Core Insights - The U.S. education market is transitioning from traditional methods to digital and career-focused programs, driven by student demand and government initiatives [2][11] - The Zacks Schools industry shows resilience, with median share prices above the S&P 500 composite, indicating promising mid to long-term prospects despite current stock performance [3] - Five education stocks are identified with expected earnings growth of over 10% year-over-year by 2026, including Chegg, Adtalem Global Education, Grand Canyon Education, Nerdy, and Legacy Education [4] Market Trends - The shift towards hybrid and AI-based learning models is gaining traction, with education companies adapting to meet the demand for flexible learning formats [5][8] - Companies like Chegg and Nerdy are benefiting from the rise of online and hybrid learning, leveraging AI-enhanced tools and subscription-based digital offerings [6][8] - The focus on career-oriented programs is increasing, particularly in high-demand fields like healthcare, aligning with workforce needs and supporting enrollment growth [9][10] Government Support - Federal and state initiatives are promoting EdTech adoption and workforce development, enhancing the prospects for education companies [11] - New interagency agreements aim to streamline program delivery and reduce administrative burdens, while a national policy established in April 2025 focuses on advancing AI education [11][12] Stock Performance - Chegg (CHGG) has a Zacks Rank of 1, with a projected earnings growth of 228.6% for 2026 despite a year-to-date drop of 42.9% [16] - Adtalem (ATGE) holds a Zacks Rank of 2, with a fiscal 2026 EPS estimate of $7.85 and expected growth of 17.7% [17] - Grand Canyon Education (LOPE) has a Zacks Rank of 2, with a projected earnings growth of 11.2% for 2026 [18] - Nerdy (NRDY) carries a Zacks Rank of 2, with an expected growth of 35.9% for 2026 despite a year-to-date decline of 16.7% [19] - Legacy Education (LGCY) also holds a Zacks Rank of 2, with a projected earnings growth of 11.9% for 2026 and a year-to-date gain of 23.8% [20]

Core Insights - The Zacks Schools industry is experiencing a recovery driven by increased demand for applied and career-oriented education, particularly in healthcare, skilled trades, cybersecurity, and IT [1][5] - Technology is becoming a significant competitive advantage, with institutions investing in adaptive learning systems and online platforms to enhance student engagement and operational efficiency [2][8] - The industry is consolidating, with larger providers acquiring smaller institutions to expand offerings and improve operational leverage [6] Industry Overview - The Zacks Schools industry includes for-profit education companies offering various programs in finance, healthcare, technology, and skilled trades, focusing on career-oriented education [4] - The sector is addressing the shortage of healthcare professionals through intensive training models linked to industry needs [1][5] Trends Influencing Growth - There is a rising demand for workforce-oriented programs, particularly among adult learners and career switchers, as the labor market increasingly values job-ready skills [5] - Government initiatives supporting vocational education and non-degree pathways are contributing to the growth outlook [3][5] Financial Performance and Valuation - The Zacks Schools industry has a Zacks Industry Rank of 65, placing it in the top 27% of over 250 Zacks industries, indicating positive near-term prospects [11][12] - The industry's forward 12-month price-to-earnings ratio is currently at 12.58X, significantly lower than the S&P 500's 23.57X, suggesting potential undervaluation [18] Key Companies and Their Prospects - **McGraw Hill**: Experiencing growth from digital and subscription models, with a projected fiscal 2026 earnings of $1.63 per share on $2.05 billion in revenues, reflecting a 300% surprise in the last quarter [21][24] - **Grand Canyon Education**: Focused on scalable online expansion and healthcare programs, with expected earnings growth of 12.9% and 11.2% for 2025 and 2026, respectively [27][28] - **Perdoceo Education**: Benefiting from rising student interest and expanding program offerings, with expected earnings growth of 11.4% and 9% for 2025 and 2026 [31][32] - **Adtalem**: Gaining from enrollment momentum and strategic partnerships, with projected earnings growth of 17.7% and 13.7% for fiscal 2026 and 2027 [35][37] - **Nerdy**: Enhancing its platform with AI integration, with improvements in earnings estimates for 2025 and 2026, indicating a potential investment opportunity [39][40]

Core Viewpoint - Nerdy, Inc. is considered one of the best EdTech stocks to buy currently, despite a cautious outlook from analysts following its Q3 results [1][2]. Financial Performance - For Q3, Nerdy reported revenue of approximately $37 million, which is roughly flat year-over-year [2]. - The adjusted EBITDA loss improved to $10.2 million, better than the guidance of a loss between $11 million and $13 million, indicating effective cost management [2]. - The company narrowed both GAAP and non-GAAP net losses compared to the previous year, reflecting tighter cost control as it approaches Q4 [2]. Analyst Ratings - Cantor Fitzgerald's Yi Fu Lee maintained a Neutral stance on Nerdy but lowered the price target to $1.00 from $1.50, following a previous adjustment from $1.75 to $1.50 in August [1][3].

Core Viewpoint - Nerdy Inc. (NRDY) has been upgraded to a Zacks Rank 2 (Buy), indicating a positive outlook on its earnings estimates, which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system emphasizes the importance of earnings estimate revisions, which are strongly correlated with near-term stock price movements [4][6]. - An increase in earnings estimates typically leads to higher fair value calculations by institutional investors, resulting in buying or selling actions that affect stock prices [4]. Company Performance and Investor Sentiment - The upgrade for Nerdy reflects an improvement in the company's underlying business, which is expected to drive stock appreciation as investors recognize this positive trend [5]. - Over the past three months, the Zacks Consensus Estimate for Nerdy has increased by 5.9%, indicating a positive revision in earnings expectations [8]. Zacks Rank System - The Zacks Rank system classifies stocks based on earnings estimates into five groups, with only the top 20% receiving a "Strong Buy" or "Buy" rating, suggesting superior potential for market-beating returns [9][10]. - Nerdy's upgrade to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating a strong potential for price movement in the near term [10].

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]