Earnings call transcript: Thinkific Labs sees 8% revenue growth in Q3 2025

Thinkific Labs Inc. reported an 8% year-over-year increase in revenue for the third quarter of 2025, reaching $18.6 million. This growth was driven by a strong performance in its commerce segment, which saw a 23% increase. The company's stock price rose by 3.88% following the earnings announcement, reflecting investor confidence in its strategic initiatives and product innovations. According to InvestingPro data, Thinkific's current stock price of $1.53 appears undervalued compared to its Fair Value, despite having taken a significant hit over the last week with a 4.89% decline.

Key Takeaways

• Thinkific's Q3 revenue grew by 8% year-over-year, reaching $18.6 million.
• The commerce revenue segment increased by 23%.
• The stock price rose by 3.88% post-earnings announcement.
• Continued investment in AI and enterprise solutions is a focus area.
• The company is targeting larger enterprise customers.

Company Performance

Thinkific Labs has demonstrated solid growth in the third quarter of 2025, with revenue increasing by 8% compared to the same period last year. This performance is attributed to the company's strategic focus on enhancing its product offerings and targeting larger enterprise customers. The introduction of new AI features and a strengthened sales team has positioned Thinkific to capture a growing market segment interested in enterprise-class solutions.

Financial Highlights

• Revenue: $18.6 million, up 8% year-over-year
• Subscription Revenue: $15.1 million, up 5%
• Commerce Revenue: $3.4 million, up 23%
• Annual Recurring Revenue (ARR): $61 million, up 5%
• Adjusted EBITDA: $1.1 million (6% of total revenue)
• Gross Margin: 73%

Outlook & Guidance

Looking ahead, Thinkific Labs has provided Q4 revenue guidance in the range of $18.4 million to $18.7 million, representing a 5-6% year-over-year growth. The company plans to continue investing in research and development, particularly in AI features, to enhance its product offerings. Thinkific aims to attract higher-quality, larger customers by shifting its marketing focus towards upmarket clients.

Executive Commentary

CEO Greg Smith emphasized the company's commitment to rapid innovation, stating, "We are deeply impatient to make this happen faster." He highlighted the significant opportunities presented by AI, saying, "AI presents a very real and significant opportunity." CFO Corinne Hua expressed confidence in the company's growth trajectory, noting, "We are focused on driving higher growth rates in the future."

Risks and Challenges

• Market Saturation: As Thinkific targets larger enterprise customers, it may face increased competition from established players in the enterprise software space.
• Economic Uncertainty: Macroeconomic pressures could impact customer spending and the company's growth prospects.
• Product Development: The success of new AI features and product enhancements will be crucial to maintaining competitive advantage.
• Customer Acquisition: The shift towards targeting larger customers could result in longer sales cycles and higher acquisition costs.

Thinkific Labs' strategic focus on innovation and enterprise solutions, coupled with its solid financial performance, has positioned it well for future growth despite the challenges ahead.

Full transcript - Thinkific Labs Inc (THNC) Q3 2025:

Chloe, Conference Operator: 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 twenty twenty five Financial Results Conference Call. I would now like to turn the conference call over to Joohun Kim, Head of Investor Relations. Please go ahead.

Joohun Kim, Head of Investor Relations, Thinkific: Thank you, and good afternoon, everyone. Welcome to Synchific's Third Quarter twenty twenty five Financial Results Earnings Call. Joining me today are Greg Smith, CEO and Co Founder of Thinkific and Corinne 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.

Greg Smith, CEO and Co-Founder, Thinkific: Thank you, Juhon. Hello, everyone. Welcome to Thinkific's third quarter fiscal twenty twenty five 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. Upside in Q3 was driven by Thinkific Commerce, a key growth factor 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 The feedback has been strong and will 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 and 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 and 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 a 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 communities 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 assistance 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, 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 6 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 and 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 GMV 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 have strengthened our sales team, including the hiring of a new VP of Sales that has a track record of scaling small and midsized 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 to 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, Corrine.

Corinne Hua, CFO, Thinkific: Thanks, Greg. Good afternoon, everyone. Our financial performance in Q3 came in above the high end of our guidance range, driven by stronger than expected commerce revenue and continued EBITDA growth. I'm encouraged by the positive feedback we have been receiving on our early release of our AI teaching assistant. This is the first of a series of AI driven features in our product road map and evidence of our development team's ability to deliver innovative features that empower customer success and ultimately drive revenue for our customers and Thinkific.

