The Life360 Inc (ASX: 360) share price has jumped in response to a promising company update.
Life360 is an ASX tech share that operates a platform that enables families to communicate, encourage driving safely and know their family locations. At 30 September 2022, it had approximately 47 million monthly active users.
Life360 getting closer to profitability
The technology business revealed that continued 2022 fourth quarter momentum, especially in membership numbers, with core Life360 subscription revenue growth of over 54% – this is in line with the company’s guidance.
Life360 said that 2022 revenue and adjusted EBITDA (EBITDA explained) is expected to meet the lower end of guidance.
According to the company, there has been a resumption of normalised growth and churn patterns since completing the iOS price changes in mid-December.
The ASX tech share also announced ‘workforce restructure’ to decrease its operating expenses. In other words, some job cuts. The restructuring comes after the business was busy with acquisition activity.
Life360 said that the restructuring is expected to deliver positive operating cash flow and adjusted EBITDA from the second quarter of the 2023 calendar year, which is the three months to June 2023. If that happens, it will be a quarter earlier than previously announced.
The company’s management believes that a leaner organisational structure will streamline Life360’s ability to deliver on core opportunities in 2023, including Tile bundling and international expansion.
2023 expectations
Life360 revealed that 2023 total revenue is expected to grow by around 35%.
Positive operating cash flow and adjusted EBITDA is expected for the 2023 full year.
Management comments
The Life360 CEO and co-founder Chris Hulls said:
Today’s restructuring is designed to benefit the most important areas of our business – our product enhancements continue to deliver very strong growth from new and existing members. We believe these changes will also enable us to realize additional business efficiencies and reduced operating expenses.
Total Paying Circles of 1.5m were in line with our previous guidance despite the significant price increases implemented during Q4, with churn levels in line with management’s expectations, further demonstrating the resilience of our subscriber base.
While hardware revenues stabilized with some encouraging trends in online sales and re-ordering, they remained impacted by retail head winds, including a significant destocking of sales channels resulting in lower orders through most of Q4. We see these historically low inventory levels as an opportunity as we move into the CY23 sales cycle.
Final thoughts on the Life360 share price
While I’m no expert on the business, it seems to be showing signs of a number of promising factors. Good long-term revenue growth, customer loyalty, the ability to implement price increases, and it’s very close to breakeven.
I think it’s a long-term opportunity, though it’s not as good value as it was yesterday.
