Thinkific Labs Inc.

Q1 2021 Earnings Conference Call

5/11/2021

spk03: Good afternoon. My name is Joanna, and I will be your conference operator today. I would like to welcome everyone to Thinkific's first quarter 2021 financial results conference call. At this time, all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star, then the number two. Thank you. As a reminder, this conference call is being recorded. Janet Craig, you may begin your conference.
spk01: Thank you, Joanna, and good evening, everyone. Welcome to ThinkHippix Q1 2021 Earnings Call and our inaugural call as a public company. Joining me today are Greg Smith, co-founder and CEO, Miranda Levers, co-founder and COO, and Karine Waugh, CFO. After the prepared remarks, we will open the call to questions. However, since we just went public two weeks ago and the cell side has not been able to initiate coverage, we do not expect there to be much, if any, in the way of Q&A. Scaling any inbound questions, we will be prepared to answer some questions we felt were on point at the end of the call. During the call today, we will make forward-looking statements that are based on assumptions and therefore subject to risks and uncertainties, that could cause actual results to differ materially from those projected. We undertake no obligation to update these statements except as required by law. You can read about these risks and uncertainties in our regulatory filings that were filed earlier today. Also, our commentary today will include adjusted financial measures, which are non-IFRS measures. These should be considered as a supplement to and not a substitute for IFRS financial measures. Reconciliations between the two can be found in our regulatory documents, which are available on our website. In addition, our commentary today will include key performance indicators that help us evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. Such key performance indicators may be calculated in a manner different than similar key performance indicators used by other companies. I would also note that we have a slide deck that supports our remarks that is available to download in the webcast interface or on our website. And finally, please note that we report in U.S. dollars and all amounts discussed today are in U.S. dollars unless otherwise indicated. I'll now turn the call over to Greg.
spk08: Hello and welcome to our first investor conference call. Thank you for joining us. I want to kick off the call by sincerely thanking all of those involved in our successful completion of our IPO. The great reception we received would not have been possible without the dedication of all of our team, both in making Thinkific the company it is today, but also the team involved in the IPO project. I also want to thank Rhino Ventures for their unwavering support they've had in our vision for Thinkific, as well as the investors that we met with along the way. We also had the help from some exceptional trusted advisors, our bankers at BMO and CIBC, our accountants at KPMG, and our lawyers at Blake's have all been a big help in this journey. While some things will now change that we become a public company, the vision, the culture, and the passion that we bring to Thinkific will not. Turning to our call today, since we are very new to many of you, we are going to do an overview of who we are, as well as cover our financial and operational results, and highlight a customer and introduce Outlook. In our first quarter, paying customers continued to drive our growth. Paying customer growth, combined with growing average revenue per user, or ARPU, resulted in our annual recurring revenue, or ARR, increasing to $34.8 million. We continue to see our paying customers experience success, which led to record levels of GMV, gross merchandise value, in the quarter. We believe that putting the success of our course creators at the heart of everything we do is at the core of our business. Taking a step back, let's take a look at who is Thinkific and what we do. In 2012, we went looking for a solution to create our own courses on our own website and under our own brand. And we wanted to build a business around this idea. We found learning management systems or LMS on course marketplaces were unable to solve this problem. The LMS lacked branding, sales, and marketing capabilities and were designed for educating stakeholders inside an institution. Whereas marketplaces required that the courses live on their website, giving them control over content, pricing, students, and branding. So we created Thinkific to allow entrepreneurs and businesses to create their own courses and learning products on their own websites, under their own brands, to build their own businesses. A great way to see how differentiated we are is to sign up for our freemium offering at thinkific.com and build your own course. Thinkific exists at the intersection of business and education. We believe any business can use education as a tool for growth. With Thinkific, you can create a new business or extend an established one. We've replaced the need to cobble together a fragile mess of solutions, and we provide businesses with one single platform that covers course creation, marketing and sales, payment processing, website creation and hosting, student engagement, communities, and course delivery. And all of these features are under our course creators brand and on their website. Our solution quickly becomes the heart of our course creators business, and we are often the core operating system for their entire enterprise. It would be difficult to overstate the opportunity we have here. As a