Group 1 - The article focuses on the Asia Value & Moat Stocks research service, which targets value investors looking for Asia-listed stocks with significant discrepancies between price and intrinsic value [1] - The service emphasizes deep value balance sheet bargains, such as net cash stocks and low price-to-book (P/B) stocks, as well as wide moat stocks that represent high-quality businesses [1] - The author provides a range of watch lists with monthly updates, particularly concentrating on investment opportunities in the Hong Kong market [1]

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)

[A Note to Our Shareholders](index=2&type=section&id=A%20Note%20to%20Our%20Shareholders) This letter details Q2 progress on the Live+AI™ vision, highlighting product innovations, successful institutional partnerships, and a clear path to profitability through strategic AI integration [Q2 Highlights & Company Vision](index=2&type=section&id=Q2%20Highlights%20%26%20Vision) The company made significant progress on its Live+AI™ vision in Q2 through AI-powered product enhancements, achieving consumer learning membership revenue growth and exceeding adjusted EBITDA expectations - The company is committed to integrating AI into every stage of the learning journey through its Live+AI™ vision to enhance tutoring, learning, and achievement[4](index=4&type=chunk) Key Financial and Operational Metrics | Metric | Q2 2025 | Change (YoY) | | :---------------------------------------------------- | :---------- | :----------- | | Total Revenue | $45.3 million | -11% | | Consumer Learning Membership Revenue | $37.8 million | +4% | | Active Members (as of June 30) | 30.6 thousand | - | | Average Revenue Per Member (ARPM) | $348 | +24% | | Varsity Tutors for Schools Bookings | - | +21% | | Non-GAAP Adjusted EBITDA Loss | $2.7 million | - | | Annualized Run Rate (ARR) Learning Membership Revenue (as of June 30) | $127.6 million | +7% | [Live+AI™ Product Launches Enable Personalized Learning at Scale](index=3&type=section&id=Live%2BAI%E2%84%A2%20Product%20Launches%20Enable%20Personalized%20Learning%20at%20Scale) The company launched several Live+AI™ products in Q2, leveraging AI to enhance personalized learning experiences and customer retention - The company enhanced AI-powered tutoring session summaries, making them more contextually aware and interactive, referencing prior sessions to create a continuous narrative of student progress[10](index=10&type=chunk) - AI-generated learner-expert matching explanations were introduced, utilizing customer data to highlight tutor matching rationale, improving new customer onboarding and activation metrics, including higher first-week session attendance and lower cancellation rates[11](index=11&type=chunk) - The company transformed 80% of its traditional practice resources into modern, AI-powered interactive learning experiences, expected to boost top-of-funnel awareness, engagement, and conversion to paid offerings[12](index=12&type=chunk) [Real-Time AI for Tutors](index=3&type=section&id=Real-Time%20AI%20for%20Tutors) The company launched the Nerdy desktop app and Tutor Copilot chat tool to provide real-time AI support for tutors - The Nerdy desktop application acts as a "co-pilot" for tutors, using real-time computer vision and audio capabilities to provide live guidance, helping tutors quickly find answers, check student work, suggest concept explanations, and prompt for understanding checks[13](index=13&type=chunk) - Tutor Copilot is a chat-based tool offering LLM-powered features, such as real-time lesson plan generation using past tutoring session context, aimed at improving session quality and tutor retention[13](index=13&type=chunk) [Real-Time AI for Students](index=4&type=section&id=Real-Time%20AI%20for%20Students) Through the Nerdy app, students can transcribe and summarize classroom discussions, receiving step-by-step explanations for complex problems - The Nerdy app enables students to transcribe and receive summaries of classroom discussions, and generate step-by-step explanations for complex problems, providing real-time learning assistance[16](index=16&type=chunk) - A 24/7 AI learning agent can automate tasks like studying, test preparation, and practice based on student learning interactions, saving time and enhancing academic success[16](index=16&type=chunk) [Real-Time AI for Teachers and School Districts](index=4&type=section&id=Real-Time%20AI%20for%20Teachers%20and%20School%20Districts) The Nerdy app offers real-time AI support for teachers and school districts, enhancing teaching