I'm also encouraged by the continued commerce revenue growth, including continued growth in penetration rate and GMV. We are beginning to see signs of larger customers being attracted to our Learning Commerce platform and that's starting to have a positive impact on ARPU. For the third quarter, revenue was $18,600,000 up 8% year over year. Revenue once again exceeded the high end of our guidance range as a result of better than expected GMV and corresponding commerce revenue. As a reminder, Q3 marked the beginning of some more challenging compares on a year over year basis as Q3 twenty twenty four saw the introduction of the gateway fee, the expert adoption of Thinkific Commerce and the release of SCORM, an important feature for Thinkific Plus.

Subscription revenue of $15,100,000 was up 5% from the prior year, driven by strong ARR growth in Q1. ARR as of September 30 was $61,000,000 up 5% year over year and up roughly $400,000 from the prior quarter, despite it being a seasonally slower time for mid market business activity and software. With our strategic shift up market to higher quality revenue and the disruption to our sales team we saw last quarter, ARR growth is below the level necessary to accelerate subscription revenue growth. Given the lag recognition from the mechanics of recurring revenue, we expect subscription revenue growth will continue to be muted until we see the benefits of our improved sales force execution and from the introduction of significant AI driven features in 2026. Commerce revenue was $3,400,000 up 23% year over year.

This year over year increase was largely a result of growth in our penetration rate, which was measured by GPV as a percentage of GMV, which climbed to 61%, up 300 basis points from the prior year quarter and up from the 47% penetration rate in the prior year. The upside in commerce this quarter was largely attributable to the exceptional success of a select number of Thinkific Commerce customers. While we often see a small number of customer successes accounting for upside in our forecasts, we do not forecast the bluebirds into our financial planning. However, we are encouraged to see large customers finding success on our Commerce product. We expect penetration rates, which has been the primary driver of commerce revenue growth for the past year, to begin plateauing next year.

That said, we expect Inkifa Commerce to continue to be a material vector of growth next year. At present, self serve customers still make up the vast majority of Commerce revenue and Commerce revenue from Plus customers is a very small, albeit a growing part of Plus revenue. One of our R and D priorities is to continue adding functionality to help think of the commerce customers sell at scale. As we expand these capabilities, we expect to both migrate Plus customers onto the product and add new Plus customers as they sign up. As Greg mentioned earlier, almost half of our commerce customers have been with us for less than a year.

Moreover, we are seeing a 78% attachment rate of Syncissa Commerce and Plus with new customers. As we continue attracting customers aligned with our updated ICP, we expect to accelerate GMV growth and create additional growth vector for commerce revenue beyond increased penetration. GMV was 115,000,000 up 3% year over year and GPV of $70,000,000 was up 34% year over year. We believe GMV growth will remain muted until we improve execution in attracting higher quality customers, while GPV continues to benefit from higher penetration rates. ARPU of $173 per month was up 5% year over year versus the prior year's $165 and up $4 from the prior quarter's $169 per month.

The increase in ARPU is largely a function of upside in commerce revenue. We also continue to benefit from higher ARPU with Plus customers, which grew to just under $2,300 per month in Q3. Now on to revenue by customer group. Self serve revenue was $13,700,000 up 5% year over year. We faced a tough compare to 2024 when we saw a strong jump in self serve related commerce revenue following the implementation of the gateway fee.

I'll discuss this further when we get to expenses. But as we pivot at market, we are reducing customer acquisition spend on lower ROI, higher churn creator market, which will temper self serve revenue growth in the short term and allow us to redeploy marketing dollars to invest in high quality revenue. Moving to Thinkific Plus, our solution for businesses with more complex requirements, which requires enterprise class security and scalability. This part of our business is sales led and includes a higher level of service both at launch and support level and includes customer success services to help them grow their business. Plus revenue of $4,900,000 was up 17% year over year.

While the sequential increase of $200,000 is in line with prior quarters, the deceleration in growth rates from the prior quarter is a result of tough comparisons with Q3 twenty twenty four that saw the introduction of SCORM, a product where there was significant pent up demand and as we discussed at that time, allowed our sales force to reengage with customers that required that feature. We were specifically focused on reducing our Turin Plus with increased investments in premium support in coordination with product development to deliver features that solve our business customers' problems and drive their revenue. As Greg discussed earlier, the sales pipeline has grown significantly over the last year and includes businesses that are larger than we have historically seen in Plus. These deals are more complex, having longer sales cycles and require greater oversight and coordination to close. We're confident in our ability to close high quality customers, and we continue to see them sign on to long term contracts.

For the third quarter in a row, more than half of new deals were multiyear and included price escalators in the outer years. While we are now fully staffed, including the hiring of a new sales leader, the tenure of the sales team is lower than it was a year ago, and it will take time for the team to reach the productivity needed to fully execute on the pipeline. Moreover, the sales cycles for these larger deals are longer, and we still have to develop the institutional muscle to navigate more complex procurement processes. Gross margin was 73%, in line with prior quarters. The gradual decline in gross margin over the past two years is due to a mix shift from commerce revenue, which carries a lower gross margin than subscription.

Over the long run, we expect commerce revenue to be of comparable bottom line profitability to subscription revenue as it incurs no associated customer acquisition costs. Looking at operating expenses. Total operating expenses was $13,800,000 roughly in line with the prior year and down slightly from the previous quarter. The decrease in total operating expenses in the quarter reflects continued financial discipline and some higher onetime costs in Q2, offset by investments in product development. R and D expenses increased to $5,500,000 in Q3, up 11% year over year and $200,000 from the prior quarter.

This increase reflects investments in strategic features, including AI and commerce features that help our customers sell at scale. Sales and marketing expenses decreased to $5,100,000 a 3.7% reduction year over year and approximately 300,000 lower than the previous quarter. This decline reflects a reprioritization of customer acquisition spending to focus on upmarket customers. As we improve conversion in these upmarket segments, we intend to scale investments in sales and marketing accordingly. General and administrative expenses was $3,100,000 in line with the prior year and down $200,000 from the prior quarter.

Note that in Q2, we saw some onetime fees associated with the secondary offering of Rhino shares. Q3 adjusted EBITDA totaled $1,100,000 representing 6% of total revenue. Our sustained adjusted EBITDA profitability amid ongoing growth investments and a strategic transformation underscores the durability of our business model. Cash flow from operations was $629,000 versus the $2,300,000 in the prior quarter and $2,500,000 in the prior year. Q3 saw some significant prepayments to infrastructure providers that led to a decrease in cash from operations from the prior quarter.

For the first September of twenty twenty five, cash flow from operations was $6,100,000 versus the $5,700,000 in the same period in 2024. In the long run, we expect adjusted EBITDA to be the best proxy for cash flow from operations. Moving to the balance sheet. Cash and cash equivalents as of 09/30/2025, was 52,000,000 a decrease of $700,000 from the prior quarter. This reflects positive cash flow from operations, offset by the repurchase of 971,000 shares for a total cash consideration of 1,700,000.0 I'll end with a few comments on guidance.

For Q4, the company expects revenue between 18,400,000.0 and $18,700,000 which represents a growth rate of 5% to 6% year over year. Let me walk you through a few key assumptions underlying our guidance. As part of our reallocation of marketing dollars away from the creative market, we are changing how we are participating in the Black Friday, Cyber Monday season as the historical approach doesn't align with our capital allocation strategy. We should therefore expect to see small decreases in self serve subscription revenue as we begin pivoting marketing dollars away from these low return investments in Q4 and beyond. While I'm pleased with the pipeline growth in Plus, we note that the comparison isn't entirely apples to apples.

The current pipeline includes larger deals that entail longer sales cycles than historical norms, and we need to build the institutional capabilities to close them. As a result, Plus subscription revenue will be muted as we continue to fight tough comparisons. With respect to commerce revenue, as I discussed before, the upside in Q3 commerce revenue was driven by a few outsized successes that may not reoccur. And accordingly, we're being cautious in our forecasts. With perm being adjusted EBITDA profitable in Q4, while we plan to increase our research and development investments, which will be partially offset by disciplined sales and marketing spend, where we're waiting to see the success in our new ad spend and better sales force productivity before we scale those investments.

We are focused on driving higher growth rates in the future. We have a strong base of customers and are focused on driving high quality revenue by delivering product features for our market customers and allocating sales and marketing spend to that area. Results from these investments will be seen through a steadily increasing ARPU of a mix of customer changes towards higher value contracts signed in Plus, where we are seeing continued ARPU growth, which will in turn grow our ARR and GPV. Together, these factors will drive meaningful long term revenue with high quality customers. And we're now happy to take your questions.

Chloe, Conference Operator: We will now begin the question and answer session. Our first question comes from the line of Robert Young from Canaccord. Your line is open.

Robert Young, Analyst, Canaccord: Hi, great. First question would be about the larger plus customers in the pipeline. What is the use case that's attracting them? What is the driver of this average size increase? Is it your go to market or is there something else?

Greg Smith, CEO and Co-Founder, Thinkific: I think it's a combination. Thanks. I appreciate the question. It's a combination of our value proposition and what we're offering, which really is this combination of learning and commerce and AI. So there is a lot of excitement around some of the development we're doing with AI, in particular, the AI teaching assistant currently being the the big imminent release.

But also in the way we're combining disability to deliver learning experiences and generate revenue from them. So the combination of that and then as you mentioned, our our go to market updates and just means we're attracting larger customers there.

Robert Young, Analyst, Canaccord: Okay. And then, I mean, during the quarter, there was an interesting acquisition of one of your peers, Sana, roughly the same size. Did you ever run into that company in any competitive capacity or and I mean, does it change the competitive dynamic at all?

Greg Smith, CEO and Co-Founder, Thinkific: It does. Yes, we were bumping up against them on the competitive front and they are strong in AI and we're early even before the LLMs launched in using AI and learning. And so they came out of the gates pretty strong on that front, and we're doing quite well. With their acquisition, we've seen them showing up a lot less, if at all, in the competitive front. So I think that's another space that just opens up a window for us to step in with our AI road map and take control of some of those market opportunities.

Gavin Fairweather, Analyst, Cormark: Okay.

Robert Young, Analyst, Canaccord: And then, I mean, quarter, you highlighted three stages of return to growth. I think the first stage was reacceleration of ARPU. We didn't see that this quarter. I think probably too early, but I was curious if you'd take a look at those three stages again, reacceleration in ARPU, what should we be looking for to see that? Is it the rollout of new products?

Or is it the plus? Maybe you can just sort of dig into that again, I'll pass the line.

Greg Smith, CEO and Co-Founder, Thinkific: Absolutely. Yes. It'll be a combination of factors, and we are seeing some. So I get that ARPU growth is up, but not at an accelerating level. What we are seeing that is encouraging me is the increase in ACV, which drives ARPU or is this basically the same thing as ARPU for us on the plus deals.

So over the last few quarters, we've seen that rising, which is good. And then as you highlighted, there are some product opportunities where that will drive further expansion revenue. So AI teaching assistant being one of those that creates expansion revenue opportunities for us. So the combination of those leaning in on larger customers who tend to select higher price points and scale and expand more with us as they grow and use the platform more combined with some of the product releases we have upcoming should help drive that.

Robert Young, Analyst, Canaccord: And you also last quarter you gave an updated customer count. Was the churn off of the smaller customers, was that just maybe a lesser factor this quarter, which would have factored into ARPU growth less? Is that another factor to think about?

Greg Smith, CEO and Co-Founder, Thinkific: Sorry, I'm trying to connect the dots there on the question of you're referring to?

Robert Young, Analyst, Canaccord: Yes, I'll re ask it. So last quarter, gave an updated customer count. And I think given the non fit customers you've been highlighting in self serve, if that's going to churn off, maybe that just hasn't happened as quickly as I'd hoped and maybe that had a dampening effect on ARPU. Just suggesting that as a scenario and looking for your response.

Greg Smith, CEO and Co-Founder, Thinkific: Fair enough. Yes. We I mean, we did see growth in self serve, some of that driven as Karine highlighted on some commerce exceptional opportunities there. We're never happy to see customers churn. So we don't want to see that.

But at the same time, recognize as we're going for larger customers, yes, we'll invest less there and see less on the smaller side, and that will also be a driving factor on changing the average ARPU across the board. But no, we haven't seen a significant shift there for that to have an impact at this point.

Chloe, Conference Operator: Our next question is from Gavin Fairweather from Cormark. Maybe

Gavin Fairweather, Analyst, Cormark: just to start on the R and D robot. Sounds like there's been some good progress on communities and AI assistant. But when you think about the other core features that are set to kind of enable your move up market, curious when those are going to be generally available and how you're thinking about pricing and packaging?

Greg Smith, CEO and Co-Founder, Thinkific: Yes, it's an iterative approach. So we run an agile shop, which means we're constantly shipping and trying to release value regularly to our customers. And so there's constant improvements every month, every week, every quarter that we're adding value. And some of the areas we're focused on is really just allowing our customers to operate at scale. So as they their businesses grow, they have everything they need to manage larger volumes of content and students.

The AI assistant definitely is a is a big one for them as well in terms of that ability to work with larger volumes of of students and give us larger volumes of learners and give an exceptional learning experience and really leverage their proprietary content to create that experience. So there's a lot we're working on. There's a bunch of other areas as well we could get into. But from a road map perspective, it's it's really continuous iteration. So it's not, in terms of serving these larger customers, it's not as many isolated moments as opposed to continue to iterate and improve along the way.

Communities is a good example of that. And throughout this year, we've continued to see iteration and improvement on our communities offering, and we're starting to see the response from customers there as well.

Gavin Fairweather, Analyst, Cormark: Appreciate that. And then on Plus, you talked about confidence in the new leadership team and the new AEs that you've attracted, but also needing to build up more institutional muscle on these larger deals. So maybe you can just talk about what you've seen throughout Q3 and Q4 to date that's been encouraging? And then how are you thinking about the to dos on the list to really maximize on the opportunity there?

Greg Smith, CEO and Co-Founder, Thinkific: Yes. Confident in the team. We've got some great team members there and seeing some positive signs. I don't want to overstate it at this point because we still have some work to do and work to do on the product to make this all come together. But some of the positive indicators is we're seeing, as we talked about an increase in the pipeline of our ideal customers coming in.

That tells me the value proposition is resonating. We're able to go out and find them and find more of them in larger volumes. They are coming in at when they are closing at larger contract values on average, and we're seeing, more than half of them on multiyear deals, with escalators built in for subsequent years. And then seeing really strong attachment rates on commerce. So all of this is a good sign for us that market is responding well to our shift.

Gavin Fairweather, Analyst, Cormark: Appreciate it. And then just lastly on self serve, maybe you can help us, from a modeling conceptual perspective here over the next few quarters. And you talked about pulling back spending on certain marketing channels and around Black Friday. Should we be thinking about that line maybe declining a little bit in in the next few quarters before getting back in into growth mode, or do you think that it'll be relatively stable? Any any kind of help just from a modeling perspective would be helpful there.

Greg Smith, CEO and Co-Founder, Thinkific: Karina, you want me jump in there? Yeah.

Corinne Hua, CFO, Thinkific: Why don't I start off and then you can add some color? We've been thinking about, you know, the self serve business from from two perspectives. One, we continue to see strong commerce growth there. And while we expect the penetration rate to start to plateau as we get into next year, there's still upside growth here, especially as we add new high GMV customers. When we look on our subscription side, we do expect it to be muted for the that's a bit for exactly the reasons we've been talking about of, know, a bit of a a mix change in terms of, you know, seeing, you know, larger customers coming on while also not investing as much in a in a more smaller solar printer customers.

And so that's going to have a muted effect. We have seen smaller growth rates on self serve for a while now, and I think that's probably going to continue into the New Year. And then some of the things that we're releasing 2026 are quite exciting. Greg mentioned some things that we think are going to have a positive impact there. And so that's what we're watching for in terms of seeing a larger return to growth rate.

Gavin Fairweather, Analyst, Cormark: Our

Chloe, Conference Operator: next question is from Thanos Moskopoulos from BMO Capital Markets.

Thanos Moskopoulos, Analyst, BMO Capital Markets: Your payment attach rate on Plus is great. So then just in terms of getting the overall penetration rate up within Plus, is that a function of persuading more of the existing base to convert? Is it maybe within Plus some of the larger GMV clients for whom you're offering is maybe still lacking some functionality? Like, what what are the key things you need to unlock there to just get the overall attach rate better? Sorry.

Not the attach rate, the penetration rate better given the attach rate already looks good.

Greg Smith, CEO and Co-Founder, Thinkific: Yeah. It's it's a it's a combination of factors. One is that although the new customers are signing up and getting good attachment rates, it does they do take longer to ramp. Right? They do more significant volumes in the long run, which is really encouraging, but it does tend to take them a little longer to to ramp up.

And so part of that is is us supporting them and and ensuring that they ramp up well. Part of it, you're right, is some functionality that really gets us the most and and gets us the most for those customers so they can get the most value out of it, and that should help drive the penetration rate as well. And we are still seeing existing plus customers switching over and selecting commerce as well, especially as we continue to add functionality. Some of the core areas of functionality is really just that ability to manage at scale and go more international in how they're selling. And so that continue to drive that penetration rate up.

But the biggest probably the biggest part of it is just the the ramp time for larger customers to do larger volumes.

Thanos Moskopoulos, Analyst, BMO Capital Markets: Okay. From a macro perspective, is there any dynamic you're seeing? Is it consistent? Or as you're dealing now with some larger opportunities, is there any macro hesitancy on customers and sales cycles or not really something worth calling out in that regard?

Greg Smith, CEO and Co-Founder, Thinkific: Not significant that we've seen there. I think we did, see some of that last year in terms of, say, funding of not for profits, but especially with some of the shifts we've made on the, ideal customer, we're not seeing much in terms of macro factors that I'd call out.

Thanos Moskopoulos, Analyst, BMO Capital Markets: Okay. And finally, any, gross margin implications as you launch some of these AI features, or, could that be kind of, additional margins given the the incremental fees associated with that?

Greg Smith, CEO and Co-Founder, Thinkific: Yeah. On the margin front there, we're still working through the details of the model on it. It should be you know, it'll definitely be accretive to revenue. The exact margins on the specific portion that is AI, I think, generally, what we're seeing in the market from other businesses using AI in their models is they are tend to be lower margins than SaaS and higher margins than payments. So somewhere in between there, probably closer on the SaaS side, but it'll depend as we get this out in customers' hands because there's also an opportunity here to really drive strong adoption and use.

And I'd rather see strong adoption and use across the customer base with stronger revenue growth than fixate too much on perfect margins there, at least initially.

Chloe, Conference Operator: Our next question comes from the line of Martin Tonner from ATB Capital Markets.

Martin Tonner, Analyst, ATB Capital Markets: Can you reiterate what you think the revenue impact will be on doing less promotion around Black Friday and other mass market events in Q4? And then I'll have one more.

Greg Smith, CEO and Co-Founder, Thinkific: Yes. I don't know that we have the specific revenue impact on that or that we've shared it. I think it's really baked into just because it is coming up imminently here baked into our guidance for the quarter ahead. So that's probably the best way to look at what the total impact is there. It's not a massive impact.

And what we did find is it tends to net out six months from now anyway. So it's more about how it impacts the near term the next quarter.

Martin Tonner, Analyst, ATB Capital Markets: Great. And maybe just talk a little bit more about pipeline of, I guess, of a better term, enterprise customers. We have a few customers that move the needle in terms of overall revenue, like not to exaggerate size, but probably know what I mean. And just wondering like what does the pipeline look there? And I appreciate that it takes time to see that market, but a little update there would be great.

Greg Smith, CEO and Co-Founder, Thinkific: Yes. The pipeline is encouraging. Again, don't want to overstate, but at this point, we are seeing I think because of a combination of what we're doing on the product, some of the things we're doing with AI, the message we're putting out in terms of how we're positioning ourselves and the value we're able to add, some of the adjustments we've made in the brand and some of the talent we brought on board is that we're seeing larger potential deals enter the pipeline and certainly a much larger percentage of our ideal customer in that pipeline. As Karine highlighted, some of the larger deals do tend to take quite a bit longer to close. And so we're still building that muscle to make sure that we can close those deals.

But it is encouraging to see this come in and how excited they are about what we have, what we're offering and also what we're building. And then, of course, the commerce opportunity there is significant as well. And we've seen even in this quarter some benefits of larger customers doing larger volumes in commerce being a positive surprise for us. So there's a lot of opportunity there. It's going to take some time, some skills and some product advancements to really capitalize on it, but it's that early indicator that the move we've made is probably the right one.

Martin Tonner, Analyst, ATB Capital Markets: There

Chloe, Conference Operator: are no questions at this time. I would now like to turn the conference back to Greg. Please go ahead.

Greg Smith, CEO and Co-Founder, Thinkific: Thank you. I appreciate your questions today and just would reiterate that the team and I are confident in the shift and that we've made the right move. We are seeing increasing evidence that there is a significant opportunity for us here. But we recognize we have work to do, and we are deeply impatient to make this happen as fast as possible. And so we are pushing hard on trying to achieve our goals and make the upward shift as quickly as we can.

Thank you.

Chloe, Conference Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a wonderful day.

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