horizontal solution, we already serve course creators from virtually every industry and vertical, from retail to health and fitness, manufacturing and marketing to professional services. They teach courses on everything from baking to, believe it or not, hula hooping or corporate finance and mining. For many, the courses they create are their primary offering and business model. For others, it's an extension to their existing business, such as a brick and mortar yoga studio adding online courses or a software company teaching marketing to gain customer loyalty. The sheer scale of our business opportunity creates a large and growing total addressable market, which is currently estimated to be $28 to $34 billion. The drivers of this TAM include the rise of the entrepreneur and creator economy, mass adoption of online learning and teaching online, with every generation now going online as their first place to learn. Many businesses are now adopting digital and teaching online to add value to customers. And of course, the future of work and the desire of so many to upskill in their careers and personal lives is driving demand for more businesses to teach online. This TAM, combined with our differentiated product offering and strategy, will allow us to continue to see strong top-line growth. Our recent IPO capital raise will enable us to accelerate that growth through deeper investments in R&D to fuel greater product innovation, as well as the expansion of our product and brand awareness, and the building of an exceptional team that we need internally to support this growth. With that, I'm going to turn the call over to Miranda, who will touch on our customers and a couple of key operational highlights for the quarter.
spk02: Thank you, Greg. As you can see, we are completely passionate about the success of our course creators. I want to introduce you to Kate Klassen, the co-founder of Coastal Drone. As a former airplane pilot, Kate channeled her knowledge of aviation into educating and certifying drone pilots. Kate was at first offering in-person classes across Canada, which was time consuming and limited the number of students that she could reach. Using Thinkific's platform, Kate exponentially expanded her reach when she launched an online course as a more scalable alternative. Since then, she has trained thousands of students online and now offers over 10 different courses with two certification tracks. Kate is just one of thousands of course creators that have leveraged their knowledge to build or grow their businesses through Thinkific's platform. Last week, we announced the Thinkific App Store, a key tool for our course creators to be able to customize their online course offerings and an important part of our long-term growth strategy. The Thinkific App Store will help us continue to build out our ecosystem, support our partners, and add functionality for course creator businesses. Our open platform approach helps solve the unique needs of course creators while allowing Thinkific to focus on solving the next biggest problem facing the majority of our customers. This lets us accelerate R&D and add functionality more rapidly than rivals. The Thinkific App Store drives benefits for our entire community. For course creators, the Thinkific App Store means increased customization and control. The 30 apps in the Thinkific App Store as of launch are organized around four specific business goals for our course creators. Creating their preferred student experience, automating communications with students, selling more courses, and keeping track of the growth and success of the business. For app developers, the Thinkific App Store opens up a range of commercial opportunities. Independent developers and entrepreneurs can build new solutions to uniquely serve Thinkific's base of 50,000 active course creators. More established brands and software companies can also create apps to integrate their products with Thinkific, enabling new marketing partnerships. And for Thinkific, the Thinkific App Store accelerates R&D adding new functionality by leveraging our growing ecosystem of third-party developers. Thinkific's own engineering teams are meanwhile freed up to focus on building core functionality, scaling architecture, and creating more ways for third parties to connect to the Thinkific platform. Although early days, we anticipate that the Thinkific App Store will drive long-term commercial success for our customers and ultimately our business. Stepping back to earlier in the quarter, we kicked off the year with Amplify, a free online conference designed to support course creator success. Reaching over 20,000 registrants, content was delivered by a roster of 32 industry experts, both live and on demand, and continues to inspire and educate course creators as they grow their businesses. This quarter, we also learned that our team earned an exciting accolade for another one of our annual events. Thinkific was awarded an Ad Week Award for Campaign of the Year in Lead Generation for the 2020 Think in Color Virtual Summit. Think in Color supports and celebrates underrepresented women who are thriving as entrepreneurs and online business owners. As our whole team continues to grow and scale, subsequent to end of quarter, we were also honored to learn that Thinkific has ranked number two on the 2021 list of best workplaces in Canada for teams of 100 to 999 employees. The annual list is compiled by the Great Place to Work Institute, a global authority on workplace culture. We are really excited about what is ahead. To speak about our current results, I'm going to turn the call over to Karine.
