Thinkific Labs Inc.

Good afternoon. My name is Ina, and I will be your conference operator today. I would like to welcome everyone to Thinkific's first quarter 2025 financial results conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Also note that this conference is being recorded. I would now like to turn the conference call over to Ju Han Kim, Head of Investor Relations, please go ahead.

Thank you, and good afternoon, everyone. Welcome to Thinkific's first quarter 2025 financial results earnings call. Joining me today are Greg Smith, CEO and co-founder of Thinkific, 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 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 and co-founder of Thinkific.

Hello and welcome to Thinkific's Q1 fiscal 2025 earnings call. Thinkific's unwavering commitment to customer success continues to drive both innovation and solid financial performance. I'm happy to announce that our Q1 results slightly exceeded the top end of our revenue guidance range. Upside was driven by strong subscription revenue, particularly in self-serve, which benefited from improvements we made to our marketing strategy, website, and onboarding processes. We continued to expand the adoption of Thinkific Commerce and Thinkific Plus where we saw record new bookings. The level of innovation remains high at Thinkific and we continue investing in making our platform easy for our customers to create and sell well-designed and impactful learning experiences. Our focus continues to be an obsession with helping our customers grow their businesses. This commitment to customer success and great customer support was recognized by G2 in its 2025 Best Software Awards this quarter. placing us among the top global companies for education and customer service. We were also recognized by Waterstone Human Capital as one of the most admired corporate cultures of 2024 in their growth category for building and enhancing a culture that drives performance. Looking ahead, we recognize this is a year of transformation for Thinkific, and we're working hard on executing the focus strategy we outlined last call. As part of this strategy, we are gearing up for some important product launches and we'll roll out new marketing and messaging this summer focused on attracting and serving our ideal customers. Although it's early in our transition, I'm already seeing strong positive signs that the approach we're taking will yield stronger results. The additions we made to our team have begun to pay off and I expect we'll continue to see that improve. Before I get into specifics in the quarter, I want to discuss the recent conversion of all of our multiple voting shares into common shares, where every share now has one vote per share. This was a significant step for us. The dual-class structure was established to support the company's early growth as a public entity. However, with a four-year track record as a public company and confidence in our team, strategic vision, and our path forward, I felt the extra voting provisions were no longer necessary. While common among tech IPOs at the time, we acknowledged that the approach may have constrained the stock's attractiveness to investors, hindering the float and liquidity of our shares. Simplifying our capital structure better aligns the interest of all of our shareholders, improves corporate governance, and is a first step to increasing our public float and liquidity of our shares. Most importantly, this change demonstrates our confidence in Thinkific's new strategy and ability to execute on a profitable growth trajectory that will maximize long-term value. Now on to the quarter. We had a solid Q1 driven by ARR growth, which grew $1.8 million this quarter. This was tempered by the anticipated softness in GMV growth. Plus had record new bookings. However, the upside in ARR was largely generated by better than anticipated growth in self-service ARR. The combination of our new strategy and team additions is paying off directly in both the efficiency of our marketing dollars and volume of new business being generated, both from improvements to our go-to-market motions and our product onboarding flows. The gains in marketing efficiency and top new business generation were in part permanent fixes that will continue to help our future results. But some of these gains in Q1 were also one-time wins. This means we'll see more normalized growth in Q2. I'm proud of the team both for the permanent fixes and the one-time wins they took for this quarter. If we can combine more improvements like this through future quarters, we'll see a stronger growth path in our future. And with our current team and strategy, I'm confident we'll be able to do exactly this. PLUS saw record new bookings in Q1, and it is confirmation of the substantial underserved market opportunity in PLUS we identified last summer. Most of our Salesforce is now delivering ahead of quota, and we are now closing on larger and longer-term deals. This quarter, we continued to release impactful functionality to the product. In February, we added advanced customer analytics capabilities. This is a feature that was highly anticipated as it helps our customers better engage with their students and helps to predict buying intent. This advanced customer analytics was the deciding factor in winning a global software company that is at the forefront of AI. This company was looking to scale its education business and switched to Thinkific this quarter from a well-known competitor whose product lacked the scalability and ease of use offered by Thinkific. We are also standing up a new, truly world-class support and customer success program that can meet the demands of our more sophisticated customers. In the first months, we achieved record customer satisfaction, or CSAT, scores of 97% for PLUS, and they've already begun making an impact on growing ARR. The strong new bookings was tempered by a decline in plus net revenue retention as we saw an uptick in plus customers who reverted back to self-serve. While not ideal, this is also not surprising and is a natural part of our shift to focus on our ideal customers and the shift in strategy to focus on serving these customers. Corrine will discuss this more later, but needless to say, as part of our execution on our new customer profiles, we are realigning our sales force to target businesses that fit our new strategy and are most likely to succeed and grow with Thinkific. We believe these adjustments will further strengthen our new customer acquisition motion, as well as help improve net revenue retention. One exciting growth lever we want to capitalize on is plus-driven commerce revenue. Later this year, Thinkific Commerce will unveil several highly requested features, including some specific to the commerce needs of larger, more successful customers. I'm confident these additions will significantly enhance Thinkific's commerce value for our Plus customers who demand more from our commerce engine. While self-serve currently drives the lion's share of our commerce revenue, these important releases will unlock powerful new growth lever, accelerating adoption of Thinkific Commerce in Plus, fueling our next phase of GMV expansion and commerce revenue growth. For the remainder of 2025, our entire team is fully engaged driving our new strategy. Adjustments continue to our website that align with our new customer profiles, and there is to be a significant refresh in the summer that will ensure we resonate with those customers who drive the most value. Enhancements to our marketing campaigns, onboarding, and activation processes have already delivered results in Q1, and we want to build upon that success through the year. Research and development is busy executing on their product roadmap. We continue to integrate AI throughout our product, automating tasks, making life easier and more productive for our customers and leveraging our data to help them succeed. With our new strategy and senior management in place, we are in a position to build on our company culture, empowering and supporting our teams to drive results for our customers and for Thinkific. With that, let me hand the call over to Corrine.

