Life360, Inc. (ASX:360): A Subscription Powerhouse with Hidden Value

Life360, Inc. (ASX:360), a leading family-focused social network and location-sharing platform, has quietly built a compelling case for being undervalued. Despite recent volatility in its stock price, the company's accelerating subscription growth, robust cash flow, and strategic execution suggest it is primed for upside. Let's dissect the data to understand why investors may be overlooking this opportunity.

Subscription Growth: A SaaS Model in Overdrive

At the heart of Life360's valuation debate is its subscription-driven business. As of Q1 2025, Total Paying Circles surged 26% year-over-year to 2.4 million, with net additions of 137,000 in the quarter—a 43% YoY jump. This growth is not confined to its U.S. market: international expansion is thriving, with Triple Tier markets (UK, Canada, ANZ) contributing a 26% YoY rise in paying circles. Crucially, the Average Revenue Per Paying Circle (ARPPC) rose 8% to $133.42, driven by price increases, tiered pricing strategies, and the rollout of Dual Tier memberships in non-core markets.

This combination of scale and monetization power is rare. Subscription revenue now accounts for 80% of total revenue, hitting $81.9 million in Q1—a 33% YoY increase. The Core Subscription Revenue (from its flagship app) grew 37%, signaling strong retention and customer loyalty.

Cash Flow: A Foundation for Growth

While valuation multiples have sparked debate, Life360's cash flow metrics are unambiguous. The company reported $15.9 million in Adjusted EBITDA in Q1—a 270% YoY increase—and has posted positive EBITDA for 10 consecutive quarters. Operating cash flow rose 13% to $12.1 million, and cash reserves swelled to $170.4 million, up $95.8 million from a year earlier. This liquidity provides a safety net for R&D, marketing, and strategic moves like its recent $275 million convertible notes offering, which underscores confidence in long-term value creation.

The Rule of 40 metric—combining revenue growth and EBITDA margin—improved to 25% for FY 2025E, up from 18% LTM, indicating better alignment between growth and profitability.

Valuation: A Mispriced Story?

The company's stock trades at a market cap of $4.9 billion and an EV of $4.8 billion, with an EV/Revenue multiple of 12.9x (based on LTM revenue of $414 million). While its EV/EBITDA multiple is skewed by LTM EBITDA of $57.5 million (yielding a misleading 83x), the metric is more reasonable when considering forward guidance. Analysts project $75 million in EBITDA for 2025, implying a forward EV/EBITDA of 64x—still elevated but rational for a high-growth SaaS company.

The P/E ratio of 818.6x is eye-catching, but this reflects a LTM net loss of -$4.6 million. However, Q1 2025 marked a turnaround with $4.4 million net income, and the company's path to sustained profitability is clearer.

Why the Discount?

Despite its strengths, Life360's stock trades at a discount to peers. Competitors like Tencent (HKG:700) and Kuaishou (HKG:1024) carry higher multiples, but Life360's niche focus on family safety and social networking offers unique growth drivers. The market may be undervaluing its data and advertising partnerships, which contributed a 99% YoY surge in “Other Revenue” to $12.8 million. This diversification reduces reliance on hardware sales, which declined 13% YoY as the company shifts toward software-centric monetization.

Risks and Considerations

• Valuation Sensitivity: The stock's high forward multiples require continued execution on growth and margin expansion.
• Competitor Dynamics: While Life360's social network has defensible network effects, global players like Meta or niche competitors could erode market share.
• Geopolitical Risks: The company mentioned tariff-related impacts but claims margins remain intact—a positive signal but worth monitoring.

Investment Thesis: Buy the Dip

Life360's fundamentals—subscription momentum, cash flow stability, and diversified revenue streams—suggest it's undervalued relative to its growth trajectory. The stock's recent dip to $62.07 in early June offers a buying opportunity, especially as the company reaffirmed FY2025 guidance for $450–$480 million in revenue and $65–$75 million in EBITDA.

The convertible notes offering further supports the case: management's willingness to raise capital at this scale signals confidence, and the proceeds could fuel acquisitions or R&D in adjacent markets like elderly safety monitoring or AI-driven location services.

Final Take

Life360's story is one of execution in a fragmented market. It's leveraging its unique position in family safety and social networking to build a sticky, high-margin subscription base. While valuation multiples are rich by traditional metrics, they align with the company's Rule of X (74% for 2025E), which suggests strong operational efficiency. For investors seeking exposure to a high-growth SaaS model with real-world applications, Life360 presents a compelling risk-reward profile.

Recommendation: Accumulate shares on dips below $65, with a target price of $80–$90 within 12–18 months, assuming continued margin expansion and EBITDA growth.