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First quarter revenue up 42% to $11.8 million on strong ARPU growth, and continued growth in Paying Customers, with adjusted EBITDA loss ahead of expectations

Previously announced reduction in workforce to realize efficiencies, with strong alignment of resources on areas of focus and growth

Thinkific reports in U.S. dollars and in accordance with IFRS

Vancouver, BC, May 10, 2022--(T-Net)--Thinkific Labs Inc. (TSX: THNC), a leading cloud-based software platform that enables entrepreneurs and established businesses of all sizes to create, market, and sell online learning products, today announced its financial results for the quarter ended March 31, 2022.

Greg Smith, Co-Founder and CEO, Thinkific

"The first quarter saw strong revenue growth, consistent with our expectations, as we continue to execute against our product-led growth strategy," said Mr. Greg Smith, Co-Founder and CEO of Thinkific. "The combination of our continued business expansion, and the workforce reduction, has increased our efficiency and enhanced alignment of our resources on growth.

"We remain firmly focused on Creator success within the knowledge economy," continued Mr. Smith. "As the market continues to evolve, so does our sales and marketing strategy, and we are seeing early signs of traction with this shift. Our ongoing development of innovative products and features lead the market, furthe strengthening our position as the platform of choice in the knowledge economy."

First Quarter Financial Highlights

• Revenue increased 42% to $11.8 million (US) compared with the first quarter of 2021, driven by the continued growth in total Paying Customers, and increasing ARPU(1).
  
  
• Gross margin was 73% versus 80% in the first quarter of 2021. The decline in gross margin reflects increased customer support costs and the adoption of Thinkific Payments, which carries a lower gross margin profile.
  
  
• Net loss for the first quarter of 2022 was $12.0 million, compared to a net loss of $1.0 million in the first quarter of 2021. The increase in net loss reflects an increase in expenditures across the Company to support our growth strategy, as well as costs associated with restructuring.
  
  
• Adjusted EBITDA(2) loss of $9.3 million was driven primarily by continued investments in Sales & Marketing (S&M), and Research & Development (R&D), as we continued to build our Platform, increase awareness in the market, and develop the team to deliver on our growth objectives. The adjusted EBITDA loss excludes the net restructuring charge of $2.3 million.
  
  
• Total Paying Customers(1) grew 21% to 33.3 thousand in the first quarter of 2022.
  
  
• ARPU(1) increased 13%, to $120 per month compared with $106 in the first quarter of 2021, driven by the movement of existing customers to higher paid plans, new Thinkific Plus customers, and the adoption of Thinkific Payments.
  
  
• ARR(1) grew 33% to $46.4 million from $34.8 million in the first quarter of 2021, as we continued to attract new Creators to our Platform, and existing Creators upgraded to higher-tier plans.
  
  
• Thinkific Payments continued to be well received by Creators. Gross Payments Value(1), which is the total value of GMV(1) processed using Thinkific Payments, for the quarter was $11.9 million. This represented 11% of $108 million in GMV processed during the first quarter of 2022.

"We expect our top line revenue growth in the near term to be driven by a significant increase in ARPU. The uptake of Thinkific Payments by an increasing percentage of our customers, as well as adopting refreshed pricing strategies that better reflect the value we deliver, are the key drivers of ARPU expansion," commented Corinne Hua, CFO of Thinkific. "With the restructuring that was announced in late March, we expect that the first quarter will be the peak of adjusted EBITDA loss for Thinkific. Our methodical approach to restructuring ensures that we have the appropriate cost structure for our business."

First Quarter Operational Highlights

• Continued to execute on the product-led growth strategy through the introduction of enhancements to our Platform's feature set, as well as advancements in Thinkific Payments during the quarter.
• Thinkific continues to lead the way in helping Creators sell more. Improvements to our Platform in the first quarter include new subscription tools, helping more Creators build sustainable subscription models, as well as further improvements to order bumps and to our high performance checkout.
• We continue to make it easier for Creators to get started, with improvements to allow faster website builds, launching and managing live events, as well as new faster onboarding experiences.
• Improved security measures as part of our focus of attracting businesses and scaling entrepreneurs. These improvements include multi-factor authentication.
• Enhancements to Thinkific Payments to simplify administration so Creators can focus on creating and selling learning products. New features for reporting and refund management save Creators time on business administration.
• Rebalanced marketing spend to drive efficiency, while continuing to grow our brand awareness and attract new customers through our integrated marketing strategy, leading to an improved cost of customer acquisition.
• Amplify 2022, Thinkific's annual virtual event that brings together top Creator minds in the knowledge economy, was held in January, with over 25,000 registrants.
• Strengthened the Board with the appointment of Steve Krenzer to the Board of Directors.
• Following a rigorous review of the Company's organizational structure, we executed on a reduction in workforce to increase efficiency and lower costs, while investing for growth. The Company-wide workforce reduction reduced headcount by 20%.

