Thinkific Labs Inc.

Good afternoon. My name is Sylvie, and I will be your conference operator today. I would like to welcome everyone to ThinkFX's first quarter 2022 financial results 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 would like to ask a question during this time, simply press star then number one on your telephone keypad. If you would like to withdraw your question, simply press star then number two. Thank you. And I would like to turn the conference call over to Janet Craig, Head of Investor Relations. Please go ahead.

Thank you, Sylvie, and good afternoon, everyone. Welcome to Seekific's earnings call for the first quarter of 2022. Joining me today are Greg Smith, co-founder and CEO, and Corrine Wach, 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 filing 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 will now turn the call over to Greg Smith, CEO of Thinkific.

Thank you, Janet. Hello, and welcome to our first quarter earnings 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 first quarter, as we continued to execute our strategy, we also had to make some very hard decisions. As you know, in late March, we announced a reduction in our workforce that resulted in us having to say goodbye to about 20% of our staff. During 2021, we increased our workforce significantly and could have grown into our cost structure, but we knew that wasn't the right thing to do, and we needed to increase efficiency and effectiveness and better align our workforce to focus on our growth drivers. To be clear, we made these changes with growth as our priority, and we continue to invest in sales and marketing as well as research and development. but are now doing it in a more efficient and effective manner. While restructuring wasn't easy on those that left the company or those that remained, we did our best to lead with empathy and kindness. Going forward, we remain focused on working together as a team to deliver value for our business, our customers, and our shareholders. Turning to just some of the highlights of our performance. First quarter revenue grew by 42% to $11.8 million. This was driven by Q1 ARR, annual recurring revenue, which grew 33% year-over-year to $46.4 million. ARPU, average revenue per user per month, grew by 13% to $120 per month compared to Q1 last year and grew 5% quarter-over-quarter. Total paying customers grew year-over-year 21% to $33,300. Payments performed well in our first full quarter of results. Gross payments volume was 11.9 million, which represents a penetration rate of 11% of GMV process during the quarter, up from 6% in Q4. Our success would not be possible if it weren't for the incredible creators on our platform. I continue to be amazed by the creativity, originality, and commitment of our creator community. The impact our creators have is tremendous, and we remain fanatical about supporting their success and continuing to improve our platform, add new features, and launch new products. We continue to see great businesses creating learning experiences with Thinkific across a variety of verticals, from crime prevention courses to painting or even the banking sector. One creator that recently touched our hearts and underscored the impact that one person or a small business can have on others is Shudio TV. Shudio has over 80,000 participants enrolled and uses a variety of methods to work with its participants, including live events, on-demand learning, as well as communities. A purpose-driven organization is focused on supporting parents and teachers for children with special educational needs or disabilities. Studio TV offers best-in-class training for parents and educators working with these students. Ian, one of the founders, has a child who is a student with special needs, and he and his partner were finding that parents and teachers were not equipped to create success for students both at home and at school, and managing the transition between the two. For example, transitioning back to school after summer break. For an autistic child that creates friends one year and finds the following year he is in a new class with none of his friends he has already made is extremely disruptive and distressing. ShootioTV was able to address this through training for parents and teachers. Ian shared with us that what really gets us excited is hearing how valuable or life-changing our content is for parents, but also how we are changing the thinking of teachers on how to approach the way they teach and work with students with special needs. As you know, Thinkific Payments was available to all creators in the United States and Canada in early November. We are in the early stages of expanding Thinkific Payments support for creators doing business in the UK, Australia, and New Zealand. We are very happy with the uptake we have seen on payments and believe it will be a short and long-term value driver for our business. It will be a significant contributor to ARPU growth this year. This quarter, we continue to enhance our feature set and broaden our offerings across our pricing tiers, including new features for reporting and refund management that save time on business administration for our customers. As you will recall, we believe Thinkific payments can reach penetration rates similar to other SaaS players in the range of 20 to 30% of GMB in the midterm, the long-term potential being even more substantial. Each quarter, we continue to improve the customer experience and add features to help our creators succeed. The importance of this continued innovation and responsiveness to our creators cannot be understated. And we believe this innovation and creator-centric approach is what drives our success, both now and in the future. Making it easier for creators to get started is foundational to their success. This past quarter, we made it easier for creators to do just that with tools that allow faster website builds, launching and managing live events, as well as a faster onboarding experience. We also continue to lead the way in helping creators sell more. Improvements to our platform in the first quarter include new subscription tools, helping more creators build sustainable subscription-based business models, as well as further improvements to order bumps and to our high-performing checkout. On top of that, we delivered enhancements to Thinkific Payments to simplify administration so creators can focus on creating and selling learning products. and we made important improvements to our security features, a key area of focus for our larger customers, including multi-factor authentication. We are calibrating our pricing strategy to ensure we align our success with that of our creators. This is tied to the constant innovation to help our creators' businesses and ensures they are supported with the price point and feature set that best supports their stage of business. This move is an important decision for us, allowing to price for value and is revenue accretive. We continue to see signs that our market is growing, whether we're looking at the rise of entrepreneurship, the growing knowledge economy, the increase in creators building and monetizing audiences, as well as in people's desire to engage and learn online. Looking at our evolving go-to-market strategy, we are encouraged by the early traction we are seeing. We're leaning into top-of-funnel awareness strategies, which will provide a better reach for us at a lower cost. We have become more efficient in our paid ads channel and are improving the integration between our product development efforts and our go-to-market outreach. Our sales and marketing strategy focuses on supporting creators on their journey from becoming problem aware, solution aware, and then evaluating and finally choosing Thinkific. Bringing this all together, we are pricing for value and being revenue accretive, evolving our go-to-market strategy and capturing higher quality customers. And we have restructured for efficiency, effectiveness, and a focus on growth. These decisions all serve to move our business forward with long-term sustainable growth as the objective. In the near term, we have a number of levers to drive revenue, whether it's upgrades to higher tier plans, new plus subscriptions, and of course, Thinkific payments, as well as adding new customers. Our decision to adjust pricing will create downward pressure on the number of paying customers, but also improve ARPU. And we're confident in this decision as it will drive revenue growth and aligns our success with that of our customers. Before I hand the call over to Corinne, I wanted to note that last week marked the anniversary of our first year as a public company. It's been an exhilarating, inspiring, and very special time in Thinkific's evolution. During this year, we've accomplished much as a team, and we are excited about what is ahead. Our successes could not have been done without our dedicated thinkers, our team. Their relentless focus on excellence, teamwork, and results, not only for our business, but also for our customers, has made this happen, and we're having fun doing it. Now, to speak about our current results, I'm going to turn the call over to you, Corrine.