Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Thinkific Labs Inc (THNCF, Financial) reported a significant increase in customer success with its Thinkific Commerce solution, with penetration rising to 47%, up 700 basis points from the previous quarter.
- The company achieved a 32% growth in Plus revenue, driven by record new customer bookings and signing its largest Plus deal to date.
- Thinkific Labs Inc (THNCF) delivered on its promise of accelerating revenue growth, achieving positive EBITDA, and maintaining positive cash flow from operations.
- The introduction of new features such as custom invoices, abandoned cart retargeting, and enhanced landing pages is expected to drive further growth and customer engagement.
- The company reported a 15% increase in Q3 revenue, driven by strong performance in both Thinkific Plus and self-serve segments, with commerce revenue up 88% year-over-year.
Negative Points
- Despite the growth, the company acknowledged that the acceleration of customer additions and ARR is expected to be a multi-quarter timeline.
- Thinkific Labs Inc (THNCF) experienced a slowdown in paying customer growth, with only a 1% year-over-year increase in self-serve paying customers.
- The company noted that while Q3 was exceptional for growth, future net increases are expected to align more with prior quarters, indicating potential challenges in sustaining the same growth rate.
- There is a need for continued investment in the Plus sales team to maintain growth, which may impact short-term profitability.
- The company faces competition from both smaller players moving upmarket and larger competitors, which could impact its market positioning and pricing strategy.
Q & A Highlights
Q: Can you comment on whether the large customer deal in Plus was a competitive RFP process and the potential deal size?
A: Corinne Hua, CFO: It was brought to us through a partner, so I'm not sure if it was a competitive RFP process. However, they did a thorough review and found our platform met their needs well, with an opportunity to add commerce to the solution.
Q: Do you anticipate that the deal sizes on your Plus offering will continue to increase over the next few years?
A: Corinne Hua, CFO: We're happy with our current deal size and have seen good deal flow. While there's room to grow, it's not a strategic focus. We aim to build features that drive up ARPU, currently averaging around $2000 per month per customer.
Q: What is the largest driver to improve activation rates in self-serve, and what progress has been made?
A: Greg Smith, CEO: It's a combination of factors like positioning, messaging, user experience, and AI improvements. Early indicators show positive results, with more customers sticking around longer and progressing further through onboarding.
Q: Can you maintain current EBITDA margins in 2025, or are there larger investments planned?
A: Corinne Hua, CFO: Our focus is on maintaining profitability while driving growth. We aim to balance growth with profitability, and we're excited about the opportunities in front of us, particularly in self-serve and Plus.
Q: What do you think the revenue mix will be from Plus in the next few years?
A: Corinne Hua, CFO: We see significant opportunity in Plus but also in self-serve. Our focus is on driving growth in both areas and ensuring the right return on investment, rather than targeting a specific revenue mix.
Q: Has the competitive landscape changed as Plus grows?
A: Corinne Hua, CFO: We see the same competitor group, but some larger players have moved upmarket, making our pricing attractive. However, smaller players continue to move up, so competition remains.
Q: Was the large uptick in payments penetration driven by the introduction of the gateway fee?
A: Greg Smith, CEO: Yes, the gateway fee was a significant factor, but it did not result in meaningful churn. We've been flexible with customers, and many see the benefits of switching to Thinkific Commerce.
Q: What are your thoughts on the evolution of Gen AI usage among your customer base?
A: Greg Smith, CEO: While precise numbers are unclear, most customers use Gen AI in some form. We expect its use to grow, particularly in creating derivative content and accelerating tasks.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