spk04: Thanks, Miranda. Turning to our financial performance for the quarter, in the first quarter of 2021, we continue to see exceptional strength in our business, with paying customers driving our growth. And when combined with our growing ARPU, our average recurring revenue increased to $34.8 million. This combination of customer growth and ARPU expansion and exceptional levels of customers' earnings shows that our formula is working and our success is compounding. One key call-out is that 2020 and Q1 saw an acceleration in our growth as a result of COVID-19. And while our growth rate remains strong, we expected to revert back to trends more in line with what we experienced before the pandemic. Now let's discuss each of these key measures in a little bit more detail, starting with paying customers. We ended Q1 with 27,500 paying customers, representing an increase of 115% from Q1 of last year. Our growth in the quarter was across all industries and regions and accelerated with our Amplify Conference held during the quarter. Our average revenue per user per month increased 15% year over year to $106 per month. This growth was primarily driven by our customers finding success and moving up our pricing tiers to leverage the features and functionality we offer at our higher-priced Pro, Premier, and Plus plans. When our customers succeed, we succeed, leading to strong annual recurring revenue, or ARR, growth. ARR grew 134% to $34.8 million, driven by the strong combination of adding new paying customers, along with the existing paying customers expanding their relationship with us. ARR is a leading indicator of future revenue growth, and at 134% growth, we see continued strength in our business model. Our customers experienced tremendous success in Q1, as evidenced by their 156% growth in GMV to $107 million. Our GMV represents core sales and membership subscriptions that our course creators offer to their students and customers. We are exceptionally proud of their achievement and the hard work of our own team that helped make the marriage of their entrepreneurial vision and the power of education a success. As a reminder, while GMV is representative of the revenue of our course creators, it does not include transactions for course sales, membership subscriptions, and other products or services processed by APIs or certain apps where the company does not record the transaction value. Now turning to our P&L. Our revenue in Q1 grew to $8.3 million, or 152% year-over-year, primarily due to an increase in the number of paying customers, which grew at a higher rate than forecasted. Gross margin for Q1 was 80%, slightly above Q4 of 2020's gross margin of 79%, as we enjoyed stronger leverage with our higher overall revenue. Our gross margin rate is expected to decline in coming quarters as we continue to scale our customer success teams to ensure customers have best-in-class experience, and based on the mix of subscription plans that our paying customers select. Operating expenses grew to $7.6 million and represent 92% of revenue compared to $2.9 million, or 87% of revenue, for the same period last year. The biggest change in ads for dollars was in sales and marketing, with an increase of $2 million year over year, where we increased headcount as well as our discretionary marketing expenses to support our sales expansion and drive both near-term demand and long-term brand awareness. We plan to continue to expand our sales and marketing efforts. R&D increased $1.5 million compared to the prior year and was 31% of revenue, which remained relatively consistent with the prior year being 33% of revenue. This was primarily due to the increase in the headcount of our R&D team necessary to continue to support and improve our platform. We expect R&D costs to continue to expand as we continue to focus our efforts on adding features and enhancing the functionality of our platform. General and administrative expenses, which grew from 20% of revenue to 24% of revenue, is driven by an increase in our headcount in order to support our overall growth and the requirements of being a public company. We expect G&A costs to increase on an absolute dollar basis as we continue to expand our headcount and expect to recognize certain additional expenses as part of our transition to a publicly traded company. Our adjusted EBITDA loss for the quarter was half a million dollars, down from a loss of $0.1 million a year ago. You'll find a summary table of the calculations for adjusted EBITDA in our press release, MD&A, and investor presentations on our website. We believe we are just getting started, and we'll continue to invest in our product, our people, and our platform with the long-term in mind. For the second quarter of 2021, Thinkific expects the following outlook. Revenue in the range of $8.7 to $8.9 million, representing year-over-year growth in the range of 91 to 96%, and adjusted EBITDA loss in the range of negative 3.4 to $4 million, as compared to a loss of $0.3 million for the second quarter of 2020. Regarding our outlook, it's important to note that as the pandemic abates, there may be implications to impact the near-term performance of our business. Additionally, the recent strength in the Canadian dollar creates another area of potential volatility on our future earnings. We remain very positive on the long-term outlook, but still it is prudent to highlight these near-term uncertainties. And to wrap up the call, I will now turn it back over to Greg.