Thanks, Greg. Good afternoon, everyone. I'm pleased with the start of our year. The upside in the quarter was primarily driven by the changes we've made in our sales and marketing teams' execution, which led to improved ARR growth and an increase in adjusted EBITDA. Furthermore, we generated strong cash flow from operations, underscoring the strength of our financial model. For the first quarter, revenue was $17.8 million, up 12% from the prior year. Revenue slightly exceeded the high end of our guidance range, driven by timing benefits that resulted in better than expected self-serve revenue growth. ARR was $60.1 million, up 6% year-over-year, and an absolute dollar basis of $1.8 million sequentially. As Greg discussed earlier, our ARR performance was driven by a combination of factors, including enhancements to our marketing strategy and website, and onboarding processes that led to better conversion rates of visitors within SelfServe. However, a large part of our Q1 upside resulted from one-time and seasonal factors. We strategically shifted from a freemium to a trial-based model, which led to stronger conversion rates. The switch to trials was completed late in Q1, so retention remained high. However, we are expecting typical attrition to show up beginning in Q2. Q1 also benefited from a full quarter of seasonally stronger Black Friday and holiday season promotions. We are therefore expecting ARR growth to normalize closer to the trend of the past year as we are still early in the execution of our new strategy. Nevertheless, the upside in the quarter is further proof in our belief that the demand for data solutions are substantial, and we are well positioned to capture it as we refine our go-to-market motion throughout the year. ARR growth led to subscription revenue of $14.6 million, which was up 6% year-over-year. Commerce revenue of $3.3 million was up 52% year-over-year. Commerce revenue growth resulted from the continued growth in GPV of 65 million, which grew 46% year-over-year, as Thinkific Commerce penetration rate, which is measured as GPV as a percentage of GMV, grew 400 basis points to 56%. We expect continued adoption of our Commerce solution and believe further penetration rate increases will be driven by the release of highly anticipated Thinkific Commerce features planned for later in the summer. The take rate remains steady at 4.5%. As we discussed previously, given the functionality we currently have available in Gifford Commerce, we expect take rates to remain around this level. GMV of $116.7 million was down 4.5% year over year. we outlined the primary driver of the GMV headwinds last call, specifically the lower GMV of our most recent cohort of customers, and our new strategy and customer focus will help address this issue, and over time, we'll see improvements here. In Q1, however, we saw a small reduction in sales across all our cohorts, implying our customers are facing macro pressure. ARPU of $168 per month was up 10% versus the prior year's 152. but flat sequentially. The increase in ARPU reflects the growth of Thinkific Plus and Thinkific Commerce. Now onto revenue by customer group. Self-serve revenue saw growth to $13.3 million, up 7% year-over-year from $12.4 million in Q1 of 2024, and relatively flat from the prior quarter. The increase year-over-year was driven by Thinkific Commerce, which has substantially higher penetration rates within our self-serve customer base. Thinkific Plus, which is built for business customers who choose Plus to get access to higher levels of support and services, as well as enterprise features such as third-party integrations, advanced analytics, single sign-on, and SCORM. Plus revenue of $4.5 million was up 27% year-over-year from the $3.6 million in Q1 of 2024, and up 5% from the prior quarter's $4.3 million. The investments we have been making in the Plus sales team delivering solid results in q1 we saw an improvement to both the length and size of contracts we closed and also saw an improvement in the win rates this led to plus having a