Life360 share price rises 7% on strong quarterly update

Shares in Life360 Inc (ASX: 360) are up in Wednesday trade following the release of the company's quarterly business update and 4C.

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The Life360 Inc (ASX: 360) share price is up 7.64% to $3.24 in Wednesday trade following the release of the company's quarterly business update and Appendix 4C. 

What did Life360 report? 

For the December 2019 quarter the family networking app reported revenue of US$18.2 million, which was 58% higher than the prior corresponding period. Furthermore, annualised monthly revenue (excluding a one-off revenue contribution) in December 2019 was US$75.4 million. This slightly exceeded the prospectus forecast and was up 67% year-on-year. Calendar year revenue for 2019 was US$59.0 million, an 84% increase year-on-year and surpassed the prospectus forecast of US$58.6 million. 

Average revenue per Paying Circle (ARPPC) rose 14% year-on-year in the quarter. The growth was underpinned by the shift to higher value Driver Protect subscriptions and a move from annual to monthly subscription packages. For the year, ARPPC was up 10%, which was ahead of the prospectus projections of a decline of around 2%. 

Life360 reported Paying Circles were up 43% year-on-year to around 827,000. However, this was lower than the prospectus forecast of 940,000. Management attributed this to deliberately shifting users to Driver Protect, which supports higher pricing and better retention. Driver Protect accounted for more than 70% of total subscriptions by the end of 2019. This was ahead of prospectus model assumptions of less than 60%.

Life360 also reported paid user acquisition spend of US$3.9 million for the quarter and US$19.4 million for 2019. This was less than the prospectus forecast of US$25.9 million. The lower acquisition spend was attributed to the achievement of significant efficiencies and strong organic growth. 

User base continues to expand 

User metrics for Life360 were also strong for the quarter. The company reported a global monthly active user (MAU) base of 27.2 million, up 47% year-on-year. This also surpassed the prospectus forecast of 26 million. MAU rose 2.4 million in the December quarter and 8.7 million for 2019. The main driver was the United States (US), which represents 60% of total MAU.

US MAU rose a record 1.9 million for the quarter to 16.3 million. The user base increased by 6.3 million in 2019, representing 63% year-on-year growth and was ahead of the prospectus forecast of 14.1 million. Management noted that its US operations delivered record sequential MAU additions in every quarter in 2019. 

Foolish takeaway

Life360 reported a solid quarter with strong revenue growth underpinned by improving user metrics. At the end of 2019, the company had a cash balance of US$64.1 million with no debt. However, the business is yet to reach cash flow break-even.

For the December quarter, it reported an operating cash loss of US$6.7 million. For calendar year 2019 the operating cash loss was $30.5 million, which exceeded the prospectus forecast of US$24.6 million. The variance was attributed to year-end prepayments of US$6.0 million that were not included in the prospectus forecast. 

Shares in Life360 have disappointed investors after listing on the ASX in May 2019 at an issue price of $4.79. With the underlying business continuing to grow, the business is worthy of further monitoring for small-cap investors. 

Other small-cap technology companies that have risen this month from positive quarterlies include Bigtincan Holdings Ltd (ASX: BTH) and Mach7 Technologies Ltd (ASX: M7T). 

Motley Fool contributor Tim Katavic has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of BIGTINCAN FPO and MACH7 FPO. The Motley Fool Australia has recommended BIGTINCAN FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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