spk08: Before we turn the call over to questions, I want to close on a few key points. We are committed to supporting our course creators and building the most differentiated and effective platform to enable their success. We believe the path we are on in terms of product development and innovation, growing our team and improving our organizational structure and ensuring we continue to make data-driven decisions are all going to be key to our long-term success. The fund raised in our IPO will be used to accelerate R&D, therefore increasing our competitive advantage. marketing spend to create more brand awareness around Thinkific, and to ensure we can bring in the best talent to support our success. Our strong first quarter, we believe, underscores the strength of our strategy. As we continue to build more tools and applications, ARPU will expand over the long term. And with continued success of our existing customers and greater brand awareness, we believe we will drive even greater expansion of our GMV and paying customer base. The Thinkific App Store is one example that we believe will drive results over the long term. The outlook we have for our business is evidence of our confidence that our business model is working, and we will continue to see growth. And finally, we are just getting started. The opportunity in front of us is tremendous, and we intend to capitalize on it. At ThinkIVIC, we believe that together business and education create an unstoppable force for positive change. I'll now turn the call back to Joanna, our operator, for questions.
spk03: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question on the phone.
spk01: Thanks, Joanna. While we're waiting for our first question on the phone, I thought I would ask a couple questions of the group. So the first question is with respect to the App Store. We just announced the App Store last week, and so I was hoping you can help me understand how creative to ARPU the App Store should be, and what are the other benefits?
spk08: Happy to chat to that, Janet. First of all, the app store for us is something that's been years in the making, first of its kind in our industry. And it's really part of a big piece of our overall strategy. And it really has synergy with other elements of our strategy, including our plus pricing model for larger and scaling and highly successful customers, our partner network, and of course, our customizable and unique learning experience. And so what this does, it allows us to scale R&D advancements faster with the help of partners. We're allowing them to build apps and integrations, and we're even seeing some customers building their own apps, which they can then leverage for themselves and resell and deliver through the app store to other customers. So we don't expect it to be accretive to ARPU or revenue in the next year or so. And even after that, it's only a small, only have a small direct financial contribution. The real value we see in it is on delivering value to course creators by helping solve their problems. And of course, having a whole partner network building apps and integrations to solve customer problems allows Thinkific and our R&D team to focus deeply on the most important problems facing the majority of our course creators. So it allows us to stay laser focused on our strategy, but still open the door to all sorts of niche solutions or niche solutions for our course creators.
spk01: Great, thank you. That was very helpful. Joanne, I don't believe we have any people queued up right now. Is that correct?
spk03: We do actually have a call that just came in from Kent Crossland at McKenzie Investments. Please go ahead, Kent.
spk07: Yeah, hi. Thanks for taking my call. And yeah, good to see the Q2 guidance out there. The year-over-year growth and revenue looks strong. What I'm wondering about is the how I know you're not providing full year guidance. So I'm wondering, have you disclosed the year over year revenue growth for the four quarters of 2020? Because what I'm trying to get a sense of is as we roll through this year. Are there any, you know, where is the toughest compare of having high COVID growth in 2020 in terms of the next three quarters you'll report?