record new bookings quarter in what traditionally is a seasonally slower quarter for business deal flow we believe these results confirm the research we did in the fall that shows the plus addresses a large and underserved market that we can grow into the strong activity in customer acquisition was tempered by an increase in downgrades as some PLUS customers decided to move to self-serve plans. We believe that for the most part, these customers were unable to dedicate the appropriate resources and or the effort to monetize their educational content and ultimately made the decision to move to self-serve as that feature set better suits their current needs. They do remain customers and we plan to re-engage with them at the right time. We are refining our PLUS go-to-market motion to prioritize customers that are a better fit for Thinkific and align more closely with our new strategic approach. While early, the increase in the number of multi-year deals we signed in Q1 is an indication that our newest customers are committed to and are dedicating their resources to drive revenue from learning products like courses and communities. Moving on to the P&L, gross margin of 74% remains consistent with the prior year and quarter. Subscription gross margin of 82% was also consistent with the prior year and quarter. Commerce gross margin was 37% compared to 33% in Q1 of 2024 and 39% in the prior quarter. Worth noting that commerce gross margin tends to fluctuate between quarters depending on the utilization of high margin features on Big Effect Commerce. Total operating expenses were $13.4 million in line with the prior year and quarter. We continue to make investments to accelerate top line growth However, as we sharpen our focus on high monetizing, ideal customer profiles, we are reallocating marketing spend to our most effective opportunities in keeping with our new strategy. This decrease in sales and marketing from the prior quarter did not slow the growth of ARR. As a reminder, we incurred approximately $400,000 in company kickoff expenses, which is included in G&A. Adjusted EBITDA was $922,000, or 5% of total revenue, versus the $240,000 and 1.5% of revenue from the prior year, and $895,000 or 5% in the prior quarter. We are committed to a strategy of profitable growth and will continue investing for growth, though we believe we can hold the adjusted EBITDA margins at the current level. Cash flow from operations was a solid $3.2 million, and our ability to convert EBITDA into cash flow is again a testament to the quality of our earnings and the power of our financial model. Moving to the balance sheet, cash and cash equivalents as of March 31st, 2025 was $51.4 million, an increase of $1.9 million from the prior quarter and as a result of our growing cash from operations. During the quarter, the company repurchased for cancellation approximately 315,000 shares for total cash considerations of $683,000. We continue to believe that at current prices, share repurchases represents a compelling opportunity to enhance shareholder value. As Greg addressed earlier, on April 24th, all multivoting shares were converted to single-voting common shares. This transaction was done on a one-to-one basis and without any premium. We believe this greatly simplifies our capital structure and is a first step in enhancing shareholder value. I'll end with a few comments on guidance. For Q2 of 2025, the company expects revenue between $17.7 and $18 million, which represents a growth rate of 9% to 11% year-over-year. The guidance reflects continued strength in PLUS and good commerce revenue growth driven by higher penetration rates of the gift of commerce. We continue to expect headwinds on GMV, which will impact overall commerce revenue growth, and this guidance contemplates continued macroeconomic uncertainty. We remain committed to profitable growth and believe we can execute this focused strategy by reprioritizing existing resources and driving operational efficiency and maintaining adjusted EBITDA margins at the current levels.

