The Life360 Inc (ASX: 360) share price is on the slide on Friday morning.
In early trade, the ASX 200 tech stock is down 9% to $14.15.
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Why is the Life360 share price sinking?
Investors have been selling the location technology company's shares today following the release of its quarterly update.
While some of the numbers were pre-released last month in a trading update, the ones that arguably matter most are now public knowledge and investors are responding negatively.
According to the release, Life360 delivered a 15% year on year increase in revenue to US$78.2 million during the first quarter. This was driven largely by a 23% lift in core subscription revenue to US$57 million.
At the end of the quarter, Life360's annualised monthly revenue (AMR) stood at US$284.7 million, which is up 19% year on year.
This led to the company achieving positive adjusted EBITDA of US$4.3 million for the three months (up from US$0.5 million) and a reported EBITDA loss of US$4.1 million.
What were the drivers of this result?
A record quarter of subscription growth underpinned this solid result.
Life360's global monthly active users (MAU) increased by 4.9 million during the three months to 66.4 million. This represents a 31% increase year on year. Management also notes that this was achieved with significant momentum, particularly in a seasonally lower period for MAU growth.
Also increasing strongly was its global Paying Circle metric. It posted net additions of 96,000 for the quarter, which was a record. This was up 21% year on year and brings the total to 1.9 million. Management advised that this was supported by improved conversion and retention.
Life360's co-founder and CEO, Chris Hulls, was pleased with the record quarter. He said:
Life360's Q1'24 results showed continued momentum, with net Paying Circles additions nearly doubling to 96 thousand from 54 thousand in Q4'23, achieving a new first quarter record. In addition, our efforts in relation to both our free members and international expansion are paying off, with 4.9 million new Monthly Active Users (also a new first quarter record.
Hulls doesn't believe the ASX 200 tech stock's growth is anywhere near over given its massive global market opportunity. He adds:
The market opportunity is on a global scale, and we believe we have significant headroom to grow as we expand to new regions, and launch new features that expand our relevance to different life stages.
Outlook
Pleasingly, Hulls revealed that the second quarter has started strongly for Life360. He said:
This momentum has continued so far in Q2'24 with the achievement of 32 thousand net Paying Circle additions during the month of April.
Looking further ahead, the ASX 200 tech stock has maintained its guidance for FY 2024. It continues to expect to report consolidated revenue of US$365 million to US$375 million, adjusted EBITDA of US$30 million to US$35 million, and an EBITDA loss of US$8 million to US$13 million.
It is likely to be this guidance that has put pressure on the Life360 share price today. Given its exceptionally strong start to the year, the market appears to have been expecting management to lift its guidance with this result. With no guidance upgrade coming, investors have been quick to hit the sell button.
But that doesn't take away the fact that this is a high quality company growing at a rapid rate.