spk04: Hello, Kent. It's Karine here. Thank you for your question. You'll be able to find our quarterly revenue results in the MD&A as probably the easiest place to find them. but I also believe there's a table at the back of the investor presentation that would also give you those numbers on a quarterly basis. So you do have a few places you can find them.
spk07: Could just, you know, tell me how that revenue growth year over year plays out through the four quarters of 2020, and maybe give me your impression on which year over year comps will will start to be tough because you really start to see that COVID, the revenue come in from people, you know, flocking to your product because of COVID.
spk04: Yeah. Thanks for repeating that. So we really saw the increase from people being locked down from the pandemic early in March. And so starting, you know, at the end of Q2, we started to cycle over some of those higher growth rates. And I would say the peak happened later in the Q2 period or beginning of Q3. I'm wrong, sorry, the end of Q2, so late in June. And we've seen that we've been able to maintain quite strong growth rates since then, but more closely to the rate that we were experiencing in 2019. And so while we did peak in Q2 and probably Q2 will be a period we're going to have some significant growth,
spk01: growth rate we're we're we also know that we're going to be cycling over some big numbers as we get into later parts of the year okay excellent thank you and congratulations with the strong quarter with the first one out of the gate thank you great thank you Kent and so move to the next question on my sheet so I cream I know that you did provide q2 guidance and given your current visibility decline to provide guidance for the full year, given COVID and wanting to see how business continues to evolve over the next year, have you seen any change in customer behavior or student behavior? Or is this just looking to, are you looking just to make sure that you understand the growth trajectory post-COVID?
spk04: Thanks, Janet. So we've been watching quite closely recent results, both by industry and geography, and haven't seen anything that impacts our overall expectations for the year ahead. However, there does remain a lot of uncertainty as how the pandemic will play out. And so we are only providing quarterly guidance at this point, as you mentioned. And as we go through following quarters, we look forward to being able to provide more transparency and share further guidance out as we have a better understanding of how the pandemic will play out.
spk01: Great, thank you. And it looks like we still don't have any questions, given the fact that we just went public two weeks ago. And so we'll end the call with one last question, subject to anybody else coming into the queue. There has been a lot of questions on competition. Some people think about LMS, some think about marketplaces. Wanted to know how you view the competitive landscape today.
spk08: Happy to chat to that, Janet. This is Greg. So if for a moment we can all pretend we're course creators and you put yourselves in the shoes of our customers, which is how we love to speak about this and think strategically and from a differentiation and competitive situation in terms of imagining you're creating your own course for your business or company or brand. And so if you look to the marketplaces, first of all, there's great companies like Coursera, Masterclass, Udemy doing wonderful things. But the big difference there is that they are one URL, one website, one domain, one brand, and all the courses, content, customers, or sort of students live under that brand and on that website. And so that really means they own and control the brand, the content, the pricing, the relationship with the students. Whereas what Thinkific gives you is your site, your brand, your business, your revenue, your control over building something. And so we actually have 50,000 active sites operating that are powered by Thinkific, many of which you would never even know are powered by Thinkific. And so each customer of ours has their own revenue driving opportunity under their own brand and their own site. Moving to LMS, if you're looking at that as a solution, the LMSs really are designed for a fundamentally different use case and usually a different type of customer. They're focused more generally on educating stakeholders within an institution or within an organization. So students in a school or employees within a company, they tend to be more expensive, time consuming to set up and manage and difficult to set up and manage and at a much different and higher price point. Whereas with us, it can be really easy to get set up and running and is designed for people who are usually educating stakeholders outside their organization. And we tend to be more of a revenue driver rather than a cost center. Moving to some other competitive advantages we see as a whole in what we offer, a few key things is we offer a differentiated learning experience that's more customizable. And that ties into the platform play as well and having that app store. But there's a lot of what we do just as our own product that allows you to build out customized and unique learning products from courses, memberships, to now student communities. And that ability to create your own customized learning experiences to match your brand and your vision as a course creator. That ties well into another piece of our differentiation, which is the platform, which ties into things like the app store and allows you to extend further how Thinkific looks and feels and functions using our APIs, our themes and our apps and integrations, as well as just the way the platform functions itself. And that piece ties in with synergy to another piece of our strategy and differentiation, which is the partner network. And so there's this whole network of partners that can offer services and products to help you as a course creator design a better experience for your end customers or your students. And so that whole partner network is there at your disposal to create a much better experience for you and for your customers and for your students. It also makes our product more sticky because these partners can come in and help you build out your vision. which means you're more likely to say stick with the platform because you get exactly what you need out of it, even if it's something that we don't offer out of the box. And then finally, there's plus, which is our higher pricing tier, but it's also representative of that ability to scale with Thinkific. And so we see more and more larger customers coming to us because we're easier to set up and use and they can get started right away on the platform and see value immediately. We're also seeing some of our early customers or customers who've started even as a team of one who are scaling up to millions of students or millions in revenue moving up to that plus price point, but also the representative of the features and functionality and infrastructure that comes with Thinkific now as a platform that allows people to scale really to almost any level. So all of those combined are a little more representative of how we differentiate in the market.