We are happy to take your questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press star four by the one on your telephone keypad. You will hear a prompt that your hand has been raised. If you wish to cancel your request, please press star four by the two. If you are using a speakerphone, please lift the handset before pressing any keys.

One moment, please, for your first question. Your first question comes from the line of Gavin Fairweather from Cormark.

Please go ahead.

Oh, hey, good afternoon. Thanks for taking my questions and congrats on the results. Maybe just to start on self-serve, we've talked in the past about activation rates versus perhaps the pre-COVID era. Nice to hear that you're seeing some permanent gains from the changes to your website and onboarding. Maybe you can just update us on how much more upside you see on that in the coming quarters and how kind of the refocus and strategy will play into that metric as well.

Yeah, it's a great question and we look really closely at it. Thanks, Gavin. There's sort of two stages or two or three stages in the way I look at this. The first is the early activation onboarding and really the core metric that comes out of that is their conversion through the initial funnel from a visitor website through to choosing us as their platform of choice, making some investments in using the product and converting to paid. So that conversion through the early stage. That we've gotten a lot of the low-hanging fruit. So there's more we can do there for sure, but a lot of the low-hanging fruit we've captured there. The next steps are start to move them further through in terms of long-term value, which drives things like expansion revenue, upgrades, improved retention and And in the long run as well, getting the right people through that funnel drives GMV and GPV. So we're through that first phase with the low-hanging fruit, and now we're working on making sure we attract the right people through and give them all the tools they need to get all the way through to retention, expansion, and GMV improvement. So lots more to come from the overall funnel, but we've extracted the easy stuff out of that first activation bit.

That's very helpful. And then maybe just moving on to plus, just on that dynamic of, self-serve clients kind of upgrading to plus and then, you know, moving back down. I mean, it sounds like that's mostly a function of just not a great product fit at the time. So as part of your, your targeting, are you shifting who you're targeting in self-serve? Are you looking for more logos kind of outside of the current business and how will that impact, I guess, sales cycles and the sales cadence?

Yeah, so there's been a shift and it's ongoing both for self-serve and plus to our new ideal customer, which is generally a little bigger, more upmarket, more likely to be successful on every metric we look at for these customer profiles. And so what we should see is more success, even within the self-serve base, the opportunity for the more of them to move to plus. And in fact, we've done a bunch of work and are continuing to do work to make it easier for self-serve customers who are a fit for Plus to move to Plus and then a better fit at Plus, which should mean better expansion and retention on the Plus side. I think what we're seeing now and it's sort of natural and I highlighted that there will be some bumps along the way and that with the new targets already, we're seeing a better fit in the customers we're approaching in Plus. I think the multi-year deals is one sign of that. And we've got further to go there, but we're starting to see that But in the process of making that switch, it's natural to see some churn of people who we had had on Plus in the past that maybe were not an ideal fit for it, but they're still happy to be on Thinkific. So a lot of that looks like, say, a much smaller customer. If that helps answer your question or if there's more I can get into, happy to.

Oh, yeah, that's very helpful. And then it sounds like the deal mix in the quarter for Plus kind of skewed up market. Can you just maybe... discuss the profile of deal sizes in the quarter. And then maybe on a related point, as you're getting into these kind of bigger deals, assuming that there's maybe a bit more competition at the table, are you seeing any competitive response around pricing?

Karin, I'm sure you can add more to it, but I think I can just highlight it was a strong new booking quarter for PLUS, strong new ARR on the new additions there. My belief in Kareem, maybe you can confirm that we did see higher average revenue per user, higher deal size. And then on the multi-year deals, that just means the overall commitment to the deal is for a longer number of years. So that was strong as well there. And yes, I think that's an early indication of our shift in who we're approaching and who we're reaching out to in terms of the type of customer profile there. Maybe Kareem can add to it. And then Gavin, I think there was a second part to your question I missed.