confidence and providing real-time translation for ESL teachers - The Nerdy app helps new and substitute teachers improve teaching capabilities through real-time content suggestions and concept explanations, also providing real-time foreign language translation and discussion summaries for ESL teachers[18](index=18&type=chunk) - The company launched over 30 AI tools for teachers and school districts to automate tasks such as IEP generation, practice problem creation, essay evaluation, grading, and document translation, aiming to reduce teacher burden and enhance personalized learning[18](index=18&type=chunk) [AI Practice Hub](index=5&type=section&id=AI%20Practice%20Hub) The AI Practice Hub provides modern, interactive, AI-powered learning tools covering hundreds of subjects and tens of thousands of concepts - The AI Practice Hub offers AI-powered interactive learning tools across hundreds of subjects and tens of thousands of concepts, supporting diagnostic tests, AI tutoring, flashcards, worksheets, interactive games, and video lessons[20](index=20&type=chunk) - Users can generate personalized content on demand and leverage a rich library of interactive content[20](index=20&type=chunk) [Agentic Practice Problems](index=5&type=section&id=Agentic%20Practice%20Problems) AI agents automatically generate personalized practice content based on a learner's recent tutoring sessions and other platform interactions - AI agents automatically generate personalized practice content based on a learner's historical learning data, identifying the most relevant learning modalities and content for use during or between sessions[21](index=21&type=chunk) [Multi-Session & Visual Summaries](index=5&type=section&id=Multi-Session%20%26%20Visual%20Summaries) AI insights now leverage the context of all a learner's historical tutoring sessions on the platform to provide deeper, more relevant summaries - AI insights utilize the context of all a learner's historical tutoring sessions to provide deeper, more relevant summaries, forming a coherent narrative of the learning journey[21](index=21&type=chunk) - New quantitative engagement metrics have been added, showing engagement and time spent on various activities within sessions, providing more value to parents and administrators[21](index=21&type=chunk) [Institutional Customer Program Delivers Successful Student Outcomes](index=7&type=section&id=Institutional%20Customer%20Program%20Delivers%20Successful%20Student%20Outcomes) Varsity Tutors partnered with a large US school district on a High-Dosage Tutoring (HDT) program, achieving significant results in ELA and Math standardized test preparation - Varsity Tutors' high-dosage tutoring program with a large school district achieved significant results in ELA and Math standardized test preparation, with students improving average scores by **11% (5%)**, more than double the control group[25](index=25&type=chunk)[26](index=26&type=chunk) - The program leveraged AI-powered student grouping, customized AI lesson plans, and AI tutoring tools to enhance tutoring effectiveness[25](index=25&type=chunk) - Future integration of Nerdy features into school district partnerships will provide real-time teaching guidance and adjustment suggestions for teachers via computer vision and audio analysis, along with student-level analytics and agentic practice problems for administrators[27](index=27&type=chunk) [In Closing](index=7&type=section&id=In%20Closing) The company is dedicated to achieving personalized learning at scale by combining human expertise with Live+AI™ technology - The company aims to achieve personalized learning at scale by combining human expertise with Live+AI™[28](index=28&type=chunk) - The back-to-school season will significantly enhance Live+AI™ capabilities to strengthen relationships with all service audiences[28](index=28&type=chunk) [Second Quarter Financial Highlights](index=8&type=section&id=Second%20Quarter%20Financial%20Highlights) This section summarizes the company's financial performance in the second quarter, including revenue, membership growth, gross margin, and adjusted EBITDA [Revenue Performance](index=8&type=section&id=Revenue%20Performance) Total revenue for the second quarter was $45.3 million, meeting guidance, but decreased 11% year-over-year Revenue Summary | Metric | Q2 2025 | Q2 2024 | YoY Change | | :----- | :---------- | :---------- | :--------- | | Total Revenue | $45.3 million | $51.0 million | -11% | - The revenue decline was primarily attributed to lower institutional revenue and a non-recurring $3.0 million