Family safety and protection app Life360 [ASX:360] has lowered its EBITDA guidance and revealed its strategy for achieving profitability this year, planning to accelerate positive cash flow by terminating 14% of employee contracts after its Tile and Jiobit merger.
Despite celebrating strong momentum in the last quarter of last year, overall numbers have been lacking, causing the stock to slide 13% in the month and pummelling it down 43.5% across the year.
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Life360 optimistic about profitability strategy
The location-sharing application maker today revealed it had accelerated a plan to reach positive operating cash flow after the company’s merger of Jiobit and Tile last year, calling for an extreme overhaul to streamline operations and drive lower operating expenses.
Restructuring the company’s workforce will mean culling the company’s current employee population by around 14%, one of the steps the company hopes will propel its strength within its industry.
Life anticipates around $4 million to be forked out in employee transition and termination costs, which is to be reflected in the Q1 2023 balance sheet.
The company said this would result in the longer-term benefit of annualised cost savings of around $15 million.
Co-founder and CEO of Life360, Chris Hulls, harked back to the company’s third quarter 2022 update, reiterating market conditions have pushed the company to look for ways to accelerate strategies.
‘The restructure that we are announcing today will enable us to bring forward by a quarter the achievement of positive operating cash flow and Adjusted EBITDA to CY23 Q2,’ explained Hulls.
‘Today’s restructuring is designed to benefit the most important areas of our business – our product enhancements continue to deliver very strong growth from new and existing members. We believe these changes will also enable us to realize additional business efficiencies and reduced operating expenses.’
Life360 fundamentals
Life’s global monthly users went up 37% YoY (year-on-year), significantly boosted by post-Christmas sign-ups, while churn levels met expectations, showing some resilience despite the economic downturn.
Core subscription revenue — not including Tile and Jiobit — grew by 54%, in line with company guidance. However, challenging retail headwinds have recently seen lower orders.
Life’s management expects revenue and adjusted EBITDA to be towards the lower end of guidance, with the cash balance guidance remaining at $55–60 million.
Life says the shift in its workforce this year will streamline its ability to deliver better on core opportunities for the year, which include the Tile bundle and focus on expanding internationally.
The security app creator will also begin its launch of full membership in the UK by the second half of the year.
Hulls concluded:
‘We are moving into 2023 in a very strong position to pursue our global growth agenda, with significant upside opportunity from the launch of the bundled hardware subscription in Q1, a strong balance sheet and an accelerated trajectory to profitability.’
The company expects positive cash flow in 2023 and revenue growth in the range of 35%.
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