First, let me confirm, yes, we did see another increase in our average contract size during the quarter and continue to see really strong close rates and a quick time of kind of like between 30 and 40 days of cycle. So it's a good thing to see that we're not giving up on how quickly we can close deals to close higher price deals. And so I think there's some good story there. I believe the second question was around what kind of competitors are we seeing and is there some competitive pricing pressure? We are seeing a fair bit of competition, and a lot of customers are moving from other platforms to ours. And our release of SCORM, kind of like July of last year, has been helpful enough for many of these customers, and so continues to be something that makes it easy for customers to migrate over to Thinkific.

Great. That's it for me. Thanks so much. Thanks, Gavin.

Thank you. And your next question comes from the line of Stephen McInsell from BMO Capital Market. Please go ahead.

Hey, thanks for taking my question. I just want to dig into the macro weakness bit. As you're bringing on a different type of customer to the platform, are you seeing any differences in terms of resiliency compared to your previous customer base? Like, are they more or less sensitive to macro shifts?

I mean, we only just started doing it, so that may be something we see over time. What I've seen before is that the larger customer will have a bigger budget and typically stay longer, make a bigger commitment, and once they're successful, stay for the very long term and continue to expand. The bigger, more corporate customers, if we see a hit to corporate budgets, we can see macro factors of a hit larger customers, just like you'd see in sort of even enterprise sales, I believe. So we do see both sides of it there. I think generally our business has a bit more counter macro factors working for it in that even as things are changing in the economy, there's more people looking for more training, more education, more opportunities career wise that may even be starting entrepreneurial ventures, training on Thinkific. Uh, but there is, we do have factors that go both ways that are both cyclical and counter cyclical, but I think a slight shift towards counter cyclical has been, uh, is what I see out there. It's harder to say that long-term in terms of your specific question and the resilience of the larger customers. I think generally they will be more resilient, but specifically to macro factors, I'm not sure yet.

Okay. Fair enough. Um, Now, with the change in the targeting that you're doing for self-serve customers, are you seeing any differences in terms of commerce adoption for those customers?

Commerce adoption remains high, but Karine, maybe you can share if we've got a specific current number on new sign-ups and percentage that are adopting commerce. I know typically that's been 80% plus.

You're right, Greg.

Yeah.

Okay, very good. And finally, just in terms of the – you mentioned that customers are coming from other platforms. Are you seeing a lot of that?

Are you seeing any changes in terms of the types of platforms that they're coming from? Not yet. Not lately, no.

It's the same groups that we've targeted in the past. And so there's a set that are on the self-serve side and a different set to some extent on the plus side. There's some overlap there. But I haven't seen a big shift in terms of which ones lately, no.

All right, great. Thanks for taking my questions. Thanks, Stephen.

Thank you. And your next question comes from the line of Robert Young from Canada Continuity. Please go ahead.

Good evening. I was curious, this may be a tough question to answer, but the customers that are moving from plus back to self-serve, I think you said think of it plus grew 27%. Is there any kind of a normalized growth if you're to ignore that factor? Just looking at net new growth, would you have maintained that 30% sort of growth profile?

Karine, you might have more accuracy on this.

I think if we pulled out everything that moved from self-serve or from plus to self-serve, yes, we'd be well above that. But I don't have that math in front of me right now. It depends on if you mean add back the revenue or if you mean count the self-serve revenue. Because the thing is, when they switch from plus to self-serve, the revenue does drop because they're going in at a lower price point. And so there's a revenue loss there. If you want to add that back in as if they never left, then yes, it would definitely be well above. If you just hold the self-serve revenue, it would add some back, but not a huge amount.

I guess my assumption is that that's a temporal thing. It's not something that happens a lot. And so if that is a one-time or not a normal issue, then what's the underlying growth in Thinkific Plus? That's basically the question I'm trying to ask.