state-funded consumer revenue program in Q2 2024[32](index=32&type=chunk) - The revenue decline was partially offset by ARPM growth from higher-frequency learning memberships and price increases implemented in Q1 2025 within the consumer business[32](index=32&type=chunk) [Consumer Learning Membership Growth](index=8&type=section&id=Consumer%20Learning%20Membership%20Growth) Consumer learning membership revenue grew 4% year-over-year to $37.8 million in Q2, representing 84% of total revenue Consumer Learning Membership Metrics | Metric | Q2 2025 | YoY Change | | :-------------------------------- | :---------- | :----------- | | Learning Membership Revenue | $37.8 million | +4% | | % of Total Revenue | 84% | - | | Active Members (as of June 30) | 30.6 thousand | - | | Average Revenue Per Member (ARPM) | $348 | +24% | - ARPM growth was driven by a shift in mix towards higher-frequency and higher-priced learning memberships, along with improved user experience and higher retention rates for new customer cohorts[32](index=32&type=chunk) [Institutional Business Strategy](index=8&type=section&id=Institutional%20Business%20Strategy) Institutional business revenue was $7.3 million, accounting for 16% of total revenue, with Varsity Tutors for Schools signing 50 contracts and achieving $4.9 million in bookings Institutional Business Metrics | Metric | Q2 2025 | YoY Change | | :-------------------------------- | :---------- | :----------- | | Institutional Revenue | $7.3 million | - | | % of Total Revenue | 16% | - | | Varsity Tutors for Schools Bookings | $4.9 million | +21% | | % of Paid Contracts | 36% | - | | % of Total Booked Value | 50% | - | - The company signed the White House "Invest in AI Education" pledge, committing to expand AI literacy and accelerate student academic growth over four years[32](index=32&type=chunk) [Gross Margin Analysis](index=8&type=section&id=Gross%20Margin%20Analysis) Q2 gross margin was 61.5%, lower than 65.7% in Q2 2024, primarily due to expert incentive programs implemented in Q4 2024 Gross Margin Summary | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--------- | :-------- | :-------- | :--------- | | Gross Margin | 61.5% | 65.7% | -4.2 percentage points | - The gross margin decline was primarily due to expert incentive programs implemented in Q4 2024, which led to faster first session times, higher first 30-day session volume, lower tutor replacement rates, and higher retention[32](index=32&type=chunk) - Q2 gross margin improved sequentially, benefiting from price increases implemented for new consumer customers in Q1 2025[32](index=32&type=chunk) [Path to Profitability](index=8&type=section&id=Path%20to%20Profitability) The company's Q2 performance reinforces confidence in achieving profitability - In Q1 2025, the company reduced headcount by approximately **16%** through AI-powered productivity enhancements and new software-driven processes[32](index=32&type=chunk) - The company expects to achieve non-GAAP adjusted EBITDA profitability in Q4 2025[32](index=32&type=chunk) [Adjusted EBITDA Performance](index=9&type=section&id=Adjusted%20EBITDA%20Performance) Q2 GAAP net loss was $12.0 million, and non-GAAP adjusted EBITDA loss was $2.7 million, outperforming the upper end of guidance Adjusted EBITDA Summary | Metric | Q2 2025 | Q2 2024 | YoY Change | | :----------------------- | :---------- | :---------- | :--------- | | GAAP Net Loss | $12.0 million | $14.4 million | Decreased $2.4 million | | Non-GAAP Adjusted Net Loss | $4.5 million | $3.1 million | Increased $1.4 million | | Non-GAAP Adjusted EBITDA Loss | $2.7 million | $2.1 million | Increased $0.6 million | - Non-GAAP adjusted EBITDA loss of $2.7 million outperformed the company's guidance range of negative $3.0 million to negative $6.0 million[35](index=35&type=chunk) - Adjusted EBITDA outperformed expectations primarily due to improved gross margin and lower marketing and general and administrative expenses[35](index=35&type=chunk) [Liquidity and Capital Resources](index=9&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, the company had $36.7 million in cash and no debt, providing ample liquidity to support operations and growth initiatives Liquidity and Capital Resources Summary | Metric | As of June 30, 2025 | | :----- | :------------------ | | Cash | $36.7 million | | Debt | None | [Third Quarter and Full Year 2025 Outlook](index=10&type=section&id=Third%20Quarter%20and%20Full%20Year%202025%20Outlook) This section provides the company's financial guidance for the third quarter and full year 2025, including revenue