Nerdy, Inc. (NYSE:NRDY) is one of the best EdTech stocks to buy now. On November 7, Cantor Fitzgerald’s Yi Fu Lee maintained a Neutral stance but took the price target down to $1.00 from $1.50. That follows his August adjustment from $1.75 to $1.50. The sequence frames a cautious but watchful sell-side posture following Q3. Nerdy reported Q3 results on November 6 that leaned defensive but operationally cleaner: revenue came in at about $37 million, roughly flat year over year, while adjusted EBITDA impro ...

Investors might want to bet on Nerdy Inc. (NRDY) , as it has been recently upgraded to a Zacks Rank #2 (Buy). This rating change essentially reflects an upward trend in earnings estimates -- one of the most powerful forces impacting stock prices.The Zacks rating relies solely on a company's changing earnings picture. It tracks EPS estimates for the current and following years from the sell-side analysts covering the stock through a consensus measure -- the Zacks Consensus Estimate.Individual investors often ...

Core Viewpoint - Nerdy Inc. reported a quarterly loss of $0.1 per share, which was better than the Zacks Consensus Estimate of a loss of $0.16, indicating a positive earnings surprise of +37.50% [1] - The company’s revenues for the quarter were $37.02 million, missing the Zacks Consensus Estimate by 5.58% and down from $37.53 million a year ago [2] Financial Performance - Over the last four quarters, Nerdy has surpassed consensus EPS estimates four times and topped revenue estimates twice [2] - The current consensus EPS estimate for the upcoming quarter is -$0.03 on revenues of $59.31 million, and for the current fiscal year, it is -$0.34 on revenues of $191.39 million [7] Stock Performance - Nerdy shares have declined approximately 40.1% since the beginning of the year, contrasting with the S&P 500's gain of 15.6% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating it is expected to perform in line with the market in the near future [6] Industry Outlook - The Schools industry, to which Nerdy belongs, is currently ranked in the bottom 31% of over 250 Zacks industries, suggesting potential challenges ahead [8] - The performance of Nerdy may also be influenced by the upcoming earnings report of KinderCare Learning Companies, Inc., another player in the same industry [9]

Financial Data and Key Metrics Changes - Third quarter revenue was $37 million, a decrease of 1% year-over-year from $37.5 million in Q3 2024, but within the guidance range of $37-$40 million [16][17] - Non-GAAP adjusted EBITDA loss was $10.2 million, an improvement from a loss of $14 million in the prior year period, indicating a 960 basis point improvement in adjusted EBITDA margin year-over-year [22][23] - Active member count as of September 30 was lower than the previous year, primarily due to operational challenges [18] Business Line Data and Key Metrics Changes - Learning Membership revenue was $33 million, representing 89% of total company revenue, with a 5% year-over-year increase in consumer revenue [17][18] - Institutional revenue was $3.7 million, accounting for 10% of total revenue, impacted by federal and state funding delays [18][19] - The new flagship Live Learning Platform achieved a 50% reduction in audio-video error rates and nearly 40% cost savings per session [9][39] Market Data and Key Metrics Changes - The institutional business saw a 20% year-over-year decrease in quarterly bookings, totaling $6.8 million, due to funding delays affecting high-dosage tutoring contracts [19] - The company anticipates sequential quarterly revenue growth in both consumer and institutional businesses in Q4 2025 [24][25] Company Strategy and Development Direction - The company is undergoing a significant replatforming to enhance product development speed and efficiency, aiming for nearly 100% of traffic on new AI-written code bases by the end of November [8][33] - A new end-to-end Varsity Tutors for Schools experience is set to launch, aligning better with school operations and enhancing product sellability [15][19] - The focus on AI integration aims to improve user experience and operational efficiency, with expectations of substantial retention improvements [12][14] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges faced during the back-to-school season due to product launch delays but expressed confidence in returning to growth [4][17] - The company expects to achieve a non-GAAP adjusted EBITDA loss in the range of $2 million to break even for Q4 2025, with full-year losses projected between $19-$21 million [26][27] - Management emphasized the importance of AI in enhancing tutoring experiences and operational efficiencies, which are expected to drive future growth [12][22] Other Important Information - The company appointed a new COO and added 13 senior operational leaders to strengthen execution and improve operational efficiencies [14][15] - The company has entered into a loan agreement for up to $50 million to enhance financial flexibility while avoiding equity dilution [23][24] Q&A Session Summary Question: Impact of new management structure on execution speed - Management expressed excitement about the new COO's experience and the centralization of control, which is expected to enhance operational improvements and product velocity [28][29] Question: Confidence in overcoming product delays - Management highlighted the launch of new experiences and improvements in underlying metrics, indicating positive trends as the school year progresses [32][34] Question: Insights on funding delays affecting institutional business - Management noted that delays in federal and state funding are impacting bookings and program launches but remains confident in the long-term potential of the institutional market [35][36] Question: Expected ROI from the new Live Learning Platform - Management indicated that improved reliability and reduced operational costs from the new platform will enhance customer retention and overall experience [39][40] Question: Plans to increase active member metrics - Management emphasized the focus on product velocity and operational improvements to drive higher engagement and retention among active members [42][43]