Yeah, actually. So maybe to clarify that a bit more, we do and have always seen some downgrade, like more downgrades from plus to self-serve than to say a competitor, which I see is a good thing because they're saying we still like the software. We still like the platform, but we're maybe just not ready or big enough or at this price point. I think that. The other thing too, is our own pricing policies are, you know, hurt us on that front and that we make it too easy to make the switch. And so there's some adjustments that we're looking at strategically for the future to make it a little more, create more incentive to move up as you're larger and you succeed, which makes it not as attractive to say, take that step back down. So this is kind of a known issue for us. It's not a one-time thing. We saw more of it this quarter. but it's definitely something that we can fix over time. So I would say it's, it's baked into the historical growth rates and plus it just hit us a little bit more of this quarter.

Okay. That's great color. I'm curious about, you said bookings are very strong, like record bookings. Um, and the past just said the funnel pretty strong in plus particularly for larger customers. Do you think that you can continue to operate above the 30% level normally, just in general, or would you change the expectation for that growth rate?

Yeah, that's certainly the goal.

I think we're going to see fluctuations around 30 for the near term. If we saw it at 27, 28, 30, 32, I think in that range, it's still a small enough number of deals. This is still a fairly small overall business on the plus side if you look at total volume of revenue. So it's hard to predict with perfect accuracy because a couple of deals can move a quarter. But yeah, I think hovering around that range is what we're doing until we make significant improvements on product and pricing. But I think there is an opportunity for us to do that. So long run, we want to be there or above. Near term, I think fluctuations within that range are appropriate.

Okay. And then just on the, you said higher win rates and the sales team operating above quota. And so I'm curious about your plans for headcounts in the sales team. Are you expanding there? I think you'd suggested marketing spend was being reallocated, but are some of that reallocation into quota sales?

Breen, you probably have more specifics on that one.

Sure. So we have seen really good performance of the team. and have a strong enablement group that really drives a lot of that early performance we're really excited about. We do have continued plans to build and grow that team, but we're following very typical metrics for when is a healthy time to add. One of the things that we saw this quarter was a strong pipeline, and so that sets us up well for continuing to add to the size of our sales team, and so we're doing just that. Last question. Robert, if you don't know, one thing I want to add about that 30% growth for PLUS, for us to achieve that, part of our plan is to be able to get a higher penetration rate of our commerce platform into that customer group. And so, we've got a fair bit of work to do. A lot of the features that are coming out in the summer are going to have a big impact on, you know, how close we can get to 30% or get above that. And so, that's a part of the strategy that's important to note.

Okay. And last question is this, EBITDA margins were I think you said that you expect EBITDA to remain at or near the current level, and so should we be thinking of 5%? I think in the past you might have guided us to a little lower than that, and then I'll pass it on.

We do see some fluctuations quarter by quarter, but the last four quarters have been really quite consistent, almost just small increases in overall dollar value. We do want to invest for growth, and so the key focus for us is staying on the profitable side of the line. But I think 5% is reasonable to expect over the next couple of quarters is what we're looking at. But if we do see opportunities to invest that have a near-term return, we will make that decision, which is why we're not specifically giving guidance on EBITDA.

Okay. Thanks. I'll pass the line.

Thank you. And your next question comes from the line of Richard Shea. From National Bank Financial, please go ahead.

Yes, thank you. I just want to maybe elaborate a bit more on the profile of your ideal customer. And plus, I think you talked about sort of bigger and upmarket. But, you know, if you can kind of dig in, are there common challenges that they're trying to address that you have an edge on relative to the competitors in the markets?

Yeah, it's a great question. And one of the challenges I think that we're quite strong at is really helping them sell. So we've looked at, especially because we've got an inbuilt commerce engine and it's core to everything that we do and works its way through even the learning experience. That's one area where we're quite strong in terms of helping these customers actually generate revenue from their learning programs, which is something that is When you look at say a more conventional LMS that they would might compare us to, it's more of a bolt-on or an add-on that yes, you can sell something sometimes, but it's not built right through the entire system. So that's definitely one area where it makes it a lot more attractive. I would say the ease of use, depending on the competitor for us, ease of use can be a huge reason. It was certainly the reason why we won a number of customers this quarter, as well as some scalability and integration opportunities through our API. There's a lot you can do if someone comes along and says, think if it's got 80, 90% of the feature set that I need with our API, you can either build your own on top or integrate into other tools that you need. So those are a few of the things that are setting us apart. There's other things like we talk about SCORM, That's sort of a necessary element to get some of the larger customers. And then one of the things we've become quite strong at is we have a real strength internally within Thinkific, within our data team and within analytics and our finance team as well. And we've applied that strength to building out some pretty amazing analytics for our customers. And we just keep, we've probably mentioned it many times over the last year, but we keep rolling out pretty significant improvements to it. And so more and more we're seeing that our customers want to see the data of how their learning is working, how it relates to their sales, how it relates to their customers, and us giving them that robust analytics is becoming a big selling point.