and adjusted EBITDA expectations [Q3 and Full Year Guidance](index=10&type=section&id=Q3%20and%20Full%20Year%20Guidance) The company expects consolidated and consumer revenue to return to year-over-year growth in Q3 2025, driven by increased consumer customer acquisition and ARPM improvements - Consolidated and consumer revenue are expected to return to year-over-year growth in Q3 2025, driven by increased consumer customer acquisition, ARPM improvements, and enhanced retention from user experience and tutor compensation investments[37](index=37&type=chunk) - Institutional revenue is projected to return to year-over-year growth in Q4 2025[38](index=38&type=chunk) Q3 and Full Year Outlook | Metric | Q3 2025 Expected | FY 2025 Expected | | :----------------------- | :--------------- | :--------------- | | Revenue | $37-$40 million | $191-$197 million | | Non-GAAP Adjusted EBITDA Loss | $11-$13 million | $13-$17 million | | Year-End Cash | - | $30-$35 million | - The company anticipates achieving non-GAAP adjusted EBITDA profitability in Q4 2025[38](index=38&type=chunk) [Financial Discussion](index=11&type=section&id=Financial%20Discussion) This section provides a detailed discussion of the company's financial performance, including revenue, gross profit, operating expenses, and net loss [Revenue](index=11&type=section&id=Revenue) Q2 2025 revenue was $45.3 million, an 11% year-over-year decrease; H1 revenue was $92.9 million, also down 11% year-over-year Revenue Performance Details | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :----- | :---------- | :---------- | :--------- | :---------- | :---------- | :--------- | | Revenue | $45.3 million | $51.0 million | -11% | $92.9 million | $104.7 million | -11% | - The revenue decline was primarily due to reduced institutional revenue and the non-recurrence of a state-funded consumer program in 2024 ($3.0 million in Q2, $4.5 million in H1)[41](index=41&type=chunk) - The revenue decrease was partially offset by ARPM growth from higher-frequency learning memberships and price increases implemented in Q1 2025 within the consumer business[41](index=41&type=chunk) [Gross Profit and Gross Margin](index=11&type=section&id=Gross%20Profit%20and%20Gross%20Margin) Q2 2025 gross profit was $27.9 million, a 17% year-over-year decrease; H1 gross profit was $55.5 million, down 21% year-over-year Gross Profit and Margin Details | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :--------- | :---------- | :---------- | :--------- | :---------- | :---------- | :--------- | | Gross Profit | $27.9 million | $33.5 million | -17% | $55.5 million | $70.0 million | -21% | | Gross Margin | 61.5% | 65.7% | -4.2 pp | 59.7% | 66.9% | -7.2 pp | - The gross margin decline was primarily due to expert incentive programs implemented in Q4 2024, which led to faster first session times, higher first 30-day session volume, lower tutor replacement rates, and higher retention[43](index=43&type=chunk) - Q2 gross margin improved sequentially, benefiting from price increases implemented for new consumer customers in Q1 2025[43](index=43&type=chunk) [Sales and Marketing Expenses](index=11&type=section&id=Sales%20and%20Marketing%20Expenses) Q2 2025 GAAP sales and marketing expenses were $13.5 million, a $2.0 million decrease year-over-year; H1 expenses were $29.3 million, down $3.6 million year-over-year Sales and Marketing Expenses Summary | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :----------------------- | :---------- | :---------- | :--------- | :---------- | :---------- | :--------- | | GAAP Sales and Marketing Expenses | $13.5 million | $15.5 million | -$2.0 million | $29.3 million | $32.9 million | -$3.6 million | | Non-GAAP Sales and Marketing Expenses | $13.2 million | $14.9 million | -$1.7 million | $28.5 million | $31.8 million | -$3.3 million | - The decrease in sales and marketing expenses was primarily due to improved consumer marketing efficiency and a modest adjustment in institutional business investments in response to recent funding uncertainties[45](index=45&type=chunk) [General and Administrative Expenses](index=12&type=section&id=General%20and%20Administrative%20Expenses) Q2 2025 GAAP general and administrative expenses were $26.6 million, a $6.6 million decrease year-over-year; H1 expenses were $55.0 million, down $10.2 million year-over-year General and Administrative Expenses Summary | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :----------------------- | :---------- | :---------- | :--------- | :---------- | :---------- | :--------- | | GAAP General and