Thinkific Labs Inc.

Good afternoon. My name is John and I will be your conference operator today. I would like to welcome everyone to Thinkific fourth quarter and full year 2023 conference call and webcast. As a reminder, this conference call is being broadcast live on the internet and recorded. All lights 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 the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key. Thank you. I would now like to turn the conference call over to Ju Hun Kim. Investor Relations, please go ahead.

Thank you, and good afternoon, everyone. Welcome to Thinkific's Q4 and full year 2023 results earnings call. Joining me today are Greg Smith, co-founder and CEO of and Karine Hua, CFO. After the prepared remarks, we will open up the call to questions. During the call today, we will discuss our business outlook and 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. These comments are based on our predictions and expectations as of today. 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 we 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 additionally, all dollar amounts discussed today are in U.S. dollars, unless otherwise indicated. I will now turn the call over to Greg Smith, CEO and co-founder of Thinkific.

Hello and welcome to our earnings call. Thank you for joining us. Thinkific is focused on ensuring that our customers succeed. And as they succeed and grow, so do we. And that statement has never been more true than it is today. Over the past year, we have made significant investments in the success of our customers and aligning our growth with theirs. We're now seeing the fruits of these investments. On the call today, I will provide highlights and key accomplishments from our Q4 and full year 2023 and elaborate on how we believe that will translate into accelerated revenue growth in 2024. After that, Corrine will provide a financial overview of the quarter, the past year, and expand on two important investments we are making to achieve our financial goals in 2024. Thinkific delivered a solid Q4 to end what was truly a milestone year for the company. We had our second consecutive quarter of positive adjusted EBITDA and cash flow from operation and grew total quarterly revenue 13% year over year to 15.6 million, beating the guidance we provided on our last earnings call. The solid results were driven by continued strength in Thinkific Commerce and Thinkific Plus, which saw revenue growth of 96% and 31% respectively. We believe that our overall revenue growth rate has stabilized at current levels, And with targeted incremental investments, we are in a good position to accelerate our growth as we move through 2024. We ended the year with the introduction of a significant number of new products and features to help our customers. One of the most exciting launches was The Leap in October, an AI-powered product that enables our customers with just a few clicks to generate comprehensive drafts for digital products like mini courses, guides, downloads, tutorials, and other digital products. all designed to be consumed quickly on mobile devices and distributed through social channels. Within 30 days of launch, the Leap had over 6,500 active accounts. Active accounts have doubled since then, growing to 13,000 users today. That includes a well-known public speaker who in under two hours was able to produce many courses that earned her over $8,000. It's extremely exciting to see how much this has accelerated the path to success for our customers. Typically building out a digital product and monetizing can take weeks or more. So to see this happen in a few hours is a huge step forward due to our AI innovations. Just in time for Black Friday, we added gifting to our commerce solution. Gifting allows someone at checkout to buy additional products for a friend, similar to buying a gift certificate to a course or other digital product. On Black Friday, average transaction sizes that included gifting were approximately 34% higher than normal. In Plus, we launched Learning Paths, a feature that provides a guided learning experience that offers learners a structured path to navigate through course content. And at the end of December, we also added a suite of productivity features to Plus. These additions continue to add value to what we believe is already the most compelling next-generation LMS product on the market. In the quarter, Learning Paths was responsible for a significant Plus expansion deal with a state agency in the United States that will now use the new capabilities to unveil a program that looks to use the curated experience Learning Pass offers to improve course completion rates and expedite the learning journey for participants. The achievements of Q4 would not have been possible without the hard work we have been engaged in for the past 18 months. In 2023, we completed our restructuring plans, which allowed us to achieve our cost efficiency and productivity targets ahead of schedule. while continuing to grow the top line in double digits. Revenue grew 15% to $59.1 million from $51.5 in 2022. Our adjusted EBITDA for the year was a negative $3 million, a $23 million improvement versus the prior year. In 2023, Thinkific released more new and innovative products and features than at any time in history. I couldn't be more proud of our dedicated team who rallied to make this happen. The Thinkific platform has never been easier for our customers to start and scale a business and create and sell digital products. And we're seeing evidence of the success of this in key performance metrics across the business. In August of 2023, we launched an automated sales tax solution and began offering multiple payment options, including buy now, pay later. These products have been instrumental in raising our payments take rate from an average of 3.6% to an average of almost 3.9% in 2023. The