Membership and User Metrics - Active Members as of September 30, 2025 decreased to 34.3 thousand, a 14% decline year-over-year compared to 39.7 thousand in September 30, 2024[70] - Active Experts decreased to 8.1 thousand for the three months ended September 30, 2025, a 15% decline from 9.5 thousand in the same period of 2024[72] Revenue and Profitability - Revenue for the three months ended September 30, 2025 was $37,019 thousand, a slight decrease of 1% compared to $37,530 thousand in the prior year[72] - Consumer revenue for the three months ended September 30, 2025 increased by 4% to $33,166 thousand, while Institutional revenue decreased by 32% to $3,688 thousand[78] - Gross Profit for the three months ended September 30, 2025 was $23,296 thousand, representing a gross margin of 63%, down from 70% in the prior year[80] - The net loss for the three months ended September 30, 2025 was $18,756 thousand, a 51% increase compared to a net loss of $24,958 thousand in the prior year[72] - Average Revenue per Member per Month (ARPM) increased by 24% to $374 as of September 30, 2025, compared to $302 in September 30, 2024[71] Operating Expenses - Total operating expenses for the three months ended September 30, 2025 were $52,177 thousand, an increase of 19% compared to $42,378 thousand in the same period of 2024[83] - Sales and marketing expenses decreased by $3,532 thousand, or 18%, for the three months ended September 30, 2025, compared to the same period in 2024[84] - General and administrative expenses decreased by $3,302 thousand, or 15%, for the three months ended September 30, 2025, excluding non-cash stock-based compensation[87] - Product and development costs were $10,285 thousand for the three months ended September 30, 2025, down from $11,273 thousand in the same period in 2024[86] - General and administrative expenses decreased by $7,128 thousand, or 11%, for the nine months ended September 30, 2025, excluding non-cash stock-based compensation[87] Cash Flow and Liquidity - Cash used in operating activities increased by $11,625 thousand for the nine months ended September 30, 2025, compared to the same period in 2024[99] - Cash and cash equivalents totaled $32,710 thousand as of September 30, 2025, down from $52,541 thousand as of December 31, 2024[91] - Cash used in investing activities was $4,051 thousand for the nine months ended September 30, 2025, compared to $5,700 thousand in the same period in 2024[100] - The company expects to use cash on hand to satisfy future working capital requirements and sales and marketing activities[95] Future Outlook and Company Status - The company expects sequential quarterly gross margin improvement to continue into the fourth quarter of 2025 due to a shift towards higher frequency and higher priced Learning Memberships[81] - The company is rolling out new user experiences for students and Experts in Q4 2025 to address operational challenges and re-accelerate growth[69] - The company expects to remain an emerging growth company until the earlier of the fifth anniversary of its IPO, achieving total annual gross revenue of at least $1,235,000 thousand, or being deemed a large accelerated filer with a market value of $700,000 thousand[112] - As of June 30, 2025, the company will continue to qualify as a smaller reporting company, with a market value of shares held by non-affiliates being less than $250,000 thousand or annual revenues below $100,000 thousand[114] Market Risk - The company’s exposure to market risk, foreign currency exchange rates, and interest rates is considered immaterial[115] - Interest income for the three months ended September 30, 2025, was $357 thousand, a decrease from $768 thousand in the same period in 2024[89] - The company borrowed $20,000 thousand under a Term Loan on November 3, 2025, with the first tranche of up to $30,000 thousand available for borrowing[94]

Financial Performance - Revenue for Q3 2025 was $37.0 million, a decrease of 1% year-over-year from $37.5 million in Q3 2024, primarily due to lower Institutional revenue[28]. - Learning Membership revenue increased by 5% year-over-year to $33.0 million, representing 89% of total Company revenue, with Active Members at 34.3 thousand and ARPM at $374, a 24% increase year-over-year[28][32]. - Institutional revenue was $3.7 million, accounting for 10% of total revenue, with quarterly bookings of $6.8 million, a decrease of 20% year-over-year due to funding delays[28][39]. - Gross margin for Q3 2025 was 62.9%, down from 70.5% in Q3 2024, attributed to investments in Expert pay and incentives, but improved sequentially by approximately 140 basis points from Q2 2025[28][42]. - Net loss for Q3 2025 was $18.7 million, an improvement from a net loss of $25.0 million in Q3 2024, with a non-GAAP adjusted EBITDA loss of $10.2 million, better than the guidance of negative $11.0 million to negative $13.0 million[28][29]. - Total revenue for Q3 2025 was $37.0 