Your Paranoia Means Big Business for This Company

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BJDF1E Social security card surrounded by barbed wire. Barbed; Wire; Identity; Theft; In; Studio; Information; No; People; Studi
Alamy
There's never been a better time than now to be in the business of catering to folks worried about someone swiping their identities. Between the data security breach at Target (TGT) during the holidays, which exposed millions of shoppers to potential transaction info theft, to the more recent Heartbleed exploit, with its serious ramifications, consumers are painful aware that they can never be too careful.

It's against this backdrop that LifeLock (LOCK) posted robust growth in its latest quarter on Wednesday afternoon. Revenue climbed 31 percent to $107.6 million, well above the guidance it had offered up in February, calling for $105 million to $106 million in revenue. LifeLock's bottom line wasn't as impressive, serving up an adjusted loss of 1 cent a share, but that deficit was better than the loss it was forecasting back in February.

More importantly, customers keep on coming. LifeLock closed out the quarter with 3.22 million subscribers, paying an average of $10.81 a month for the service that monitors a member's identity for potential violations. LifeLock has experienced sequential growth in revenue and subscribers for what is now 36 consecutive quarters.

Picking the Lock

LifeLock doesn't prevent all instances of identity theft. As a monitoring platform, its role is to provide early detection of breaches that can be addressed before things get worse. When incidents do happen, LifeLock is there with a recovery team and an insurance policy to cover losses that can't be recouped.

There will be probably never be a service that can cut your identity theft risk to anywhere near zero, and that's true of LifeLock as well as rival Intersections' (INTX) Identity Guard platform. However, that hasn't stopped negative critiques and lawsuits accusing it of being incomplete.

LifeLock can only blame itself. Its original ads featured CEO Todd Davis boldly revealing his Social Security number as a way of demonstrating how strong his faith was in his product. The ads may have led some to believe that LifeLock provided ironclad protection -- in fact, the marketing stunt resulted in numerous cases of data thieves swiping Davis' identity.

The Data is in the Details

LifeLock went public at $9 a share two years ago, and the stock has gone on to beat the market since then. It wasn't a winner right away, spending most of its first few months of trading below its IPO price. It didn't break into the double digits until February of last year. However, after so many quarters of sequential growth, a skeptical market came around to embrace LifeLock.

It's not just that its subscriber tally is going up. Folks are paying more for protection. The $10.81 a month average is 10 percent higher than it was a year ago, largely the result of more subscribers upgrading or signing up to the newer LifeLock Ultimate plan, where customers pay $25 a month for enhanced monitoring protection.

It's not perfect. It's not cheap. But it is attracting customers. LifeLock is pointing out that the first quarter was its second-most successful quarter in terms of gross new members in the company's history.

LifeLock is also raising its outlook for all of 2014 after the better than expected start to the year. It sees $460 million to $468 million in revenue, up from February's forecast calling for $455 million to $465 million in revenue. Despite the small loss during the first quarter LifeLock expects adjusted earnings per share to clock in 44 cents to 48 cents, just above its earlier range of 42 cents to 47 cents. LifeLock's adjusted EBITDA and free cash flow ranges are also moving higher since initiating coverage in February.

LifeLock shares may not be a great value on an adjusted earnings basis, but there is something to be said about a company that has had a run of nine years in a row where revenue and subscriber count kept consistently inching higher every three months.

It's a shame that we live in a time when ID theft monitoring is a growing service, but someone outside of the hacker ought to profit from it.

Motley Fool contributor Rick Munarriz owns shares of LifeLock. The Motley Fool recommends LifeLock. Try any of our newsletter services free for 30 days. ‚Äč

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