Life360 share price tumbles 18% as cash reserves get chewed up

Investors go cold on Life360’s cash burn…

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Key points

  • The Life360 share price is down 17.6% this morning following the release of its quarterly report
  • While revenue grew strongly, investors appear focused on the substantial cash burning during the quarter
  • The company is guiding towards a US$32 million to US$38 million loss for the calendar year

Another quarter of growth is putting the Life360 Inc (ASX: 360) share price in the spotlight today.

Moments after the morning bell, shares in the location safety tech company were trading down 18% to $4.40. The negative sentiment follows a dreadful showing by tech shares on the US market overnight, with the Nasdaq Composite Index (NASDAQ: .IXIC) falling 3.95%.

At the time of writing, the Life360 share price is trading at $4.40, down 17.6%. Let’s take a look at the company’s latest earnings.

Life360 share price dives despite growth

Highlights of Life360’s results for the quarter ending 31 March 2022 include:

  • Consolidated revenue up 129% from the corresponding quarter to US$52.7 million
  • Underlying revenue (excluding acquisitions) increased 64% year on year
  • Consolidated annualised monthly revenue up 73% year on year to US$166.1 million
  • Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) loss of US$12.6 million
  • Global monthly active users reached 38.3 million, up 36% year on year
  • Cash at the end of the quarter of US$98.2 million, down from US$231.3 million at the end of December

What else happened during the quarter?

While the headline metrics appear positive for the Life360 business, it doesn’t seem to be enough for the share price today.

Notably, the broader market continues to rotate away from tech plays that are currently unprofitable. For Life360, the cash has continued to flow outwards in the March-ending quarter.

Specifically, the company landed more than US$50 million in receipts from customers. However, most of this was consumed by staff, administration, and marketing costs. When it came to the net line, Life360 recorded US$37.8 million in net cash used in its operating activities.

Additionally, the Tile acquisition removed a further US$96.2 million from the company’s piggybank during the quarter. However, Life360 is targeting positive cash flow by late 2023 with the integration of Jiobit and Tile.

What did management say?

Commenting on the quarterly figures, Life360 CEO Chris Hulls said:

Life360 continued its significant business momentum, delivering strong results across key operational metrics in the March 2022 quarter.

We added 71,000 net new subscribers, an increase of more than 160% from the March 2021 quarter. Monthly Active Users (MAU) also showed a significant increase, with an 8% quarter-on-quarter gain to 38.3 million, translating to 36% year-on-year growth.

In regards to the financial side of Life360, Hull stated:

We’ve also adjusted our strategic plan in light of market conditions, and are now targeting cash flow breakeven by Q4 of CY23, with our first full year of cash flow breakeven in CY24. This target will be assisted by the accelerated integration of Jiobit and Tile into Life360 as a single business unit.

What’s next?

Looking ahead, shareholders might have been disappointed by the company’s resumed earnings guidance — propelling the Life360 share price downwards today.

According to the report, underlying EBITDA for CY22 is expected to come in at a loss of between US$32 million to US$38 million. Although, core subscription revenue is slated to grow by 50% or more.

Life360 share price snapshot

The past year has been a volatile ride for those following the Life360 share price. At its peak, shares were fetching $13.94. Now, at $4.40 apiece, the company’s shares are down roughly 25% from a year ago.

This poor performance is mostly in line with the broader technology sector. For example, the S&P/ASX All Technology Index (ASX: XTX) has fallen 21.4% over the past 12 months.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns 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.

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