Life360, Inc. (ASX:360): A Turnaround in Sight?

Life360, Inc. (ASX:360), a leader in connected safety and family location services, has been on a trajectory toward profitability in recent quarters. With margin improvements, disciplined cost management, and strategic growth initiatives, the company is positioning itself for its first sustained period of profitability. Let’s dissect the data to assess whether investors should take notice.

Margin Expansion: The Path to Profitability

Life360’s recent financial results highlight a clear shift toward profitability. In Q4 2024, Adjusted EBITDA surged to $21.2 million, up from $8.9 million in the same period the prior year. Gross margins expanded to 74% in Q4 2024, up from 69% in Q4 2023, driven by higher contributions from subscriptions and advertising/data partnerships. Subscription revenue, which now accounts for 78% of total revenue, boasts a gross margin of 86%, reflecting the scalability of its core business.

The company’s cost discipline is equally notable. Operating expenses grew just 22% year-over-year (YoY) in Q4 2024, far slower than the 33% revenue growth, enabling operating leverage. For example, R&D spending rose only 14% YoY, while sales and marketing costs increased 31%, aligned with subscription growth and new hardware launches. CFO Russell Burke emphasized that these efforts are part of a deliberate strategy to “balance growth with profitability.”

Strategic Levers Fueling Growth

Life360’s playbook for profitability includes three key initiatives:
1. Subscription Dominance: Paying Circles (subscribers) grew 25% YoY to 2.0 million globally, with Average Revenue Per Paying Circle (ARPPC) rising 6% YoY to $131.76. Pricing strategies, such as Triple Tier markets in the UK and ANZ, are driving higher ARPPC.
2. Hardware Synergies: Hardware revenue grew 8% YoY in Q4 2024, with average selling prices up 9% due to reduced returns and premium product launches. Integrating devices like Tile into subscriptions creates cross-selling opportunities.
3. Advertising Scaling: A new advertising business, leveraging first-party location data, contributed $13 million in Q4 2024, a 112% YoY jump. This high-margin revenue stream now accounts for 11% of total revenue, with further upside as adoption grows.

2025 Outlook: Ambitious but Achievable?

Life360’s 2025 guidance targets $450–480 million in revenue, with subscriptions expected to grow 28–31% YoY to $350–360 million. The company aims for Adjusted EBITDA of $65–75 million, up 43% from 2024’s $45.5 million. This confidence stems from:
- Margin Expansion Goals: A long-term target of 35%+ Adjusted EBITDA margins, up from 12% in 2024.
- Strategic Investments: A $8 million R&D spend on a new pet-tracking device in 2025, which could diversify revenue streams without diluting margins.
- Global Reach: International monthly active users (MAUs) surged 46% YoY, reducing reliance on the U.S. market.

The stock’s 18.1% increase in September 2024 reflects investor optimism, but volatility remains tied to execution.

Risks on the Horizon

While the path to profitability is clear, challenges persist:
- New Product Pressures: The pet device launch could strain near-term margins if adoption lags.
- Competitive Threats: Rivals in family safety and wearable tech may undercut pricing or innovation.
- Economic Sensitivity: A slowdown could impact discretionary spending on subscriptions and hardware.

Conclusion: A Turnaround Worth Watching

Life360 is making a compelling case for profitability, with Adjusted EBITDA up 137% YoY in Q4 2024 and a $45.5 million full-year EBITDA in 2024. The 2025 targets, while ambitious, are backed by a track record of margin expansion and disciplined cost management. If the company executes its strategy—scaling subscriptions, monetizing data-driven ads, and leveraging hardware synergies—ASX:360 could deliver its first sustained profit in years.

Investors should monitor two key metrics ahead of the Q1 2025 earnings release on May 18, 2025:
1. Adjusted EBITDA: A result closer to the high end of the $65–75 million range would validate management’s guidance.
2. ARPPC Growth: Sustained increases here signal effective pricing strategies and customer retention.

While risks remain, Life360’s progress suggests it’s no longer a “story stock” but a company with a tangible path to profitability. For investors willing to navigate near-term volatility, the reward of a 35%+ EBITDA margin business by 2025 could prove compelling.