Mr. Greg Smith reports

THINKIFIC ANNOUNCES THIRD QUARTER 2023 FINANCIAL RESULTS AND PROVIDES FOURTH QUARTER 2023 OUTLOOK

Thinkific Labs Inc. today released its financial results for the quarter ended Sept. 30, 2023. Thinkific reports in United States dollars and in accordance with IFRS (international financial reporting standards).

"We are now seeing the payoff from our decisive actions over the last 18 months, resulting in our best quarter as a public company," said Greg Smith, chief executive officer of Thinkific. "The milestone of adjusted EBITDA profitability was reached alongside strong revenue growth and a productive period for our team, where we delivered key product updates that will set the stage for continued profitable growth in 2024.

"I'm pleased with the early interest and feedback from our customers and partners from recent product launches, including our mobile app solutions, AI tools, The Leap and valuable commerce tools. Our priorities remain steadfast on helping our customers succeed by making it easier to get started and earn their first dollar, providing tools that allow them to sell more, and supporting our larger customers' goals on Thinkific Plus," concluded Mr. Smith.

Third quarter financial highlights

The results herein include enhanced disclosure with revenue split between subscription and commerce streams, with an additional separation at the customer level between Self Service and Thinkific Plus customers.

• Commerce revenue increased 86 per cent year over year to $1.5-million, building on the success of Thinkific Payments and other recently launched commerce tools. Subscription revenue increased 8 per cent to $13.5-million.
• Total revenue increased 13 per cent year over year to $15.0-million compared with the third quarter of 2022, above the company's guided Q3 2023 range of $14.5-million to $14.7-million.
• On a customer basis (inclusive of both subscription and commerce revenue), Self Service customer revenue grew 8 per cent to $11.8-million on a combination of increases in Thinkific Commerce and paying customers. Revenue from plus customers increased 38 per cent to $3.2-million with new businesses leveraging the company's modern learning solution to retain and engage their customers.
• Gross margin was 77 per cent in the third quarter of 2023, a slight increase from 76 per cent recorded for the third quarter last year. Subscription margin is strong at 82 per cent as the company continues to find efficiencies in its infrastructure costs. Commerce revenue margin came in at 33 per cent.
• Net loss for the third quarter of 2023 was $900,000, compared with a net loss of $10.7-million in the third quarter of 2022, a 91-per-cent improvement.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $700,000, a key milestone as the company returns to profitability and an improvement of 113 per cent or $6.4-million over the prior year.
• Total paying customers grew 3 per cent to 34,400 in the third quarter of 2023 compared with the prior year.
• ARPU (average revenue per user) increased 9 per cent to $145 per month compared with $133 per month in the third quarter of 2022.
• ARR (annual recurring revenue) grew 7 per cent to $54.2-million from $50.9-million in the third quarter of 2022, due to improvement in ARPU and customer count.
• GPV (gross payment volume) processed through Thinkific Payments was $35.2-million compared with $17.7-million in the prior year, a 99-per-cent increase. Thinkific Payments is the largest component of the company's commerce revenue segment. GPV is the total dollar value of transactions processed using Thinkific Payments, and represented 32 per cent of GMV processed during the quarter.
• GMV in the third quarter was $110-million, up 13 per cent compared with the third quarter of 2022. This is the fourth consecutive quarter of improving YoY growth, which signals a rising demand for digital learning products.
• Cash and cash equivalents were $87-million at Sept. 30, 2023. Cash earned from operations in the third quarter of 2023 totalled $3.5-million.

"Our commitment to EBITDA profitability has paid off, and I'm immensely proud that we achieved this ahead of schedule and in combination with revenue growth and $3.5-million earned in cash from operations. It's a testament to the exceptional teams we have throughout our organization," said Corinne Hua, chief financial officer of Thinkific. "With our strong cash position, clear growth opportunities, and a large and growing market -- we will help more customers succeed and continue to profitably grow our top line."