spk01: That's great. Thanks, Greg. And just before, I guess, we close the call, I would just like to check the queue one more time. Joanna, do we have anybody else that is in the queue at this time?
spk03: You do have a question from Anton Ligo at ATB. Please go ahead.
spk00: Hi. Congrats on the quarter. My question was related to essentially your pricing point. Are you expecting new customers to go up the ladder, and if they do, upgrade their subscription? How does that happen? Does it come in turn? No. organically or is it as a result of your sales efforts? Or can you just kind of walk me through a typical path for your customers when they subscribe to the entry level and as they kind of go up the subscription plans? Can you just provide a bit more color to that, please?
spk02: Yeah, happy to take that. This is Miranda. So our plans are really feature-based. So our goal is to really make Thinkific easy to get started and for everyone at the beginning, and that's even where you see that free tier. And from there, the product really takes over. So the pricing is designed so that as you start to launch your course and start to get more students, your feature needs are really what pull you up. So for example, you might start to have more students and you want to be able to start selling in groups or manage them through advanced segmentation, or you've now added multiple courses and you're wanting to do things like sell membership pricing or in bundles and all of those features Start to pull you up that price point when we look at our sales teams They're really focused on the plus tier of our business and that's where you see Sort of a mid market and larger brands who are coming in with very similar very common set of needs, but they're needing to speak with a salesperson and some additional support when they're generally when they're starting and So it really tends to be more product-led growth to pull our customers through the pricing plans organically as they start to see and experience success on Thinkific.
spk05: Okay, thanks. That's helpful. Thank you.
spk03: Next question comes from Robert Young at Canaccord. Please go ahead.
spk06: Hi, good evening. I missed the beginning, so I'm sorry if I retraced some previous material here. But one of the pieces that jumped out at me, obviously, is the growth in ARPU driven by some new paying customers choosing to subscribe at the highest tier plans. And so I'm just curious about how that overlaps with PLUS and what's driving that. Is there something that's different than might have been the case in 2020 or 2019?
spk05: Sure, yeah, happy to discuss that.
spk08: So the growth in ARPU historically has been driven by two key components. One of them is people selecting that higher price point of plus, as you highlighted. So what we see is people will come in and very quickly select that even as their starting point, not always necessarily moving up there, although a good percentage of people that are on that price plan do actually upgrade from lower price tiers to that level. The other area is we have a growth price plan. And so that's an add-on to our $99 option. And that allows people to slowly scale the price that they pay based on the success that they have and the number of students they have. And it gives them an extra set of features that moves up. So those historically have been two key drivers combined to move average revenue per user up. One of the things that comes on that actually applies downward pressure on our average revenue per user is growth. So the more paying customers we add, They're often starting at that $99 level as a start point. And then so a large quarter of new customers like this past one tends to apply some downward pressure to average revenue per user. But then those other factors will kick in to bring that up over the future. Additionally, the way we see going forward is there are a lot of accretive opportunities for average revenue per user. such as payments and the recent introduction of payments. And although we're cautiously rolling that out slowly over the rest of this year, we do hope to see payments revenue starting to be introduced in 2022 and beyond. And so that as well can be a factor that can be accretive to ARPU in the future. And then there's other opportunities we can from a product value add perspective where we can introduce more creative opportunities to ARPU in the future that are beyond just pricing and payments. So that could look like adding new features to new solutions that could potentially add to ARPU in the future. Okay. I just want to make sure I hit on your key point there. Did that answer the question?
