Thinkific Labs Inc.

conference call. As a reminder, this conference call is being broadcast live on the internet and recorded. 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'd like to ask a question during this time, please press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star, followed by two. Thank you. I would now like to turn the conference call over to Ms. Janet Craig. Please go ahead.

Thank you, Pam, and good afternoon, everyone. Welcome to Thinkific's earning call for the fourth quarter of 2021. Joining me today are Greg Smith, co-founder and CEO, and Karine Wah, CFO. After the prepared remarks, we will open the call to questions. 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. Our commentary today will include adjusted financial measures, which are non-IFRS measures. They should be considered as a supplement to and not a substitute for IFRS 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 to similar key performance indicators used by other companies. I should also note we have a slide deck that supports our remarks available to download on the webcast interface or on our website. And finally, all dollar amounts discussed today are in U.S. dollars unless otherwise indicated. I'll now turn the call over to Greg Smith, CEO of Thinkific.

Thank you, Janet. Hello, and welcome to our fourth quarter and year-end 2021 conference call. Thank you for joining us. At Thinkific, we remain fanatical about our creators' businesses and continue to advance our products, platform, and features to support and expand their success. In the fourth quarter, we continued to do just that, and our results, as well as our confidence in the future, are a reflection of our commitment to our creators. Turning to just some of the highlights of our performance, total paying customers grew year-over-year by over 32%. to 32,300. That represents a 73% compound annual growth rate or CAGR over the past two years. Q4 2021 ARR or annual recurring revenue grew 43% year over year to 43.8 million compared to 30.7 million in Q4 2020, a CAGR of 89% from our 2019 results. ARPU grew by 9% to $114 in Q4 2021 compared with 105 in Q4 2020. This continued increase in ARPU, or average revenue per user per month, is driven by upgrades to higher paid plans from our existing creators, expansion of our Plus business, and the beginning of Thinkific Payments revenue. Combined, our growing customers and higher ARPU resulted in a significant year-over-year increase to annual revenue, which grew by over 81% to $31.8 million in 2021, with Q4 2021 revenue of $10.8 million, a 49% increase over $7.2 million in Q4 2020. As we continue to attract new creators to our platform and our existing creators continue to experience success and upgrade to higher tier plans. This represents a CAGR over the past two years of 97%. Payments tracked ahead of our expectations in the quarter with 6% of GMV for the quarter being processed through Thinkific payments. GMV for 2021 was $415 million, up 50% from 2020, as our customers continued to experience success selling learning products on Thinkific. Thinkific continues to execute against its business strategy, including product-led growth and innovation. This includes growth across all our KPIs, including ARR, ARPU, paying customers, and GMV. Launch of the Thinkific App Store, launch of Thinkific Payments, scaling Thinkific for growth, including... investments in R&D to continue to support the success of our creators and broaden the suite of services to support the knowledge economy, investments in sales and marketing to drive brand and broader awareness, strengthening our executive leadership team, and hiring more thinkers, particularly in R&D and sales and marketing, to support our growth. As you know, we love to share creator stories with you, and our creators span across industry, age group, and geography. Today, I wanted to touch on Kat Norton, who combined her incredible skills with Excel and TikTok. She took her ideas onto TikTok, then Instagram, where she now has over a million followers, and then to Thinkific. She's been featured in publications such as Forbes and Business Insider. With her fun and informative style, she's truly a great example of the power of entrepreneurship and the knowledge economy. While working her full-time job, she took her passion for Excel and created a side hustle with TikTok videos and quickly became Miss Excel. While her TikTok videos went viral, she also needed a revenue model. She found Thinkific and started with a single course. And within months, Kat's teaching business surpassed her day job. Now, Miss Excel offers courses, coaching, group sales, and a private community. Thinkific gave her a uniquely accessible solution to design courses her own way while building her customer journey around her strengths. Kat told us, Thinkific made it really easy for me to grow a seven-figure business in 12 months. And what I love most of all is the impact I'm able to have with my content. I'm excited to launch into some new areas shortly as I learn more about my audience. And that's what we do best, helping creators grow and build their own business under their brand with full control over their content, customers, and revenue. As you know, Thinkific Payments was available to all creators in the United States and Canada in early November. We're in the early phases of expanding Thinkific Payments support for creators doing business in the UK, Australia, and New Zealand. Thinkific Payments is expected to accelerate Thinkific's long-term growth by allowing us to share in the success of our creators, including increasing lifetime customer value significantly, while customer acquisition costs stay the same, all at no additional cost to our creators. Thinkific Payments was designed with the success of our creators in mind, giving them new revenue streams and helping them earn more from their existing