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.