Strong Q3 Growth Lifts Expectations For Life360

Australia | Nov 01 2021

This story features LIFE360, INC. For more info SHARE ANALYSIS: 360

Strong third quarter results from Life360 have analysts positive on the company’s outlook, with a strong subscriber base sustaining improving results.

-Positive results for Life360 in the third quarter encourage a favourable outlook
-Annualised monthly revenue increased to US$120.1m
-Company en route to achieving profitability by 2023

By Danielle Austin

Location-based family social services provider Life360 ((360)) has moved closer to profitability after strong third quarter results, with the company successfully downgrading its expected 2021 underlying earnings loss to less than the -US$15m it had previously expected to exceed.

Strong performance during the US back-to-school quarter saw the company, which offers a mobile application for families providing driving safety, location sharing and communications features which is monetised through subscription offerings, continue to move closer to an underlying earnings profit.

For Bell Potter the highlight of the quarterly update was a 13% quarter-on-quarter increase in annualised monthly revenue to US$120.1m.

Credit Suisse noted quarterly revenue of US$29.3m was up 45% year-on-year, although the company still reported a -US$3.2m underlying earnings loss.

For Morgan Stanley, the company is much closer to breaking even than expected, and the broker noted the bumper quarter saw Life360 raise core business annualised monthly revenue guidance for December to US$125-130m.

A downside to results were reported supply issues for the recently on-boarded Jiobit. Results from the quarter saw Life360 reduce Jiobit’s annualised monthly revenue guidance and revenue guidance, with Jiobit’s metrics reported separately from core business. 

Bell Potter noted Jiobit contributed to only one month in the third quarter, while the fourth quarter will be impacted by a full quarter contribution, and Life360 should benefit from this despite issues. On commentary from the company, it is expected that metrics for the core business and Jiobit would be reported together in the next year.

Looking ahead, a historically softer fourth quarter has analysts forecasting slower growth in the coming period. Both Bell Potter and Morgan Stanley also noted that a dual listing in the US is expected in the coming year, which could be another catalyst for the company.

Customer base strength a platform for continued growth

It was noted by the analysts that Life360’s global paying circles (subscribers) increased 10% in the quarter and were up 26% year-on-year, to total 1.10m, with Morgan Stanley noting this was another quarter of paying circle record growth for the company. In the US, paying circles increased even further, up 28% year-on-year.

In Bell Potter’s view, demonstrated ability to grow customer base 8% in 2020 despite covid impacts demonstrates resilience in Life360’s subscriber base. Additionally, the broker noted this showed potential for strong subscriber growth when market conditions normalise.

Bell Potter retains its Buy rating on Life360 and increases its target price 16% to $12.50 but notes a near-term acquisition could provide upside risk. The broker also upgraded revenue forecasts by 2%, 6% and 7% for 2021, 2022 and 2023 respectively. Bell Potter continues to guide to an -US$13.6m underlying earnings loss in 2022 before the company is expected to reach profitability in 2023.

Credit Suisse retains its Outperform rating and increases its target price to $12.70 from $10.00, while lifting revenue forecasts of 3%, 5% and 6% through to 2023. Positive drivers, including paying circle growth, means the broker considers upside risk to forecasts.

Morgan Stanley retains its Overweight rating with a target price of $10.50.

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