Thinkific has price target trimmed at ATB

ATB Capital Markets analyst Martin Toner said in an August 6 update that Thinkific Labs (Thinkific Labs Stock Quote, Chart, News, Analysts, Financials TSXV:THNC) reported Q2/FY25 revenue of $18.1-million, up 11.7% year over year and slightly ahead of consensus at $17.9-million.

Toner maintained his “Sector Perform” rating on THNC while lowering his price target on the stock from $3.25 to $3.00.

Average revenue per user rose 9% to $169. Gross margin came in at 73.4%, below the 74.9% consensus, while Adjusted EBITDA of $1.0-million beat expectations of $0.8-million. Thinkific guided for Q3 revenue between $18.1-million and $18.4-million (versus $18.4-million consensus), implying roughly 7% growth at the midpoint, and said it expects to remain EBITDA positive.

Toner said, “While we view the 9% ARPU growth constructively, we are still waiting for a growth inflection amongst the new customer cohorts.”

The company is also shifting its strategy to focus more on high-GMV customers after five straight quarters of slowing GMV growth. In Q4, GMV declined 0.3% year over year. Management believes that narrowing its focus will help reaccelerate GMV growth and drive stronger Commerce and Thinkific Plus revenue.

“This will take time to materialize,” the company said, adding that it’s also looking for ways to help new customers onboard more quickly.

On April 15, Thinkific announced it would eliminate its dual-class share structure, converting all 44.4 million Multiple Voting Shares into Subordinate Voting Shares on a one-for-one basis and renaming them Common Shares.

“This will result in 68.0mm Common Shares outstanding, with each share carrying equal voting rights,” Toner said. “According to management, this simplifies THNC’s capital structure and acts as a ‘first step’ to increase the public float and stock liquidity. The share conversion also aids the Company’s governance, in management’s view, by giving all shareholders an equal vote per share.”

Subscription revenue for the quarter rose 6% to $14.9-million. Commerce revenue grew 48% year over year to $3.2-million. Revenue from Thinkific Plus Subscription and Commerce combined grew 25% to $4.7-million.

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