million, a decrease of 1% from $37.5 million in Q3 2024, driven by a 32% decline in Institutional revenue[62]. - Consumer revenue for Q3 2025 was $33.2 million, representing 89% of total revenue, a 4% increase from $31.9 million in Q3 2024[62]. - As of September 30, 2025, cash and cash equivalents were $32.7 million, down from $52.5 million at the end of 2024[63]. - The company entered into a loan agreement for up to $50 million, borrowing $20 million under the Term Loan to support working capital and growth initiatives[55]. - The company expects Q4 2025 revenue in the range of $45-47 million and full-year revenue between $175-177 million[37]. - Non-GAAP adjusted EBITDA loss for the full year is expected to be in the range of $19-21 million, reflecting improvements in marketing efficiency and operating leverage[37][35]. - Net loss for the nine months ended September 30, 2025, was $46,908 thousand, an improvement from a net loss of $51,371 thousand in the same period of 2024, representing a 9% decrease[66]. - Non-GAAP adjusted net loss for the nine months ended September 30, 2025, was $24,287 thousand, compared to $19,133 thousand in 2024, indicating a 27% increase in losses[74]. Operational Efficiency - The company experienced a 960 basis point improvement in non-GAAP adjusted EBITDA margin year-over-year, driven by improved operating efficiency and cost reductions across every P&L line item[15]. - The company reduced headcount by approximately 27% year-over-year as of September 30, 2024, contributing to improved operational efficiency[15]. - Sales and marketing expenses for Q3 2025 were $16.6 million, a decrease of $3.7 million from $20.3 million in Q3 2024, reflecting improved marketing efficiency[44][46]. - General and administrative expenses for Q3 2025 were $25.8 million, down $6.0 million from $31.8 million in Q3 2024, indicating effective cost control measures[49]. - Non-GAAP sales and marketing expenses for the nine months ended September 30, 2025, were $44,703 thousand, down 13% from $51,515 thousand in 2024[68]. - Non-GAAP general and administrative expenses for the nine months ended September 30, 2025, were $59,380 thousand, a decrease of 11% from $66,508 thousand in 2024[70]. - The company is implementing new user experiences for students and Experts in Q4 2025 to address operational challenges and drive growth[78]. AI and Technology Integration - A 2.0 version of the Live Learning Platform was launched, achieving a reduction of approximately 50% in audio/video error rates and nearly 40% cost savings per session[7]. - The company is targeting nearly 100% of its traffic on new codebases written with AI by the end of November 2025[6]. - AI-driven improvements have lifted sales conversion by more than 10% through real-time AI capabilities[13]. - The company is undergoing a significant replatforming to modern, decoupled systems, enabling deeper AI integration and customer-facing innovations[6]. - The new consumer dashboard integrates AI Practice Hub, leading to over 50% growth in the consumption of practice content since launch[9]. - Nerdy is rolling out AI-powered session analytics via a new tool that generates actionable recommendations and reliable evaluations, streamlining reviews from less than 2% of sessions to comprehensive coverage[26]. Partnerships and Insights - The partnership with Carnegie Mellon University has yielded insights that enhance session quality and improve retention strategies[12]. - The partnership between Nerdy and Carnegie Mellon has delivered significant insights into effective tutoring dynamics, leveraging advanced discourse analysis and large language models (LLMs) to enhance session quality[26]. - Insights from real-world data analysis revealed critical patterns in student expectations and tutor interactions, demonstrating the importance of proactive feedback loops[26]. - The project highlighted how session-level insights scale to platform-wide trends, improving overall engagement metrics[26]. - High-density student-tutor exchanges can boost engagement and knowledge retention by up to 30% through targeted interventions addressing technical glitches and mismatched pacing[26]. - The project identified underperforming tutors early, paving the way for broader quality enhancements across end-to-end user experiences[26]. Future Outlook and Risks - The company expects continued sequential quarterly gross margin improvement into Q4 2025 as the mix of Consumer revenue shifts towards higher frequency and higher-priced Learning Memberships[43]. - The decline in Active Members is expected to impact Consumer revenue, but improvements in ARPM and retention are anticipated to partially offset this decline[34]. - The company faces significant risks that could cause actual results to differ materially from forward-looking statements, including evolving offerings and high levels of indebtedness[95]. - There is a history of net losses and negative operating cash flows, which may necessitate seeking additional liquidity sources[95]. - Risks associated with customer acquisition and retention, as well as scaling operations in both Consumer and Institutional businesses, are highlighted[95]. - The company is subject to litigation, regulatory, and reputational risks due to many learners being minors[95]. - There are uncertainties related to the development and use of artificial intelligence, including regulatory risks[95]. - The company has filed its Annual Report on Form 10-K on February 27, 2025, and its Quarterly Report on Form 10-Q on November 6, 2025, detailing various risks[96].