learning products with our differentiated selling features. It is a powerful suite of tools built to help our creators sell more and spend less time on administration. In the private release last summer, we saw strong receptivity, and our expectation when we launched is that we would continue to see creators embrace it, and they did. The new embedded payment processor is directly integrated into a creator's Thinkific dashboard, enabling them to accept payments, manage payouts, process refunds, and update banking and business information without the friction of integrating a third-party payment provider. We are helping our creators who live to teach sell more naturally. This creator-centric payments processing was embraced by our customers, and we saw 6% of all of our GMV processed using Thinkific Payments in the fourth quarter. When Thinkific Payments was launched, it was offered as the first among options for payment processing. In the future, it will become the default payments processing system for new customers. In the midterm, we believe we can reach penetration rates consistent with what we have seen with other similar SaaS players, in the range of 20% to 30% or greater, with long-term potential being even more substantial. Turning to other updates on the product and feature front, in Q4, we continued to differentiate our feature set to strengthen our ecosystem. We extended the value of our open platform with new solutions for all customers. We've added solutions for learning experiences, selling, and business operations. Our app store includes apps from well-known brands such as Zoom, Google Analytics, MailChimp, and ActiveCampaign, and other lesser-known brands such as Drop-In Blog, which provides our creators with key functionality to help them market and sell their courses. The Thinkific App Store allows partners such as agencies and developers to create apps that extend our platform's capabilities, increasing the value and functionality for our creators and attracting new creators to Thinkific. A few weeks ago, we held our annual creator conference, Amplify, a free virtual event that brings together the top minds in the knowledge economy to educate and inspire digital creators across the globe. We saw strong attendance with over 25,000 digital creators registered from over 110 countries. The event provided the opportunity for attendees to learn from many of the industry's most celebrated knowledge economy experts, network with other global creators, gain practical tools and advice, and use tailored offers from Thinkific to launch or scale their digital learning business. We saw strong engagement with the Thinkific platform, with double the uptake of Amplify's core promotional offer in 2021 compared to 2020. With this strong engagement, we look to convert potential and current creators engaging with us into paying customers. which takes me to the topic of the evolving market and our marketing strategies. We're seeing more and more signs that our market is growing. Whether we're looking at the rise of entrepreneurship, the growing creator economy, or people's desire to engage and learn online, all signs suggest that we're witnessing the evolution of our market from niche to more mass market. The early adopters and creators that sparked the initial interest in growth in the market remain. But the increased interest we've seen in campaigns such as Black Friday and Amplify and the growth in traffic indicates that we're moving into the next phase of the market, beyond early adopters towards a more mainstream mass market. It's still early days as we build a clearer picture on the data coming in, but it's exciting because it means our market is moving from niche high-end creators to a much wider set of potential customers. As our market opportunity evolves, we must also change our sales and marketing strategies. We'd been very effective in our channel marketing strategy when the market was early adopters and people that were more solution aware. With the knowledge economy moving mainstream, we're now investing in and adopting a marketing strategy that will accelerate adoption, including an integrated marketing approach to create multiple customer touchpoints and content, branding, and messaging that speaks to the mainstream. This is the cornerstone of our new go-to-market strategy. This means we are now looking more at the total funnel from awareness to engagement to the customer journey and lifecycle marketing through to sales and conversion. We're working to update our go-to-market strategies here in the beginning of 2022 and are already starting to see signs of strength in our new approach, which we expect will become more apparent in the latter half of this year. What is really gratifying about the success of Amplify, the evolution of the market and marketing strategies, is that it reinforces four things. The strength of our platform and the engagement we have within the creator community, providing our creators with the tools to be in charge of their success and build their brand in their unique ways. Our conviction in the growth and adoption of knowledge commerce. The critical new hires we've made in our executive team were the right ones to continue to propel our business and our long-term growth trajectory. With our product-led strategy, our differentiated platform, and our ability to engage and convert creators, I am confident in our ability to capture the market opportunity ahead of us. Before I hand the call over to Corinne, I wanted to touch on one other announcement we had today, a new appointment to our board of directors. We're excited for Steve Krenzer to join our board. He brings substantial expertise that is relevant to scaling high-growth organizations, and he has deep experience in finance, operations, sales, and marketing. To speak about our current results, I'm going to turn the call over to Karine.