Fund managers, page-1421

2023* was a major inflection for Life 360 for 2 main reasons :
- they had a large increase of their prices in the US (+ 25 %), but it did not prevent them to continue to increase their basis of paying customers,
- they were able to stabilise their costs (GAAP expenses increased by 4 % vs + 33 % for revenues).
As a result, the company was able to turn positive for adjusted EBITDA (6.8 % margin) and cash flow from operation (8 m USD vs - 57 m USD in 22).

The other major element is that the company has decided to introduce a new revenues stream : advertising, from FY 24.
Which makes sense as they have a large basis of users (61.4 million), but only a small fraction that they were able to monetise so far (1.8 million in FY 23).
We also know that these users are quite active (US members use the app on average 5 times a day).
Based on these elements, the company thinks that it could reach similar scale than their subscription business (which generated 221 m USD in FY 23).
If they can do this in the future (probably in several years), this element only would enable their sales to go from 305 m USD in FY 23 to 526 m USD.

Advertising is also interesting because it is high margin and the company expects a rather rapid return on investment in this activity (mainly from FY 25).

All the elements above and their large potential out of the US (strong growth now in Canada, UK and Australia) explain why the company has high aspirations in terms of revenues and margin.
They target revenues of 1 bn USD** and 25 % EBITDA margin.
Based on their recent history of growth and operating leverage, these targets look achievable, as long as their business is not disrupted.

Last interesting element in their model : they have a low level of Capex requirement.
According to what I saw, all their R&D is considered as expenses and so included in their EBITDA.

For me, the main difficulty at this stage is to understand why they do not have not more competition and/or why competition has not been able to prevent them to be so successful.

* their financial year ends in December.
** apparently 5 year target