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Company Performance - Nerdy Inc. reported a quarterly loss of $0.07 per share, better than the Zacks Consensus Estimate of a loss of $0.10, and an improvement from a loss of $0.08 per share a year ago, resulting in an earnings surprise of +30.00% [1] - The company posted revenues of $45.26 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 3.04%, and down from $50.98 million year-over-year [2] - Over the last four quarters, Nerdy has surpassed consensus EPS estimates four times and topped consensus revenue estimates three times [2] Future Outlook - The current consensus EPS estimate for the coming quarter is -$0.12 on revenues of $42.34 million, and for the current fiscal year, it is -$0.33 on revenues of $193.8 million [7] - The estimate revisions trend for Nerdy was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Schools industry, to which Nerdy belongs, is currently in the top 15% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% of industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact stock performance [5]

Financial Data and Key Metrics Changes - Total revenue for the second quarter was $45.3 million, down 11% year over year from $51 million in the same period in 2024, primarily due to lower institutional revenue and a nonrecurring state-funded program [5][21][22] - Consumer learning membership revenue grew 4% year over year to $37.8 million, representing 84% of total revenue, with active members at 30,600 and average revenue per member per month (ARPAM) reaching $348, a 24% increase year over year [6][22] - Non-GAAP adjusted EBITDA loss was $2.7 million, better than the top end of expectations, compared to a loss of $2.1 million in the same period last year [7][27] Business Line Data and Key Metrics Changes - Varsity Tutors for Schools bookings grew 21% year over year, driven by demand for high dosage tutoring offerings and positive responses to the Live plus AI platform [5][23] - Institutional revenue was $7.3 million, representing 16% of total revenue, with the integration of Live plus AI capabilities resonating strongly with district leaders [22][24] Market Data and Key Metrics Changes - The company anticipates consumer revenue to accelerate in growth each quarter throughout 2025, supported by higher frequency learning memberships and price increases [7][28] - The institutional segment is expected to return to year-over-year growth in 2025, with a cautious federal and state funding environment impacting the first half of the year [29] Company Strategy and Development Direction - The company is focused on enhancing its AI capabilities to improve customer experience and operational efficiency, with a vision to combine live instruction with AI for superior outcomes [4][11] - More than 30 new AI tools for schools were launched, aimed at helping educators streamline tasks and personalize learning [15][52] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in improving trends for the back half of the year, citing strong leading indicators for retention and customer acquisition [35][36] - The company expects to deliver profitability in the fourth quarter of this year, with cash and cash equivalents of $36.7 million and zero debt [27][30] Other Important Information - The company is entering the back-to-school season with enhanced AI-powered interactive learning experiences, which are expected to drive deeper engagement among existing learners [10][11] - The company has made significant infrastructure investments in AI, leading to greater efficiency and automation in internal processes [72] Q&A Session Summary Question: Can you talk about the return to revenue growth and confidence in improving trends? - Management highlighted that the last sixty days were the most productive in the company's history, with improvements in retention and customer onboarding driving confidence in growth [34][35] Question: What AI tools are most exciting for driving benefits in the next few quarters? - Management expressed excitement about the Nerdy app, which influences real-time tutoring sessions and enhances the overall customer experience [45] Question: Will there be any benefit for Nerdy to capitalize on recent AI funding announcements? - Management noted a significant opportunity to help school districts adopt AI tools, with broad interest now emerging from administrators [50][51] Question: What is the timeline for the rollout of high dosage tutoring nationwide? - Management indicated that the institutional opportunity is real and that they are well-positioned to serve large school districts, with strong bookings expected in the upcoming quarter [58][59]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents Nerdy Inc.'s unaudited condensed consolidated financial statements for the periods