Thinkific Labs Inc.

Good afternoon, my name is Chloe and I will be your conference operator today. I would like to welcome everyone to Thinkific's third 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. 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 third 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 the 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 those key performance indicators used by other companies. I should also note we have a slide that supports our remarks available to download on the webcast interface or on our website. 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.

Thank you, Jihan. Hello, everyone. Welcome to Thinkific's third quarter fiscal 2025 earnings call. Q3 saw solid progress as we continue to transform Thinkific. We're seeing evidence that our focus on our upmarket ideal customer profile is working. And we're investing in the products and capabilities that will attract these customers and drive revenue growth. Upsiding Q3 was driven by Thinkific Commerce, a key growth vector that we continue to unlock by evolving the platform to deliver success for our customers at scale. In the quarter, we also started rolling out our AI teaching assistant to a select group of customers. The feedback has been strong and we'll continue admitting more customers before its official launch early in 2026. We believe this and other AI features we have planned will redefine the future of learning, creating richer, more engaging learning experiences that will empower our customers to succeed at scale and ultimately accelerate growth for Thinkific. In prior calls, I've talked about this shift upmarket for us. Today, I'll elaborate more on what this means, our progress, and the future opportunity for Thinkific and our customers. I am confident there is a large and growing market opportunity ahead of us, and I see evidence from the feedback we get from our customers and the growing pipeline of potential customers, specifically with these upmarket customers that we are now targeting. That said, we have a lot of work to do to win a greater share of this market and accelerate our growth, with much of that work required in R&D and evolving our product on a number of fronts to meet the needs of our customers. Our go-to-market began its transition with the rebrand earlier this year, and we're now evaluating key areas to optimize spend, and we're aggressively redeploying budgets away from lower ROI campaigns and toward upmarket opportunities, with a significant shift expected over the next couple of quarters. In R&D, we're building an integrated platform that attracts larger, more successful businesses to self-serve and drives a strong flow to our plus plans. one that meets the needs of our upmarket customers to improve close rates, ARPU, and retention. We're investing in a better user experience for both customers and their learners, introducing more robust tools for selling, learning, and managing businesses at scale. Our focus is on delivering modern, innovative, and customizable learning experiences and empowering our users to efficiently manage their content and learners as they grow. AI is at the core of how we are executing on this product vision, creating opportunities for our customers to save time, earn more revenue, and create more engaging and effective learning experiences. In Q3, we began rolling out AI Teaching Assistant to a number of beta customers. The early feedback has been strong, and we're expanding the access to more customers who will now be able to leverage its innovative capabilities. General availability is slated for early next year. Through our AI teaching assistant technology, we're able to provide customers with a more accurate and more personalized experience than they can get with the generally available LLMs. With Thinkific, their teaching assistants are highly customized to their unique proprietary content while maintaining security over their intellectual property. Teaching Assistant is the solution designed to help our customers scale their businesses while saving them time, and it will also create additional revenue opportunities for our customers. while providing a more interactive, personalized, and valuable learning experience to their learners. The positive feedback we have been receiving confirms we're hitting the mark. In addition to these teaching assistants, there are other avenues we plan to add significant value for our customers through the use of AI. In the quarter, we also released improvements to our community's product as a strategic focus for Thinkific. These updates, informed by customer feedback, aim to strengthen learner connections and support our customers' goals in creating engaging, community-driven learning experiences. At present, many of our customers are using third-party platforms like Facebook or Reddit to build communities. Though popular and often used, these broad social platforms can permit the participation of random individuals and the posting of unrelated content. Things that introduce considerable distractions and undermine the intended purpose of the community. Additionally, it's hard to control access, have paid subscriptions, and control quality in these public forums. Whereas Thinkific Communities offers an environment unified with course content, and AI teaching assistants where learners can, with a single login, stay engaged with their fellow learners and allow our customers to