The Life360 Inc (ASX: 360) share price is up around 6% after announcing an acquisition called Jiobit.
What’s Jiobit?
It’s a provider of wearable location devices for young children, pets and seniors.
Life360 says that it provides families a comprehensive location-aware safety solution that is accurate, secure, reliable and real-time. This solution combines a discreet wearable called the Jiobit Location Monitor, with mobile-based software services, combined with patented location technology.
The company has been monitoring this segment of the location awareness market for several years knowing it would potentially accelerate the company’s strategy to broaden market reach.
Jiobit projects that its total annualised revenue run rate for the month of December 2021 will be US$11.7 million, consisting of US$5.7 million of subscriptions and US$6 million from other sources, mostly consisting of hardware device sales.
The purchase price represents a range of 3.2x to 4.7x the projected forward looking revenue run rate. It’s operating on a cash burn of approximately US$5 million per year.
The upfront cost is US$37 million and up to US$54.5 million if certain targets are met.
What is the rationale for the acquisition?
Management said that Jiobit’s combination of quality hardware, patented ‘progressive beaconing’ connection technology and subscription-based, real-time location awareness intersects with Life360’s high standards of performance and technology capability, and is complementary to the company’s core mission of family operations, safety and security.
Jiobit will allow Life360 to tap into two fast-growing markets: the multi-billion pet supplies and services and elder care markets.
Life360 has been executing a strategy to enlarge and enhance its core user base of families with teenagers by moving into both younger and older demographics. With the launch of ‘Membership’ in July 2020, Life360 has made the initial step in this direction, offering a significantly enhanced suite of bundled products focused on the safety and security of the family.
Expanding into hardware-based location awareness is part of this broader strategy. Bundling Jiobit’s high value, low-cost physical device into Life360’s top membership tiers is expected to significantly boost both conversion and retention.
Life360 will continue to look for acquisitions that can help it build on its market share.
Summary thoughts
This seems like a smart strategic buy by Life360. I can see why the market has sent the share price higher.
I don’t know enough about Life360 to call it a high conviction idea, but this acquisition seems to improve the thesis for the business.
There are other ASX growth shares that may be worth investigating.