ended June 30, 2025, including statements of operations, comprehensive loss, balance sheets, cash flows, and stockholders' equity, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial line items [Condensed Consolidated Statements of Operations (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20%28Unaudited%29) This section presents the unaudited condensed consolidated statements of operations, detailing revenue, gross profit, and net loss for the specified periods Condensed Consolidated Statements of Operations (Unaudited) - Key Figures (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $45,263 | $50,984 | $92,858 | $104,711 | | Gross Profit | $27,842 | $33,487 | $55,453 | $70,002 | | Operating Loss | $(12,288) | $(15,229) | $(28,873) | $(28,082) | | Net Loss | $(12,001) | $(14,398) | $(28,152) | $(26,413) | | Net Loss Attributable to Class A Common Stockholders | $(7,897) | $(9,093) | $(18,393) | $(16,539) | | Basic and Diluted Loss per share | $(0.07) | $(0.08) | $(0.15) | $(0.15) | - Revenue decreased by **11%** for both the three and six months ended June 30, 2025, compared to the prior year periods[8](index=8&type=chunk) - Net Loss improved for the three months ended June 30, 2025, decreasing to **$(12,001) thousand** from **$(14,398) thousand** in the prior year, but worsened for the six months, increasing to **$(28,152) thousand** from **$(26,413) thousand**[8](index=8&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss%20%28Unaudited%29) This section outlines the unaudited condensed consolidated statements of comprehensive loss, including net loss and other comprehensive income items Condensed Consolidated Statements of Comprehensive Loss (Unaudited) (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Loss | $(12,001) | $(14,398) | $(28,152) | $(26,413) | | Foreign currency translation adjustments | 79 | 2 | 116 | (8) | | Total Comprehensive Loss | $(11,922) | $(14,396) | $(28,036) | $(26,421) | | Total Comprehensive Loss Attributable to Class A Common Stockholders | $(7,847) | $(9,092) | $(18,318) | $(16,544) | - Total Comprehensive Loss improved for the three months ended June 30, 2025, decreasing to **$(11,922) thousand** from **$(14,396) thousand** in the prior year, but worsened for the six months, increasing to **$(28,036) thousand** from **$(26,421) thousand**[10](index=10&type=chunk) [Condensed Consolidated Balance Sheets (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20%28Unaudited%29) This section provides the unaudited condensed consolidated balance sheets, detailing assets, liabilities, and stockholders' equity at specific dates Condensed Consolidated Balance Sheets (Unaudited) - Key Figures (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $36,722 | $52,541 | | Total Current Assets | $47,639 | $64,714 | | Total Assets | $73,689 | $92,507 | | Total Current Liabilities | $22,411 | $28,327 | | Deferred revenue | $10,355 | $15,263 | | Total Liabilities | $24,949 | $31,394 | | Total Stockholders' Equity | $48,740 | $61,113 | - Cash and cash equivalents decreased by **$15,819 thousand** from December 31, 2024, to June 30, 2025[13](index=13&type=chunk) - Total assets decreased by **$18,818 thousand**, and total liabilities decreased by **$6,445 thousand** from December 31, 2024, to June 30, 2025[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20%28Unaudited%29) This section presents the unaudited condensed consolidated statements of cash flows, categorizing cash movements from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Unaudited) - Key Figures (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net Cash Used in Operating Activities | $(13,489) | $(1,235) | | Net Cash Used In Investing Activities | $(2,333) | $(3,755) | | Net Cash Used In Financing Activities | $0 | $0 | | Net Decrease in Cash, Cash Equivalents, and Restricted Cash | $(15,819) | $(4,986) | - Net cash used in operating activities significantly increased to **$(13,489) thousand** for the six months ended June 30, 2025, compared to **$(1,235) thousand** in the prior year[15](index=15&type=chunk) - Capital expenditures, primarily for internal use software and IT equipment, decreased to **$(2,333) thousand** from **$(3,755) thousand**[15](index=15&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity%20%28Unaudited%29) This section details changes in stockholders' equity, including additional paid-in capital and accumulated deficit, for the specified periods Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - Key Changes (Six Months Ended June 30, 2025 vs. 2024) (in thousands) | Metric (in thousands) | June 30, 2025 | June 30, 2024 | | :-------------------- | :------------ | :------------ | | Additional Paid-In Capital (End of period) | $607,974 | $583,948 | | Accumulated Deficit (End of period) | $(576,259) | $(531,820) | | Total