Under the Spotlight AUS: Life360 (360)

Life360 ($360) may have ignored warnings to never work with children or animals, but the location tracking app has won a legion of helicopter parents keen to track their kids in real-time. All in the name of safety, of course.  

Whiskers and Rover could be next as the company eyes pets (and pet owners) in its plans to grow beyond 70m monthly users who rely on its location tracking and emergency alerts to monitor family safety.

Founded in 2008, the San Francisco-based company‘s double-digit subscriber growth hasn’t been lost on investors. Shares have rallied from $4.79 at its 2019 ASX IPO to a record $20.73 on 10 October. The stock is up 123% since Under the Spotlight last analysed the company, and management has been busy since with a U.S. listing in June and launch of its advertising business in September.  

Greenbacked

The U.S. IPO provides a bigger profile for Life360 among tech savvy investors with a history of paying richer multiples for fast growing companies. Growth in monthly users and subscribers, reflected in upgraded FY24 revenue and EBITDA guidance, has seen the US shares ($LIF) rise from an IPO price of US$27 to US$42.07.  

A long-term target of 150m monthly average users and $US1b in revenue offers U.S. investors a growth story. They’ll be hoping for more of what’s been delivered. Users grew from 12m in 2018 to 70m in Q2 2024 and revenue increased from US$36m in Q2 of 2022 to US$65.7m in Q2 of 2024 thanks to subscriber growth and price rises. FY24 revenue is forecast between US$370m and US$378m. 

Life360 operates a freemium model, with a free tier used to entice users to become paying customers for one of three tiers of membership. ‘Paying circles’ have grown from 370,000 to around 2m over the past six years as new features and enhanced user experience have driven subscriptions.

With 40m U.S. users, the U.S. is central to its growth strategy and provides the template for expansion to new markets. Conversion from the free tier is key. Around 35% of U.S. users who convert to paying subscribers do so in the first month, while 28% convert over two to 12 months. The remaining 37% convert over three years. US subscription revenue is 62% of total revenue. 

U.S. paying circles – who pay between US$7.99 and $US24.99 a month –  have increased from 280,000 in 2018 to 1.5m. And each subscription is bringing in more cash: average revenue per paying circle is US$152, up from US$59 in 2018. The company sees room to grow in the U.S. as its members are only 13% of the smartphone enabled population.  

Global roaming

Markets outside the U.S. are also an important part of the growth story. International monthly users have grown from 6m in 2018 to 30m, while paying circles have risen to 562,000 from 93,000. 

While international subscription revenue is only 9% of revenue, key markets like Australia, Canada, the U.K. and Europe remain underpenetrated relative to smartphone users. While penetration – as a percentage of smartphone users – is estimated to be 9% in Australia, it’s only 3% and 1.2% for Canada and Europe.  

International average revenue per paying circle lags the U.S. - it’s around a third of the U.S at $US56. But the launch of triple tier memberships – and price increases for existing subscribers – in the UK, Australia and New Zealand boosted international revenue 12% over the past year.

Together with the U.S., these markets are key to Life360’s ambitions to move into elderly monitoring, auto insurance and grow in pet tracking. Pet tracking offers a way to grow hardware revenues and extract value from the $US205m acquisition of Tile in 2021. 

Adding up

Life360 users open the app around five times a day, which makes advertising revenue an attractive growth opportunity. 

The company hired former Google executive Brian McDevitt to lead the ad business and convert high levels of engagement into advertising dollars. Life360’s app is one of the top 15 U.S. iOS apps ranked by daily users. 

The ad platform launched in September, with Uber ($UBER) signed up as an advertising partner. Life360 will deliver targeted ads to parents of kids with Uber Teen accounts.  

The Uber partnership is interesting as Life360 showcased the rideshare giant’s advertising growth as an example of how it could cash in on the US$402b global mobile advertising market. Uber grew advertising revenue from US$11m in 2020 to a run rate of around US$900m by the end of 2023. 

Life360 is eyeing advertising average revenue per user (ARPU) of more than US$1 per monthly average user per year. However, this could take between three and four years. 

Great expectations

Life360 has ambitious growth plans and investors are paying attention. 

The U.S. listing provides a higher profile in the most important market for tech stocks, but comes with added pressure to continue delivering strong growth in subscribers, whether two-legged or four.  

This does not constitute financial advice nor a recommendation to invest in the securities listed. The information presented is intended to be of a factual nature only. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking financial, legal and taxation advice before investing.