Third quarter operational highlights

• Launched new commerce tools to help the company's customers sell more, including:
  • An automated sales tax solution, powered by Stripe, which removes the complexity and confusion associated with sales taxes for the company's Thinkific Payments customers, allowing them to focusing on growing their business rather than tracking and remitting taxes.
  • Providing buy now, pay later (BNPL) credit options through providers Affirm, Klarna and Afterpay, Thinkific's BNPL functionality allows customers to more easily sell higher-priced products, and provide their students with more flexible payment options.
  • Advanced analytics capabilities that provide the company's customers with deeper insights into their enrolments, orders, student and course engagement, revenue, and bottom line business performance, so they and their teams can track ROI (return on investment) and make smart, informed decisions to grow and scale their businesses quickly and effectively.
• Expanded availability of the company's customizable app building solution Branded Mobile to all customers. This offering provides students with an app-based learning environment that suits their lifestyle and is accessible on the devices they use most, which leads to better engaged communities and higher sales, driving more revenue for the company's customers.
• Recognized by The Globe and Mail publication, Report on Business as one of Canada's Top Growing Companies in 2023, Thinkific's fourth consecutive year on this prestigious list. Recognized by Business in Vancouver, BIV News as No. 7 on the Top 100 Fastest Growing Companies, a list ranked by percentage growth in revenue between 2018 and 2022.

Subsequent to quarter-end

• Launched The Leap by Thinkific, a powerful AI tool for content creators and influencers that makes it easy to build, promote and sell exceptional digital products in minutes. The Leap has already seen more than 6,500 new accounts created.
• Hosted the fifth annual Think in Color Summit, held in October, in Los Angeles, which attracted a host of entrepreneurs and small and medium business participants both in person and via event content made available on-line on demand. A speaker lineup of 100 per cent people of colour delivered personal insights on all aspects of creating, marketing, and scaling on-line courses and digital product-based businesses.
• Recognized for the company's strong culture and commitment to building an exceptional team at Thinkific as a Certified Great Place to Work for the third year, after a thorough, independent analysis conducted by Great Place to Work Institute Canada. The certification is based on direct feedback from Thinkific employees, provided as part of an extensive and anonymous survey about the company's workplace experience and culture.
• On Oct. 27, 2023, the company filled a renewal of a preliminary base-shelf prospectus to offer up to $300-million of subordinate voting shares, preferred shares, debt securities, warrants, subscription receipts and/or units, or any such combination from time to time over a 25-month period.

Outlook

For the fourth quarter of 2023, the company expects revenue of $15.2-million to $15.4-million. The company expects adjusted EBITDA to remain profitable and are not targeting an increase to adjusted EBITDA in the near term as the company makes planned investments for growth.

Quarterly conference call and webcast information

A conference call will be held at 2:30 p.m. PT (5:30 p.m. ET) on Nov. 7, 2023, to discuss Thinkific's third quarter financial and operational results. To participate in the call, please dial 1-888-664-6383 (United States/Canada toll-free) or 1-416-764-8650 (international/Toronto). For those unable to participate, a replay will be available from 4:30 p.m. PT (7:30 p.m. ET) on Nov. 7, 2023, by dialling 1-888-390-0541 (U.S./Canada toll-free) or 1-416-764-8677 (international/Toronto). The pass code is 036797 followed by the pound key. The replay will expire at 8:59 p.m. PT (11:59 p.m. ET) on Nov. 14, 2023. The conference call will also be available via webcast on the investor relations section of Thinkific's website.

Thinkific's unaudited consolidated financial statements and accompanying notes, and management's discussion and analysis for the three months ended Sept. 30, 2023, are available on the company's website and on SEDAR+.

About Thinkific Labs Inc.

Thinkific makes it simple for creator educators and established businesses of any size to scale and generate revenue by teaching what they know. The company's platform gives businesses everything they need to build, market and sell digital learning products -- from courses to communities -- and to run their businesses seamlessly under their own brands, on their own sites. Thinkific's more than 50,000 active creators earn hundreds of millions of dollars in direct course, membership and community sales while teaching tens of millions of students. Thinkific is headquartered in Vancouver, Canada, with a distributed team.

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