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Life360’s strong first quarter revenue and earnings were not enough to dispel market concerns around monthly active users.
- Life360’s first quarter marked a fourth miss in five from monthly active users
- Revenue and adjusted earnings ‘beat’ consensus forecasts
- Market's focus remains on monthly active users (at least for now)
- Current share price presents an asymmetric risk profile, Macquarie suggests
By Mark Woodruff
A recurring theme in recent reporting by family safety and location-sharing company Life360 ((360)) has been strong underlying growth, offset by market disappointment over slowing growth in monthly active users (MAU).
Back in FY22, when MAU growth significantly outpaced subscription growth, concerns were raised around monetisation.
Now, with subscription growth exceeding MAU growth, Morgan Stanley explains the focus has shifted to the sustainability of overall growth.
Following third quarter results last November, Bell Potter was relaxed on softer MAU trends, viewing them as a function of deliberate marketing changes. Improved conversion (Paying Circles as a percentage of MAU) was noted as evidence of stronger monetisation.
Offshore investors were more focused on headline subscriber growth rather than the company’s improving monetisation metrics, Ord Minnett protested.
After FY25 results in March, this broker highlighted market scepticism around guidance of circa 115m MAUs in 2026, given management pointed out year-on-year growth for MAUs in the March quarter would come in lower than the 20% growth rate needed to achieve the full year target.
At the time, management stated MAU growth would be “more back half weighted due to product-led growth investments and scaled marketing in new geographies”, which suggested a significant increase in member engagement was on the horizon.
The first quarter result
As the saying goes, it felt “like deja vu all over again” when Life360’s share price fell around -11% following its first quarter result, after technical issues in the MAU registration funnel limited onboarding of new Android users.
RBC Capital notes this marks the fourth MAU miss in the past five quarters.
Fortunately, Life360 delivered a solid overall quarterly result, in Canaccord Genuity’s view, with revenue and adjusted earnings exceeding consensus forecasts, though MAUs came in around -1% below expectation.
By the close of trade on Friday, the share price had bounced back nearly 5%.
RBC points out the divergence between financial performance and user metrics is likely to reinforce market concerns the company may be entering “harvest mode”, prioritising the maximisation of profitability from a structurally declining business.
A re-acceleration in growth is seen as the only way to dispel these concerns.
First quarter metrics
Revenue and adjusted earnings of US$143.1m and US$17.1m were respectively 4% and 14% above consensus forecasts.
Total revenue rose around 38% year-on-year driven by subscription revenue growth of 32% to about US$108.2m.
The key positive from the result, according to Bell Potter, was strong Paying Circle growth of 201,000 quarter-on-quarter, more than double the broker’s own forecast of 99,000 and well above consensus of 109,000.
Paying Circles net additions were supported by improved funnel conversion, which management attributed to AI-driven onboarding enhancements, alongside continued strength in international markets.
Citi believes Paying Circle conversion momentum is likely to remain strong as Life360 leverages AI to deliver additional value to customers, while the Pet Tracker product is attracting a younger paying demographic, supporting stronger lifetime value outcomes.
Hardware revenue declined -49% to US$4.5m, while advertising revenue more than tripled to US$19.7m.
Macquarie believes the integration of the recently acquired advertising business Nativo Inc is tracking well.
The combination of Life360’s first-party family location data with Nativo’s buy- and sell-side infrastructure is enabling new forms of advertiser engagement, Canaccord highlights, including smaller initial campaigns that can scale into larger, longer-term relationships.
The company highlighted Starbucks as a key partner, attracted by the scale of Life360’s location data and its ability to support closed-loop measurement.
Management slightly upgraded 2026 revenue and operating earnings guidance.
Given the continued momentum in subscription revenue, Citi views the upgraded revenue guidance as conservative and sees potential for further upside to margins.
Margins
Management is targeting long-term earnings margins of 35%. RBC notes consensus estimates currently assume the company will achieve this target by FY31, with margins reaching 35.6%.
The 2026 earnings margin expectation remains unchanged at 20%; however, RBC notes management is guiding to Q2 margins of 16% versus consensus expectations of 18%, with sequential improvement anticipated through Q3 and Q4.
The second-half weighting is expected to be driven by advertising revenue seasonality and front-loaded integration costs on top of brand advertising spend.
Softer hardware revenue is expected following the exit from the bricks and mortar retail channel.
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