Stockholders' Equity (End of period) | $48,740 | $82,550 | | Class A Common Stock - Shares (End of period) | 121,027 | 112,245 | | Class B Common Stock - Shares (End of period) | 64,395 | 65,427 | - Additional Paid-In Capital increased due to non-cash stock-based compensation, while Accumulated Deficit worsened due to net losses[17](index=17&type=chunk) - Total Stockholders' Equity decreased significantly from **$82,550 thousand** in 2024 to **$48,740 thousand** in 2025 for the six months ended June 30[17](index=17&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20%28Unaudited%29) This section provides detailed notes explaining the basis of presentation, significant accounting policies, and specific financial line items in the unaudited financial statements - Nerdy Inc. consolidates Nerdy LLC's financial results, with Legacy Nerdy Holders' portion allocated to noncontrolling interests (NCI). Nerdy Inc. is a holding company with no material assets other than its ownership in Nerdy LLC[20](index=20&type=chunk)[21](index=21&type=chunk) - New accounting pronouncements (ASU 2024-03 and ASU 2023-09) will result in expanded disclosures for expense disaggregation and income tax information, but are not expected to materially impact financial statements[24](index=24&type=chunk)[26](index=26&type=chunk) Revenue by Business Category (in thousands) | Category | Three Months Ended June 30, 2025 | % | Three Months Ended June 30, 2024 | % | | :------------ | :------------------------------- | :- | :------------------------------- | :- | | Consumer | $37,824 | 83% | $39,716 | 78% | | Institutional | $7,308 | 16% | $11,135 | 21% | | Other | $131 | 1% | $133 | 1% | | **Total Revenue** | **$45,263** | **100%** | **$50,984** | **100%** | | Category | Six Months Ended June 30, 2025 | % | Six Months Ended June 30, 2024 | % | | :------------ | :----------------------------- | :- | :----------------------------- | :- | | Consumer | $75,837 | 81% | $81,318 | 77% | | Institutional | $16,688 | 18% | $23,022 | 22% | | Other | $333 | 1% | $371 | 1% | | **Total Revenue** | **$92,858** | **100%** | **$104,711** | **100%** | - The effective income tax rate was **(0.62)%** and **(0.36)%** for the three and six months ended June 30, 2025, respectively, differing significantly from statutory rates due to valuation allowance changes and NCI income tax benefit[35](index=35&type=chunk) - Nerdy Inc. has not recognized a **$117,228 thousand** liability under the Tax Receivable Agreement as of June 30, 2025, as it was not probable that payments would be made based on future taxable income estimates[51](index=51&type=chunk) - The Company settled a PAGA lawsuit in Q1 2025 for **$2,000 thousand** related to independent contractor classification, with no new expense recorded in the current periods[53](index=53&type=chunk) - The Company operates in one reportable segment: Tutoring, generating revenue from services to Learners and Institutions fulfilled by Experts through its Live Learning Platform[55](index=55&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.](index=16&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) This section provides management's perspective on Nerdy Inc.'s financial performance, condition, liquidity, and capital resources for the periods ended June 30, 2025. It highlights key operating metrics, revenue and expense trends, and the impact of strategic initiatives like AI-enabled productivity improvements and Expert incentives [Overview](index=16&type=section&id=OVERVIEW) This overview describes Nerdy's online learning platform, its AI-driven approach, and its service to both consumers and institutions - Nerdy operates a platform for live online learning, leveraging AI to connect Learners and Experts across various subjects and formats, including Learning Memberships, one-on-one instruction, and group tutoring[63](index=63&type=chunk) - The company's offerings serve both Consumers and Institutions, with its flagship business being Varsity Tutors LLC[63](index=63&type=chunk) [Key Operating Metrics](index=16&type=section&id=KEY%20OPERATING%20METRICS) This section analyzes key operational performance indicators, including active members, average revenue per member, and active experts Active Members (in thousands) | Date | Active Members | | :--------- | :------------- | | June 30, 2025 | 30.6 | | June 30, 2024 | 35.5 | | YoY change | (14)% | - Active Members decreased by **14%** year-over-year as of June 30, 2025, primarily due to lower retention in older customer cohorts with a higher proportion of lower frequency Learning Memberships[66](index=66&type=chunk)[67](index=67&type=chunk) Average Revenue per Member per Month (ARPM) | Date | ARPM | | :--------- | :--- | | June 30, 2025 | $348 | | June 30, 2024 | $281 | | YoY change | 24% | - ARPM increased by **24%** year-over-year