Life360 (ASX:360) share price hits record high on Q3 update and guidance upgrade

This tech share had another strong quarter…

| More on:
young lady checking her social media accounts with floating emoji reactions and smiling

Image source: Getty Images

The Life360 Inc (ASX: 360) share price is storming higher on Wednesday.

In early trade, the mobile app maker’s shares are up 6% to a record high of $10.54.

Why is the Life360 share price rising?

The catalyst for the rise in the Life360 share price today is the release of the company’s third quarter update.

According to the release, Life360 delivered underlying revenue growth (excluding Jiobit) of 45% year-on-year to US$29.3 million. This means that Life360’s Annualised Monthly Revenue (AMR) (excluding Jiobit) reached US$120.1 million at the end of September. This is 48% higher than a year earlier.

Consolidated revenue, which includes the Jiobit acquisition, rose 47% over the prior corresponding period to US$29.7 million.

Life360 reported an underlying EBITDA loss of US$3.2 million excluding Jiobit and US$3.7 million including it. This left the company with a cash balance of US$50.4 million. Management remains confident its strong capital position represents sufficient resources to fund future growth.

What were the drivers of its growth?

A key driver of its growth was another solid increase in its Global Monthly Active User (MAU) base.

It reached 33.8 million at the end of September. This is a 31% increase year on year and an increase of 1.5 million since the end of June. The latter was despite the expected churn from the TikTok viral surge that inflated the previous quarter.

Life360’s user base comprises 22.2 million MAU in the US (up 1.9 million from the June quarter) and 11.6 million International MAUs. The latter was down slightly since the June quarter due to roll off from the TikTok surge.

Another positive was that its Global Paying Circles increased 26% year on year or 10% quarter on quarter to 1.1 million. Management notes that US Paying Circles increased 28% year-on-year, benefiting from the launch of the new Membership offering in July 2020. Its net subscriber additions of more than 104,000 was a second consecutive quarterly all-time record, increasing 15% on the June quarter.

Finally, also heading in the right direction was its Average Revenue Per Paying Circle (ARPPC). It increased 24% year-on-year and 8% quarter on quarter. Management notes that ARPPC for new cohort Membership subscribers was a 39% uplift from the first half of 2020.

In light of this strong performance, the company has increased its 2021 AMR guidance. It now expects AMR in the range of US$125 million to US$130 million for the core business. This is up from its previous guidance of US$120-US$125 million.

Strategic review

Life360 revealed that it is in active negotiations with potential acquisition targets that will accelerate its vision of being the dominant platform for a much broader suite of family services. It advised that this includes transactions that could simultaneously result in a dual listing on a US exchange.

Regardless of the outcome of any M&A transaction, Life360 has engaged advisors to begin the process to dual list on a US exchange in 2022.

Management commentary

Life360’s Chief Executive Officer, Chris Hulls, commented: “This was another milestone quarter for Life360, with growth continuing to accelerate in the US as the country emerges from COVID-19. We are excited by the metrics the business is delivering, in particular the second consecutive quarter of record subscriber additions taking us to more than 1.1 million Paying Circles, underlying revenue growth of 45% year-on-year and reaching US$120.1 million in Annualised Monthly Revenue for the first time. As a result of this momentum, we have upgraded our CY21 AMR guidance.”

“Monthly Active Users continued to increase from the second quarter despite the expected roll-off of lower quality users from the viral surge in downloads we experienced that quarter from TikTok. While there was some modest decrease in international MAU due to the viral surge and regions with greater pandemic restrictions, this was in line with our expectations. US MAU growth was robust, increasing by 1.9 million from the June quarter to 22.2 million, reflecting the traditionally strong US Back-to-School period.”

The Life360 share price is up 170% in 2021.

Should you invest $1,000 in Life360 right now?

Before you consider Life360, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Life360 wasn't one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Life360, Inc. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers