Thinkific Labs, Inc. ((TSE:THNC)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Thinkific Labs, Inc. showcased a generally positive sentiment, with notable progress in revenue growth, particularly within the Commerce segment, and advancements in AI-driven features. However, the company faces challenges such as slower subscription growth, the need for further R&D advancements, and extended sales cycles for larger deals.
Strong Q3 Revenue Growth
Thinkific reported a robust Q3 revenue of $18.6 million, marking an 8% increase year-over-year and surpassing the high end of their guidance. This growth was primarily fueled by stronger-than-expected performance in the Commerce segment and continued EBITDA growth.
AI Teaching Assistant Rollout
The company introduced its AI Teaching Assistant to select customers, receiving strong feedback. This feature is set for general availability by early 2026, indicating Thinkific’s commitment to integrating AI into its offerings.
Commerce Revenue Growth
Commerce revenue saw a significant increase, reaching $3.4 million, up 23% year-over-year. This growth was driven by an increase in the penetration rate to 61% from 47% the previous year, highlighting the segment’s strong performance.
Plus Revenue and Customer Engagement
Plus revenue rose to $4.9 million, a 17% year-over-year increase. Over half of the new deals were multiyear with price escalators, reflecting strong customer commitment and engagement.
Sales Pipeline Growth
The sales pipeline has expanded significantly year-over-year, with larger enterprise engagements now representing six-figure opportunities, indicating a promising future for Thinkific’s sales strategy.
Challenging Comparisons and Subscription Growth
Subscription revenue growth remains muted due to challenging year-over-year comparisons and disruptions within the sales team. The ARR growth is currently below the levels needed to accelerate.
R&D and Product Development Needs
Thinkific acknowledges the need for substantial R&D and product development to meet the demands of upmarket customers and seize growth opportunities.
Self Serve Revenue Challenges
The company expects muted growth in Self Serve revenue due to reduced investment in acquiring smaller, less profitable customers.
Longer Sales Cycles
As Thinkific shifts towards larger, more complex customers, longer sales cycles are anticipated. This shift necessitates the development of new capabilities to effectively navigate procurement processes.
Forward-Looking Guidance
Looking ahead, Thinkific anticipates Q4 revenue to be between $18.4 million and $18.7 million, reflecting a growth rate of 5% to 6% year-over-year. The company is strategically shifting its focus towards upmarket customers, with investments in AI-driven features and enhancements to Thinkific Commerce aimed at attracting larger, high-GMV customers. The sales pipeline’s growth, particularly with larger enterprise engagements, is promising, although longer sales cycles are expected.
In summary, Thinkific Labs, Inc.’s earnings call reflected a positive outlook with strong revenue growth and promising developments in AI and Commerce segments. However, challenges such as slower subscription growth and longer sales cycles remain. The company’s strategic focus on upmarket customers and AI-driven features positions it well for future growth.