as of June 30, 2025, driven by a mix shift to higher frequency Learning Memberships and price increases in Q1 2025[67](index=67&type=chunk)[68](index=68&type=chunk) Active Experts (in thousands) | Period | Active Experts (2025) | Active Experts (2024) | Change % | | :----------- | :-------------------- | :-------------------- | :------- | | Three Months Ended June 30 | 9.7 | 11.6 | (16)% | | Six Months Ended June 30 | 12.1 | 14.4 | (16)% | - Active Experts decreased by **16%** for both the three and six months ended June 30, 2025, due to lower Consumer Active Experts (driven by Expert incentives promoting higher utilization of top Experts) and lower Institutional business utilization[69](index=69&type=chunk)[70](index=70&type=chunk) [Results of Operations](index=17&type=section&id=RESULTS%20OF%20OPERATIONS) This section details the company's financial performance, analyzing revenue, gross margin, and operating expenses for the reporting periods Revenue by Business Category (in thousands) | Category | Three Months Ended June 30, 2025 | Change % | Six Months Ended June 30, 2025 | Change % | | :------------ | :------------------------------- | :------- | :----------------------------- | :------- | | Consumer | $37,824 | (5)% | $75,837 | (7)% | | Institutional | $7,308 | (34)% | $16,688 | (28)% | | Other | $131 | (2)% | $333 | (10)% | | **Total Revenue** | **$45,263** | **(11)%** | **$92,858** | **(11)%** | - Total revenue decreased by **11%** for both the three and six months ended June 30, 2025, primarily due to lower Institutional revenue and the non-recurrence of a state-funded Consumer revenue program from 2024[73](index=73&type=chunk) - Gross margin decreased for both current year periods (**62%** vs **66%** for Q2, **60%** vs **67%** for H1) due to Expert incentives, but Q2 2025 gross margin improved sequentially due to Consumer price increases[78](index=78&type=chunk)[80](index=80&type=chunk) - Sales and marketing expenses decreased by **13%** for Q2 2025 and **11%** for H1 2025, driven by Consumer marketing efficiency gains and moderated investment in the Institutional business[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk) - General and administrative expenses decreased by **20%** for Q2 2025 and **16%** for H1 2025, attributed to AI-enabled productivity improvements, new software processes, headcount reductions, and other cost reduction efforts[82](index=82&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) - Interest income decreased for both periods due to lower interest income on cash balances[89](index=89&type=chunk) [Liquidity and Capital Resources](index=19&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section assesses the company's cash position, operating cash flows, and ability to meet its financial obligations Cash and Cash Equivalents (in thousands) | Date | Cash and cash equivalents | | :--------- | :------------------------ | | June 30, 2025 | $36,722 | | Dec 31, 2024 | $52,541 | - The Company incurred cumulative losses and negative operating cash flows, relying on cash on hand for financing, and expects current cash to be sufficient for the next twelve months' requirements[91](index=91&type=chunk)[92](index=92&type=chunk) Cash Flows (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :----------------------------- | :----------------------------- | | Operating activities | $(13,489) | $(1,235) | | Investing activities | $(2,333) | $(3,755) | | Financing activities | $0 | $0 | | Net Decrease in Cash | $(15,819) | $(4,986) | - Cash used in operating activities increased by **$12,254 thousand** year-over-year, primarily due to lower revenue, gross margin, a legal settlement payment, and working capital changes[96](index=96&type=chunk) [Critical Accounting Policies and Estimates](index=20&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) This section highlights the company's critical accounting policies and estimates, noting no material changes from prior disclosures - There have been no material changes to the Company's critical accounting policies and estimates previously disclosed in its 2024 Annual Report[100](index=100&type=chunk) [Recently Issued Accounting Standards](index=20&type=section&id=RECENTLY%20ISSUED%20ACCOUNTING%20STANDARDS) This section refers to Note 2 for details on recently issued accounting standards and their potential impact - Refer to Note 2 in the financial statements for a discussion of recently issued accounting standards[102](index=102&type=chunk) [Cautionary Note on Forward-Looking Statements](index=20&type=section&id=CAUTIONARY%20NOTE%20ON%20FORWARD-LOOKING%20STATEMENTS) This section provides a cautionary note on forward-looking statements, outlining inherent risks and uncertainties that could affect future results - The report contains forward-looking statements