Okay, that's super helpful. If I sort of step back and sort of think about these companies or enterprises that are trying to sort of sell their learning programs, How do we, how do we size that? Like, do you have a sense of, well, I guess you can do in terms of the addressable market there, like how many companies out there have those type of programs?

Yeah, we've broken this down a few different ways. It's not the easiest thing to perfectly break out, but we've worked with some external consultants a few times. Our most recent analysis of the market was midway through last year, and I believe in this area we got to about a $30-$35 billion market opportunity in terms of what we could potentially address there. So it's significant for us to go after and a lot of opportunity. And I think there is continued growth in it in the future, as well as more and more companies. There's still plenty of companies out there that aren't doing anything with learning that could be. And there's lots that are doing things with learning that could be selling it.

Okay, great. And then just the last one for me, I know you don't sort of disclose the customer count anymore, but Is there any way you can give us a sense or order of magnitude of the number of customers that are on PLUS?

Yeah, I mean, on the customer count, we added a little over 600 total this quarter. And the PLUS count, Karine, do you have that?

Yeah, it's over 700. Okay, great. Thank you.

Thank you. And your next question comes from the line of Todd Copeland from CIBC. Please go ahead.

Yeah, good evening, everyone. A couple questions for me. With the pivot that you're anticipating in terms of product refresh, et cetera, can you imagine AI and feature sets helping your customers utilize it? Can that be a driver to actually raise your growth rate if you think if we look out a year or two? And if so, just talk a little bit about that.

Yeah, I think I mean, AI, there are so many use cases and opportunities for us, obviously, within our overall team. So I think there has a potential to drive our growth rate just through an efficiency in terms of our team using it, in terms of the pace that we can produce new features and code and functionality, even our ability. We have an amazing sales team that just keeps getting better and better, but there's an opportunity for them to use it more in a way that can help them hit larger and larger numbers and go after and help more customers that way. as well as on our success and support side. But I know that's not directly where you're going. The other opportunity for growth certainly is in helping our customers. The biggest challenge all of our customers face is in building their business, which really means building their content and selling their experiences. And there's so much we can do to both save them time by analyzing, moderating, and taking on tasks for them, but also going out and even helping them find new business and new revenue. So there's a lot of opportunity that we're looking at there that will save them time to go build their business and also actually just go build their business for them. And because our growth at Thinkific is so closely tied to the success of our customers, we're really focused on investing in AI that helps our customers succeed. If we do that well, then yes, that should in turn drive growth for us as well.

Yeah. But it's fair to say it's still in the exploration phase, isn't it?

Well, continuous exploration, I say, is going to be our view of AI for years to come. But right now, we are actively rolling out new functionality and pushing harder and harder on using it as a team.

My second question had to do with the ARR growth comments. And you talked about how you expect it to settle back. But I mean, it's more or less been at this level for a few quarters. So were you actually talking about net dollars in terms of additions settling back?

Or what was the point on that, if you could just clarify that? Thanks a lot.

Todd, I'll take that one. The comment was around net dollars.

At 1.8 million ads of ARR this quarter, that was a higher number than we've had for a while. And so we do expect to go back to where we've seen the increase over the last year. So kind of like the average over 2024, that's closer to what we're expecting. And some of that's because we know that the gains, some of the gains that we had in self-serve were one time. And so that will take us back to a more normal level. And then while plus is going to continue to grow, we've got some other headwinds that are hitting revenue from a GMV perspective, and so probably balancing those out a little bit.