Highlights Subsequent to Quarter End

• Released first-of-its-kind online learning Trends Report revealing key trends in the knowledge economy from top Creators. The report highlighted that online content creation is the most popular type of business entrepreneurs aspire to launch. The full report is available here.

Outlook

Thinkific is at the centre of the knowledge economy, and gives businesses everything they need to build, market, and sell online courses and other learning products, and to run their business seamlessly under their own brand, on their own site.

Thinkific expects continued growth in revenue in the second quarter of 2022, driven largely by ARPU expansion, as well as new Paying Customers. The adoption of Thinkific Payments, revised pricing strategies, and customers moving up the product pricing tiers, all contribute to ARPU growth.

The company says its expectations for the second quarter of 2022 are:

• revenue of $12.4 - $12.6 million, representing year-over-year growth of 36% - 38%
• adjusted EBITDA loss in the range of $7.7 million to $8.3 million.

Actual results may differ materially from Thinkific's financial outlook as a result of, among other things, the factors described under "Forward-Looking Statements" below.

Condensed Interim Consolidated Statements of Financial Position (unaudited)
(expressed in U.S. dollars)

Condensed Interim Consolidated Statements of Loss and Comprehensive Loss (unaudited)
(expressed in U.S. dollars)

Condensed Interim Consolidated Statements of Cash Flows (unaudited)
(expressed in U.S. dollars)

Reconciliation from IFRS to Non-IFRS Measures (unaudited)
(expressed in thousands of U.S. dollars)

About Thinkific

Thinkific (TSX:THNC) makes it simple for entrepreneurs and established businesses of any size to scale and generate revenue by teaching what they know. Our Platform gives businesses everything they need to build, market, and sell online courses and other learning products, and to run their business seamlessly under their own brand, on their own site. Thinkific's 50,000+ active creators earn hundreds of millions of dollars in direct course sales while teaching tens of millions of students. Thinkific is headquartered in Vancouver, Canada, with a distributed and growing team.

Non-IFRS Measures

The information presented within this press release includes "Adjusted EBITDA" and certain industry metrics. The "Adjusted EBITDA" is not a recognized measure under International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board, does not have a standardized meaning prescribed by IFRS, and is therefore unlikely to be comparable to similar measures presented by other companies. Rather, this measure is provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, it should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. We also use certain industry metrics: "Annual Recurring Revenue", "Paying Customers", "Average Revenue per User", "Gross Merchandise Volume" and "Gross Payments Value". These industry metrics are unaudited and are not directly derived from our financial statements. The non-IFRS measure and industry metrics are used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures and industry metrics in the evaluation of issuers. Our management also uses the non-IFRS measure and industry metrics in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation.

"Adjusted EBITDA" is defined as net income (loss) excluding taxes, interest, depreciation and amortization (or EBITDA), as adjusted for stock-based compensation, foreign exchange gain (loss), net finance expense, and transaction-related expenses. Adjusted EBITDA does not have a standardized meaning under IFRS and is not a measure of operating income, operating performance or liquidity presented in accordance with IFRS and is subject to important limitations.

Please refer to "Reconciliation to IFRS from Non-IFRS measures" in this press release for more information.

Key Performance Indicators

We monitor the following industry metrics to help us evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions: "Annual Recurring Revenue" or "ARR", "Average Revenue per User" or "ARPU", "Gross Merchandise Volume" or "GMV", "Paying Customers" and "Gross Payments Value" or "GPV". Our key performance indicators may be calculated in a manner different than similar key performance indicators used by other companies.

"Paying Customers" is the count of unique Thinkific subscribers on paid plans as of period end, excluding all trial and free customers, and including both monthly and annual subscribers.

"ARPU" is the average monthly Revenue per Paying Customer in the quarter. ARPU is calculated by taking the average Revenue for each month in the quarter and dividing this by the average number of Paying Customers for the same quarter.

"ARR" is the annual value of all current Paying Customer subscriptions at the end of the period, with the number of Paying Customers multiplied by 12 times the average monthly subscription plan fee in effect on the last day of that period.

"GMV" is the total dollar value of all transactions of course sales, membership subscriptions, or other products or services by our Creators, facilitated through our platform during the period, net of refunds. GMV does not include transactions for course sales, membership subscriptions, or other products or services processed by APIs or certain apps where the Company does not record the transaction value.

"GPV" is the total dollar value of GMV processed through Thinkific Payments.