regarding future expectations, including revenue growth, operational improvements, and the sufficiency of cash, which are subject to various risks and uncertainties[104](index=104&type=chunk) - Key risks include the evolving nature of offerings, history of net losses, ability to acquire and retain customers, intellectual property, independent contractor classification, and the development and use of AI[104](index=104&type=chunk)[110](index=110&type=chunk) [Emerging Growth Company Status](index=21&type=section&id=EMERGING%20GROWTH%20COMPANY%20STATUS) This section clarifies the company's status as an emerging growth company and its implications for reporting requirements - Nerdy Inc. is an 'emerging growth company' and will remain so for its Q2 2025 report, but will lose this status starting with its Annual Report on Form 10-K for the year ended December 31, 2025, due to the fifth anniversary of TPG Pace Tech Opportunities' IPO[107](index=107&type=chunk)[109](index=109&type=chunk) - As an emerging growth company, Nerdy has taken advantage of exemptions such as not complying with auditor attestation requirements and reduced executive compensation disclosures[107](index=107&type=chunk) [Smaller Reporting Company Status](index=22&type=section&id=SMALLER%20REPORTING%20COMPANY%20STATUS) This section confirms the company's status as a smaller reporting company and its continued eligibility for reduced disclosure requirements - Nerdy Inc. is a 'smaller reporting company' and will retain this status for its 2025 Annual Report and 2026 interim periods, based on market value and annual revenue criteria[112](index=112&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk.](index=22&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) The Company's exposure to market risk, including foreign currency exchange rates and interest rates, is deemed immaterial - The Company's exposure to market risk, foreign currency exchange rates, and interest rates is immaterial[113](index=113&type=chunk) [Item 4. Controls and Procedures.](index=22&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance for timely and accurate financial reporting. No significant changes in internal control over financial reporting occurred during the quarter - The CEO and CFO evaluated the effectiveness of disclosure controls and procedures as of June 30, 2025, and concluded they were effective[114](index=114&type=chunk) - Management acknowledges that controls provide only reasonable assurance and apply judgment in evaluating cost-benefit relationships[115](index=115&type=chunk) - No significant changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[116](index=116&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings.](index=22&type=section&id=Item%201.%20Legal%20Proceedings.) This section refers to Note 12 in the financial statements for details on legal proceedings, including the settlement of an independent contractor classification matter. No environmental proceedings requiring disclosure were identified - Information regarding legal proceedings is incorporated by reference from Note 12 of the financial statements[117](index=117&type=chunk) - No environmental proceedings with monetary sanctions of **$1,000 thousand** or more were identified for disclosure[118](index=118&type=chunk) [Item 1A. Risk Factors.](index=22&type=section&id=Item%201A.%20Risk%20Factors.) The Company reiterates that there have been no material changes to the risk factors previously disclosed in its 2024 Annual Report. Readers are advised to consider these risks, as well as other unknown or immaterial risks, which could adversely affect the business - No material changes to the risk factors previously disclosed in the 2024 Annual Report have occurred as of the date of this Quarterly Report[119](index=119&type=chunk) - Additional risks and uncertainties not currently known or deemed immaterial may also impair the business[120](index=120&type=chunk) [Item 5. Other Information.](index=23&type=section&id=Item%205.%20Other%20Information.) No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[121](index=121&type=chunk) [Item 6. Exhibits.](index=23&type=section&id=Item%206.%20Exhibits.) This section lists the exhibits filed with the Form 10-Q, including the Certificate of Incorporation, Bylaws, certifications from the CEO and CFO, and Interactive Data Files - Exhibits include the Certificate of Incorporation, Bylaws, CEO and CFO certifications (Rule 13a-14(a) and 18 U.S.C. Section 1350), and Interactive Data Files (iXBRL)[123](index=123&type=chunk) [SIGNATURES](index=24&type=section&id=SIGNATURES) The report is duly signed on behalf of Nerdy Inc. by Jason Pello, Chief Financial Officer, on August 7, 2025 - The report was signed by Jason Pello, Chief Financial Officer of Nerdy Inc., on August 7, 2025[126](index=126&type=chunk)