Life360 shares plunge -30% as losses accelerate to fuel growth

Reporting season stakes couldn’t be any higher for tech stocks as investors pivot away from assets with lofty valuations.

Life360 (ASX: 360) has had its valuation fall by almost a third after reporting a wider-than-expected loss for the calendar year 2021. 

To the uninitiated, the company's core offering , the Life 360 mobile app, is a market leading app for families, with features that range from communications to driving safety and location sharing.

Financials at a glance:

• Revenue of US$112.6m, up 40% 

• Net loss of -US$33.6m versus -US$16.3 in the prior year

• Cash balance of US$231.3m 

• Debt of US$12.5m 

The net loss exceeded Bell Potter and Citi expectations of -US$13.5m.

In stark contrast to the company’s share price performance, CEO Chris Hulls hailed the result, saying: 

“2021 was a landmark year for Life360. We achieved accelerating operational metrics across the business, with three consecutive quarters of record subscriber additions.”

“We finished the year with Annualised Monthly Revenue of US$135.7 million, a year-on-year increase of 51% and a strong leading indicator of the growth opportunity ahead,” added Hulls. 

Spend money to make money 

Life 360 reported a 49% increase in operating expenses to US$122m, which consists of: 

• Research and development:  US$60m (+29%)

• Sales and marketing: US$47.5m (+57%)

• General and administrative: US$23.7m (+96%)

The modest growth in user acquisition expenses reflected a shift from traditional performance marketing to new channels including streaming TV. 

Not the time and place 

The idea of accelerating losses does not bode well with the market's current risk-off attitude and pivot towards more cyclical or safe-haven assets.

Many of the market's worst performing stocks in the last 12-months following the exact same loss making tech theme. Notable names include:

• Sezzle (ASX: SZL) -84%

• PointsBet (ASX: PBH) -76%

• Redbubble (ASX: RBL) -69%

Apple debacle

Life360 acquired bluetooth device-tracking company Tile for $205m earlier this year to expand the company's addressable market.

Tracking devices have faced increasing scrutiny after Apple's AirTags were increasing reports of stalking incidents.

"We are also watching developments around the privacy concerns relating to Apple AirTags and stalking risks. The scrutiny Apple is facing in the press is moderating growth of the category overall," said Hulls.

Life360 was unable to provide any forward-looking guidance due to US federal securities laws, but the cash splurge and Apple overhang was more than enough to dent a -30% hole for shareholders.

Life360 12-month price chart