Is There New Life In This ASX Technology Company?

Is There New Life In This ASX Technology Company?

11 Jul, 2024 | Stock Insight

The COVID-19 era witnessed unprecedented growth in technology stocks, fueled by government stimulus packages and historically low interest rates.

This perfect storm of economic conditions created a fertile ground for a risk off attitude with tech companies a significant beneficiary, many seeing their valuations soar to dizzying heights. However, as central banks began to tighten monetary policy and raise interest rates to combat inflation, numerous tech darlings experienced sharp corrections, leaving investors questioning the sustainability of their growth narratives and valuations.

Following a difficult period, a select few companies have managed to regain their footing and approach their previous share price heights. One such standout is Life360 (ASX: 360), a family-focused social networking and location-sharing platform. Unlike many of its peers that have struggled to recover, Life360 has managed to not only return to those heights but exceed, attracting renewed investor interest.

The company’s ability to navigate the challenging post-stimulus environment and deliver value in an era of higher interest rates sets it apart in the tech sector.

About the Company

Life360 offers a comprehensive family-oriented platform designed to keep loved ones connected and safe.

The company’s flagship mobile application and Tile tracking devices form the core of its product ecosystem, providing users with a suite of features including real-time location sharing, safe driver reports, and crash detection with emergency dispatch capabilities. With a global reach extending to over 150 countries and approximately 66 million Monthly Active Users (MAU’s), Life360 has established itself as a leader in the family safety and connectivity space. The company’s mission to deliver peace of mind resonates with families of all types, addressing the universal need for security and connection in an increasingly digital world.

Life360’s recent expansion includes the acquisition of Tile, enhancing its ability to track not just people but also pets and valuable belongings. The move has broadened the company’s service offerings and strengthened its market position. As Life360 continues to innovate and grow, it has taken steps to increase its presence in the U.S. market, including a recent initial public offering aimed at boosting capitalisation and financial flexibility

The company’s Nasdaq initial public offering marks a significant milestone. The offer consisted of 5,750,000 shares of common stock priced at $27.00 per share, with 3.7 million shares being offered by Life360 and a further 2.05 million from existing investors. The company raised approximately $100 million from the sale of its shares, which will be used to bolster its financial position and fund general corporate purposes including working capital. Trading on the Nasdaq under the ticker symbol (NASDAQ: LIF) commenced on June 6, 2024.

The US is viewed by management as a natural progression in the company’s expansion, potentially opening doors to a broader investor base and increased market visibility.

How They’ve Turned it Around

Life360 has seen its share price more than double in the last 12 months.

The catalyst for the incredible growth has been driven by the company’s strategic pivot towards monetising its valuable user base through advertising. After experiencing volatility in 2022, with shares falling to $2.50 in June amid a broader tech sell-off, the company has rebounded strongly. The new advertising offering leverages Life360’s unique position in the family-tracking app market, tapping into a high-value demographic that is particularly attractive to advertisers. The company’s extensive first-party location data provides a rare and valuable asset for contextually relevant advertising.

The announcement sparked market enthusiasm and led to an impressive 38% increase on the day.

While initial revenue from this new offering in Q1 2024 was minimal, Life360 anticipates significant growth in the second half of 2024 and substantial scaling in the coming years. The company has completed development work for programmatic ads and expects to be set up for direct sales at scale.

The move positions Life360 to potentially transform its business model, creating a major new source of revenue while maintaining a privacy-first approach that complements the user experience.

Recent Results

In a Q1 update to the market, Life360 showcased impressive financial and operational performance.

Total revenue increased by 15% year-over-year to $78.2 million, driven by a 19% rise in subscription revenue, which reached $61.6 million. Core subscription revenue, excluding non-core hardware-related subscriptions, saw a 23% increase to $57.0 million. The company achieved a record net addition of 96,000 Paying Circles, a 21% year-over-year growth, bringing the total to 1.9 million. Paying Circles represent groups of users subscribing to Life360’s premium services. MAUs also grew significantly, with 4.9 million new users added, a 31% year-over-year increase, totaling approximately 66.4 million globally.

Life360 reported its sixth consecutive quarter of positive adjusted operating earnings at $4.3 million, a substantial improvement from $0.5 million in Q1 2023, and narrowed its operating earnings loss to $4.1 million from $12.6 million the previous year.

Annualised Monthly Revenue (AMR) reached $284.7 million, up 19% year-over-year. Additionally, the company generated positive operating cash flow of $10.7 million, an improvement of $19.9 million from Q1 2023.

The TAMIM Takeaway

Life360 has progressively moved through the broad peaks and troughs of technology share price movements of the 2020 to 2022 period. The company is showing impressive growth in its key operations measurements, as well as improving financial performance, hence it has gained prominence in the past 12 months.

Life306’s innovative approach to monetisation, particularly through its new advertising offering, has positioned it for continued future growth. With impressive Q1 2024 results and significant user base expansion, Life360 is capitalising on its unique market position in the family-focused technology sector. The company’s streak of positive adjusted operating earnings and improved cash flow underscore its operational efficiency. As Life360 begins to leverage its valuable first-party data and expand its advertising capabilities, it is poised for further financial growth and market penetration. The recent Nasdaq listing opens new avenues for investment, reinforcing Life360’s status as a compelling opportunity in the technology sector.

With a clear strategy and strong execution, Life360 is well-positioned to continue expanding its user base, collecting valuable data and providing value to its customers. In turn, with both operational and financial metrics showing positive progress, this technology company should continue to be on investor’s radar.

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Disclaimer: Life360 (ASX: 360) is currently held in TAMIM Portfolios. 

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