Is Thinkific (TSX:THNC) a buy right now?

Thinkific Labs’ (Thinkific Labs Stock Quote, Chart, News, Analysts, Financials TSX:THNC) third-quarter results suggest recent price increases and growth in larger enterprise customers could offset declining subscriptions among smaller users, supporting more stable revenue and stronger free cash flow.

In his Nov. 4 report, ATB Cormark Capital Markets analyst Gavin Fairweather maintained his “Outperform” rating and $3.25 target on the Vancouver-based online learning software company.

“While we think most investors will wait to see further evidence of stability, we are starting to gain comfort that self-serve pricing increases and Plus growth can offset early-stage SS churn and avoid negative operating leverage, while the reshaped cost structure drives a significant cash flow stream relative to the current EV,” Fairweather said.

Thinkific reported third-quarter revenue of US$19-million, up 2% year-over-year and slightly above Fairweather’s US$18.9-million estimate. Adjusted EBITDA reached US$1.8-million, exceeding his US$1.6-million forecast, while annual recurring revenue increased 4% to US$63.1-million.

Thinkific Plus revenue increased 18% to US$5.7-million, accelerating from 14% growth in the second quarter and 12% in the first. Fairweather said the improvement reflects Thinkific’s growing ability to attract larger enterprise customers. He estimates Plus has approximately 775 customers with an average annual contract value approaching US$30,000.

“We note DCBO’s ACV on new customers is >$60k, leaving strong headroom for expansion as the product advances,” he added.

A partnership with Articulate could provide another source of growth. “The Articulate partnership will enable customers creating content in Articulate to seamlessly push to Thinkific for delivery,” Fairweather said.

The analyst noted that Articulate has approximately 125,000 customers, meaning even modest adoption potentially making a significant contribution to Thinkific Plus revenue.

Meanwhile, self-serve revenue declined 3% to US$13.3-million, reflecting customer losses following reductions in marketing spending. However, a 10% subscription price increase introduced in mid-August resulted in better-than-expected customer retention.

“We think the pricing lever can offset most of the early-stage churn in the coming years,” Fairweather said.

Thinkific also reduced its annual cost structure by approximately US$19-million, with most savings taking effect late in the third quarter.

The company expects fourth-quarter revenue of US$18.9-million to US$19.2-million and an Adjusted EBITDA margin of 20% to 25%, demonstrating how lower expenses could improve profitability without significant revenue growth.

Fairweather believes the combination of pricing increases, enterprise growth and cost reductions should support stronger free cash flow.

“We are seeing confirmatory evidence (Plus accelerating, SS absorbing price) that Thinkific’s revenue may be relatively stable despite recent significant changes which set the stage for a durable stream of significant FCF,” he said.

The analyst raised his fiscal 2026 revenue forecast to US$75.5-million from US$75.2-million and his Adjusted EBITDA estimate to US$5.9-million from US$5-million. For fiscal 2027, he increased his revenue forecast to US$75.2-million from US$71.8-million and his Adjusted EBITDA estimate to US$18.5-million from US$17.6-million. Fairweather expects approximately US$18.5-million in annual free cash flow in both 2027 and 2028, which could support further share repurchases or dividends. He said Thinkific trades at approximately 2.6 times estimated 2027 Adjusted EBITDA, a valuation he considers attractive given improving profitability and cash generation.

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