spk06: Yeah, more than answer it. Hopefully you didn't retrace a whole lot just for me. No, not at all. The other thing is the very large growth in GMV. It'd be interesting to me to get your take on what are the drivers of that and how do you think of that as the comps sort of lap as you go through 2021, get into a, you know, as the world normalizes and maybe the growth changes?
spk08: Yeah, so we're still, and that's partly the reason why we're being cautious on any predictions of the future, obviously, is learning as we come out of the pandemic, what the impact will be there. But again, as Karina shared earlier, we aren't As we look at data of our own customers and their customers, we're not seeing anything that's showing us significant suggestions to change our expectations in coming out of the pandemic. However, to your more direct question on what's driving that growth in GMV, the nice thing is the growth of GMV is driven by a mixture of both new customers coming in and selling their own courses and also pre-existing customers continuing to level up in their success. And we continue to see both those factors driving it. And so it does tend to have a compounding effect. And so even if there is future changes in the market, generally that compounding effect of more customers and each one continuing to level up their success. And I think there was a good chart early on in the prospectus that shared this as well of the growth of our customers' revenue year over year, even for their first five years on the platform, and that continuing to increase year over year. So when you pile one year on top of the next, that continues to have a nice incremental effect on our GMV and the success of our customers.
spk06: Right, right. And maybe last question. I'm sure someone asked about App Store, but the 15% take rate, I think, if I'm correct on that, that seems low relative to some of the other app stores. And so I was wondering if, how you're thinking about that as a revenue line, is that expected to be a profitable revenue line or is it more of a marketing tool? Any thoughts there?
spk08: Yeah, great question. And so the way we're looking at the app store, at least in the short term and by short term, I mean, the next few years is very much about value add to customers and attracting more partners to work with us and work with the app store and build apps. So in addition to it only being 15%, We give a holiday from that 15% to partners who join for the first six months. And so really not looking at it as a huge driver of revenue or ARPU growth over the next little while and really focusing on how do we maximize the value add to customers? How do we maximize the number of partners working with us, the number of apps that they're building, the quality of those apps? We are actually optimizing for quality over quantity, but still wanting to have more on the platform. and making sure they're solving really valuable problems for our course creators to increase their success, increase stickiness with the platform, and of course, increase success of our partners. So the big message we want to send out there through that 15% and even the six month holiday from it is the message that partners can come and build a profitable business as we've already seen our partners do by working with Thinkific and we want to do everything we can to support them building a profitable business so they can in turn add value to our customers by building products and features. And so even if there isn't revenue in it in the short term for us, there's huge value to our customers and huge value to our partners, which, of course, the way that our success aligns with our customers and our partners means that there's value in it for everyone in the long term.
spk05: Okay, great. Thank you. Thanks for taking the questions. Thank you.
spk03: Thank you. Without no further questions, I will now turn the call back over to Greg Smith for closing comments.
spk08: Thank you, Joanna, and thank you, everyone. Just want to reiterate, thank you to everyone who was involved in the IPO and to our investors as well who have supported us through this and believe in us and the mission. One thing I've said many times recently to close so many of our chats and meetings is we truly are just getting started, and we are really excited about looking to the future and the success we can deliver to our course creators. Thank you, everyone.
spk03: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines. Enjoy the rest of your day.
Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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