of 2023.

“This is being driven by the extremely promising results we are seeing for hardware to drive membership revenue. While this will not result in significant savings for CY22, we will enter CY23 with a much leaner organisational structure with which to drive membership,” said Hulls.

Life360 resumed its earnings guidance, which reiterated the near-term loss-making nature of the business. The 2022 calendar year is expected to deliver:

• Core Life360 subscription revenue growth of more than 50%

• Group revenue of US$245-275m (up 118-144%)

• Underlying loss between US$32-38m

Notice a trend?

Several companies making 52-week lows follow a similar, fast-growing, loss-making narrative. Amid a new era of tightening monetary policy, investors appear to be growing less tolerant for cash burning companies.

Stocks making 52-week lows include:

• Bigtincan (ASX: BTH)

• Zip (ASX: Z1P)

• Dubber (ASX: DUB)

• Redbubble (ASX: RBL)

• PointsBet (ASX: PBH)

Life360 price chart