better understand, support, and influence an individual's learning journey. Within the quarter, we did see a number of customer wins because of this incremental functionality, including an educator of financial investment strategies who migrated from Facebook communities. Commerce has been a significant driver of growth in self-service over the past couple of years, and it's proven to help customers increase sales with capabilities like order bumps, alternate payment methods, and advanced analytics. As we move up market, we're investing in capabilities that will allow larger customers with larger volumes and more complex billing environments leverage those same powerful selling capabilities that self-serve customers have benefited from. We have released improvements that allow for more flexibility in handling larger group orders, including flexibility around prices and trial periods and notifications of payments and subscriptions. In Q3, the New York Academy of Art, a customer of Thinkific since 2020, began using Thinkific Commerce to meet their need for diverse payment solutions to accommodate large and international student cohorts. This graduate school, known for rigorous fundamentals in training and contemporary art, initially leveraged Thinkific at the onset of COVID to continue operations resulting from the shutdown. And since, they've been able to use Thinkific to expand their reach far beyond New York City. The New York Academy of Arts has transformed its online education into a powerful marketing channel that attracts out-of-state and international students to New York for in-person study. Their continued growth led them to upgrade to Thinkific Plus, and they're now migrating to Thinkific Commerce to further scale their operations. At Thinkific, our proudest moments come when customers like the New York Academy of Art grow and achieve lasting success. Supporting and accelerating our customers' achievements is our primary goal. Our continuing investment in Thinkific Commerce reflects our ability to support customer growth and help organizations like the New York Academy of Art achieve their goals. As I mentioned earlier, Q3 upside was driven by success in Thinkific Commerce as we are seeing strength in upmarket customers that we've been focusing on. Currently, less than 10% of Thinkific Commerce revenue comes from plus customers. This is an opportunity for us to better help our largest customers. As we achieve greater success in attracting high GMV customers, we expect Thinkific Commerce will remain a driver of growth, fueled by higher GMV customers coming on to Thinkific, even as penetration rates are expected to level off next year. This optimism is grounded on the solid progress we've been making in targeting and acquiring customers with higher GMVs. Our sales pipelines have been up significantly year over year, especially within those that fit our new ICP. We are also excited that we are getting in front of and seeing larger enterprise engagements, as they are now taking our sales team's calls to discuss their online learning strategies. Some of these larger enterprises represent six-figure opportunities to Thinkific. These achievements are a result of the upmarket moves we made earlier in the year. like the changes to our website, reallocation of ad spend, and creation of an outbound motion, all of which are having positive results to attract customers that fit our new ICP. With the product improvements currently in the works within our R&D teams, we expect to expand on this opportunity in 2026. In the third quarter, we saw the majority of new plus customers committing to using commerce. Bringing these high GMB customers onto Thinkific Commerce has the potential to be transformational for Thinkific because they have more predictable businesses, adding a stable and reliable foundation to our commerce stream. While we are seeing strong sales pipeline gains, in order to capitalize on these gains, we must ensure our sales team executes and converts them, which I'm confident this team can do. We've strengthened our sales team, including the hiring of a new VP of sales that has a track record of scaling small and mid-sized businesses that fit our ICP. While the average tenure of our sales team is lower than it was a year ago, our training programs are enabling newer reps to ramp up effectively. At the same time, our shift towards larger, more complex customers means we are now navigating more rigorous procurement processes and longer sales cycles. Closing these types of deals is a capability Thinkific has not historically needed, but I'm confident that our new sales leadership will build this muscle in time to fully capitalize on the exciting product launches we have planned for next year. In summary, the team and I are confident that our shift up market was the right move. Evidence increasingly shows a significant opportunity here. Additionally, AI presents a very real and significant opportunity for us to add financial value to our customers in terms of time and dollars saved, revenue earned, and more effective learning experiences. Our Thinkific teaching assistants are a significant step in the right direction. While we're excited about this upmarket shift, at the same time, we are deeply impatient to make this happen faster, and we have work to do to capitalize on this. We are relentless in our goal of accelerating this progress. And with that, I'll pass it over to you, Karine.