Life360: massive growth potential from the helicopter parent tailwind 

ASX listed Life360 (ASX:360), a family safety app that allows GPS location sharing is one of the larger and more exciting companies held by the Montgomery Small Companies Fund. In the two business days since Life360 announced its results for the year to 31 December 2023, the share price has jumped 46 per cent from $8.30 to $12.14.

This values the company at AU$2.48 billion, putting it on a revenue multiple of 5.1X the U.S.$305 million (up 33 per cent). At the adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) line, Life360 achieved its first positive annual figure at U.S.$20.6 million since its listing five years ago. 

Importantly, monthly active users grew by nearly 13 million or 26 per cent to 61.4 million, up from 48.6 million. The non-U.S. monthly active users account for 24.6 million or 40 per cent of the total, and its pace of growth was 7 million or 40 per cent from 17.6 million a year earlier. 

Guidance is for Life360 to record at least 20 per cent revenue growth in calendar 2024 to U.S.$370 million, significantly higher adjusted EBITDA at U.S.$30-$35 million, and a year-end cash balance exceeding U.S.$80 million. Life360 is pursuing new value-added revenue streams, including advertising, which may encourage free users to transition to one of the subscription models, as per the Spotify (NYSE:SPOT) business model. 

Currently, Life360 has 1.8 million “paying circles”, split by 1.3 million in the U.S. and 0.5 million internationally. This implies that of the 36.8 million U.S. users, 3.5 per cent are currently “paying”, whilst of the 24.6 million international users, only 2.0 per cent are currently “paying”. 

Given that U.S. paying users receive the equivalent of roadside assist, which includes help alerts, ambulances being dispatched, miles driven with crash detection, safe arrival notification and bluetooth location updates, it seems logical parents will upgrade their circle to the (higher) subscription model as their children get their driver’s license. 

The average revenue per U.S. paying circle is U.S.$150 (up 24 per cent in the December 2023 quarter), and U.S.$48 for the international paying circle; it seems likely both the number of paying circles and the average price per paying circle have enormous upside over the medium-term. 

Life360 has a calendar 2028 aspirational goal to increase its monthly active users from the current 61.4 million to 150 million, its revenue from a forecast U.S.$370 million (in 2024) to at least U.S.$1.0 billion and EBITDA margins from around one per cent to 25 per cent. At today’s price and exchange rate, this would imply an enterprise value (of AU$2.4 billion) to EBITDA (U.S.$250 million) ratio of 6.2X. To us, this aspirational goal looks very achievable, however, the question is, “Will Life360 get there more quickly?” 

The Montgomery Small Companies Fund owns shares in Life360This blog was prepared 04 March 2024 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade Life360, you should seek financial advice. 



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