Mathieu Martin - Stocks and Stones earnings preview Thinkific is a leading platform for creating, marketing, and selling courses, digital products, communities and learning experiences online.
Thinkific is another former market darling, having IPO'd near the top of the last small-cap bull market in April 2021. After reaching a peak of $19.47, the stock declined to a low of $1.40 (-93%) due to slowing revenue growth and a deflation of its valuation multiples.
Today, you have a SaaS company with highly recurring revenues expected to grow about 15% per year, trading at an EV/Revenue multiple of 1.2 times. After spending aggressively to grow in 2021 and 2022, the company became more disciplined and reached a slightly EBITDA-positive state a few quarters ago.
Again, I think there are two ways to win here: more growth or higher profitability. The beauty of the SaaS business model is that management can make those tradeoffs depending on how efficient the growth engine is. I suspect Thinkific has not found the right balance yet, as it's spending too much to grow too little. Over time, I expect them to figure out how to get better returns on their marketing dollars or cut that spending and focus on cash flows.
It's unclear if this coming quarter will be the catalyst, but I expect the stock to rerate higher when we see better growth or profitability.
Thinkific reports on November 5 after the market close.