final two quarters benefiting from these features driving the end of year take rate to 4.2%, as well as helping to improve gross margins. More importantly, these features are making it easier for our customers to both sell more and manage their businesses more easily, automating the pain and complexity of sales tax and making it easier to sell larger ticket items with buy now, pay later. We also became SOC 2 security compliant early in the year, which along with our upgraded analytics has paved the way for strong growth in Plus in 2023. With these continued improvements, we were able to sign an innovative financial services marketing company as a new Plus customer in 2023. This company uses Thinkific to provide courses to its network of financial advisors. Beyond our ease of use, rapid deployment timeline and commercial capabilities, it was our simple and seamless single sign-on or SSO capability that was cited as a key reason for signing with Thinkific. Armed with our upgraded analytics package, one of our larger Plus customers now no longer has to manually export data to monitor its students. With the innovations included in the upgraded analytics package, they can now automatically track individual students and are no longer burdened with this old clunky workaround. As a result, they can now focus on student success more easily, identifying roadblocks at the quiz level and offering targeted support. We continue to improve our analytics package, adding a ton of value to our larger customers across the board. We also signed a SaaS company that automated management of contractor spend. Despite their complex training requirements, they were able to use Thinkific's easy-to-start capabilities and launch within 16 days, leveraging our onboarding tools and launch specialist support. This ability for Thinkific Plus customers to implement our solution so rapidly has been a big win in our sales process. They are often surprised that the time to value is many months faster than they had budgeted for. Our upgraded analytics package was a key differentiator for the new customer, which is now looking to also leverage our SSO. These are just a few of the customer wins that would not have been possible without the achievements of our product teams in 2023. Their work is paving the way for success in 2024. We also just held our company kickoff in January and came away excited about continuing to drive customer success in 2024. A number of customers attended our kickoff to share their journeys, wins, and challenges with us. We listened to how they achieved success through Thinkific, as well as their suggestions on what we can do to help them grow even further. The team is energized and looking to apply these learnings to help all our customers achieve greater success this year. Thinkific will continue to focus on profitable growth in 2024. That said, we believe that given the nascent nature of our market and the large opportunity we see ahead of us, we will prioritize growth over expanding our adjusted EBITDA margin and begin making targeted investments into the business to accelerate top-line growth. This will be done in a thoughtful manner, and incremental spend will depend on us achieving key milestones. We intend to invest in those areas that have already achieved solid ROI. We will double down on AI, which has already provided demonstrable results in the leap, with respect to activations and marketable products, and thoughtfully incorporate the power of AI throughout the entire platform. During 2023, we built our own AI service layer into the Thinkific platform. This serves to make the deployment of AI-related features throughout Thinkific easier and faster to build. With this in place, we'll see further AI innovation accelerate for Thinkific in 2024. There are many use cases where we can leverage AI to improve our customers' productivity. I plan to share more details on these in the coming earning calls. AI and machine learning present a unique opportunity for Thinkific to accelerate the success of our customers by making many of the tasks they take on when starting and building a business easier and more impactful. We have our own view on the ethics and principles that guide our use of AI. One of these principles is respect for the unique genius of each customer. What this means to us is that each customer of Thinkific brings a unique brand and perspective on the topics they teach. This makes their learning products unique. We will always use AI to augment the expression of creators' unique genius, to bring it out, but not replace it. We believe that operating with this and other core principles in mind will set us apart in our use of AI and ensure that we use it intelligently, responsibly, and for maximum impact. Another area of focus will be on partnerships and collaborations. One of the biggest requests we get from customers is help to grow their subscriber base once they've set up their course. Beyond the already significant and improving analytics in order to help supercharge their efforts, we're looking to partnerships and collaborations within industry thought leaders, as well as larger brands and companies. One such collaboration is with John Ushai, a renowned and respected educator with almost a decade of experience working with top creators inside YouTube and Instagram. John's inside accelerator is designed to propel aspiring and established creators going beyond the basics and instead offering a masterclass in content creation, covering everything from finding better content ideas to mastering social storytelling, on-camera confidence, frictionless filming, and beyond. Before I pass the call to Corrine, I want to thank the entire Thinkific team. Without their tireless efforts and passion in pursuing our goals and priorities and supporting our customers, these results would not be possible. Now over to you, Corrine.