Right. Okay.

So net new rather than percentage growth. I get it. Thanks very much. Appreciate it.

Thank you. And your last question comes from the line of Martin Toner from ATB. Please go ahead.

Thanks very much. Can you talk a little bit about the strength in bookings? And how material is it to the overall business? And maybe any comments you can have on the pipeline, given your shift in strategy is going to become, I suspect, a little more like, you know, pipeline based.

Karine, do you have more on the, do you want to jump in on that? I can speak to strategy and pipeline if you want, but I think – I'm sure. Why don't you take that part? Yeah, okay. Sorry.

And the first part, Martin, was around how material the pipeline and the new bookings growth is?

Yeah.

Correct. Yeah, look, I think the way I see this is it's really good to see our team hitting above quota, especially a lot of them are quite new. It's a strong team. And as we add to it, they're posting strong results. I think the flow through that we have to see in the flag of the shifts to self-serve is we have to increase the overall net dollar retention or net revenue retention there. So we're seeing what we want to see in terms of new ads. But what we need to shift next is that overall retention and expansion opportunity. And so some of the shifts we're making in the type of customer we're selling to should drive that. The multi-year deals should drive that. So I think it's essential and material to the overall success of the business going forward. But for it to really show up in our bottom line, we're going to need to show that retention and expansion over time. And the new ideal customer we're focusing on should help as well as some of the product features. And then as Corrine highlighted, some of the shifts in... on more of a focus on commerce there as well should help as well with all of that. So overall quite material in the future, but right now we need to bring in those second metrics in order to see the impact on the top and bottom line be more significant material in the near term.

Super.

Corinne, can you maybe Give me anything on pipeline or did that cover the pipeline?

The story is probably the same on both sides. We do have a strong pipeline that we're quite excited about. And I think the key focus here is that this market that we're going after that we're quite excited about does look to be able to see some early signs of success. And so the research that we completed told us there was an opportunity here, and then the results we're seeing from our team, including the pipeline that we're building, really does validate that. But to what Greg said, we've really got to fix or improve our net revenue retention. And so that's kind of the second step of this is while we're proving out the size of this market, we've got to make sure we're doing the right things to keep the customers and help them find value fast.

Thank you. Last one for me. What were the unusuals that contributed to EBITDA margin that you don't think are repeating or recurring?

We did have a few things happen in the EBITDA that

kind of like were different from this quarter versus last. One of them was our kickoff expenses. We brought the whole team together to talk through strategy and the plans for the year. We also had some reductions in our sales and marketing costs. And on the sales and marketing side, we do expect there to be some noise in terms of some ups and downs quarter by quarter as we're moving on to this new strategy. There's you know, work we're doing around the website that we're excited to see launch shortly, you know, kind of in the summertime frame, as well as, you know, Greg had mentioned some work we're doing around pricing and packaging. And so I think there's, you know, moments where we're going to see some ups and downs, which is why we haven't been giving guidance specifically on EBITDA. However, we are very focused on maintaining positive profits there. And so, you know, it kind of speaks to, you know, why there's going to be some ups and some bumps as we go through the year.

Thank you very much. Appreciate it.

Thank you. There are no further questions this time. I would now hand the call back to Mr. Craig Smith for any closing remarks.

Thank you, Ina. Appreciate it. Thank you everyone for attending.

To wrap things up, I want to emphasize we rolled out very recently our new strategy and approach. It's a year, 2025 very much is a year of transformation for Thinkific. And from what we see, it's going well. And we're starting to see things move in the right direction. We've seen some acceleration in some of the key metrics that we want to see. We're seeing our activation and onboarding working appropriately. You may hear in me that I'm being a little cautious given the uncertain macro environment and making too many big future predictions. but we started evolving our team and strategy late last year. Today, we're seeing the first signs that these changes are working. With any significant change like this, we expect to see some bumps along the way, and we've still got some work to do to fully transition to the new strategy, but as we put these pieces in place, I expect it to yield much stronger results for both our customers and our shareholders. Thank you.

Thank you, and this concludes today's call. Thank you for participating, and we all disconnect.