Administrative Expenses | $26.6 million | $33.2 million | -$6.6 million | $55.0 million | $65.2 million | -$10.2 million | | Non-GAAP General and Administrative Expenses | $19.4 million | $22.5 million | -$3.1 million | $40.1 million | $43.9 million | -$3.8 million | | Product and Development Costs | $10.7 million | $11.6 million | -$0.9 million | $21.4 million | $22.2 million | -$0.8 million | - The decrease in general and administrative expenses was primarily due to AI-powered productivity enhancements, new software-driven processes, system implementations, headcount reductions, and other cost-saving measures[49](index=49&type=chunk) [Net Loss, Non-GAAP Adjusted Net Loss, and Non-GAAP Adjusted EBITDA (Loss)](index=12&type=section&id=Net%20Loss%2C%20Non-GAAP%20Adjusted%20Net%20Loss%2C%20and%20Non-GAAP%20Adjusted%20EBITDA%20(Loss)) Q2 2025 GAAP net loss was $12.0 million, and non-GAAP adjusted net loss was $4.5 million Net Loss and Adjusted EBITDA Summary | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :----------------------- | :-------------- | :-------------- | :-------------- | :-------------- | :-------------- | :-------------- | | GAAP Net Loss | $(12.0) million | $(14.4) million | Decreased $2.4 million | $(28.2) million | $(26.4) million | Increased $1.8 million | | Non-GAAP Adjusted Net Loss | $(4.5) million | $(3.1) million | Increased $1.4 million | $(12.4) million | $(4.0) million | Increased $8.4 million | | Non-GAAP Adjusted EBITDA Loss | $(2.7) million | $(2.1) million | Increased $0.6 million | $(9.1) million | $(2.0) million | Increased $7.1 million | - Q2 non-GAAP adjusted EBITDA loss of $2.7 million outperformed the company's guidance range of negative $3.0 million to negative $6.0 million[51](index=51&type=chunk) - Adjusted EBITDA outperformed expectations primarily due to improved gross margin and lower marketing and general and administrative expenses[52](index=52&type=chunk) [Liquidity and Capital Resources](index=12&type=section&id=Liquidity%20and%20Capital%20Resources_2) As of June 30, 2025, the company held $36.7 million in cash and cash equivalents, providing sufficient liquidity for operations and growth initiatives Liquidity and Capital Resources Summary | Metric | As of June 30, 2025 | | :----------------------- | :------------------ | | Cash and Cash Equivalents | $36.7 million | | Debt | None | [Conference Call Details](index=13&type=section&id=Conference%20Call%20Details) Nerdy management will host a conference call on August 7, 2025, at 5:00 PM ET to discuss financial results - The conference call to discuss financial results will be held on August 7, 2025, at 5:00 PM ET[56](index=56&type=chunk) - Investors can participate via phone (US: 1-833-470-1428, International: 1-404-975-4839, Access Code: 310344) or the company's investor relations website (https://www.nerdy.com/investors)[56](index=56&type=chunk)[57](index=57&type=chunk) [Condensed Consolidated Financial Statements (Unaudited)](index=14&type=section&id=Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including statements of operations, revenue breakdown, balance sheets, and cash flows [Statements of Operations](index=14&type=section&id=Statements%20of%20Operations) This section provides condensed consolidated statements of operations for the three and six months ended June 30, 2025, and 2024, detailing key financial figures Condensed Consolidated Statements of Operations | (in millions, except per share data) | 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 | | Cost of revenue | 17.421 | 17.497 | 37.405 | 34.709 | | Gross Profit | 27.842 | 33.487 | 55.453 | 70.002 | | Sales and marketing expenses | 13.558 | 15.537 | 29.343 | 32.929 | | General and administrative expenses | 26.572 | 33.179 | 54.983 | 65.155 | | Operating Loss | (12.288) | (15.229) | (28.873) | (28.082) | | Interest income | (0.365) | (0.879) | (0.827) | (1.765) | | Other expense, net | 0.004 | 0.010 | 0.004 | 0.035 | | Loss before Income Taxes | (11.927) | (14.360) | (28.050) | (26.352) | | Income tax expense | 0.074 | 0.038 | 0.102 | 0.061 | | Net Loss | (12.001) | (14.398) | (28.152) | (26.413) | | Net loss attributable to noncontrolling interests | (4.104) | (5.305) | (9.759) | (9.874) | | Net Loss Attributable to Class A Common Stockholders | $(7.897) | $(9.093) | $(18.393) | $(16.539) | | Loss per share of Class A Common Stock: Basic and Diluted | $(0.07) | $(0.08) | $(0.15) | $(0.15) | | Weighted-Average Shares of Class A Common Stock Outstanding: Basic and Diluted (in thousands) | 120.151 | 109.924 | 119.304 | 108.757 | [Revenue Breakdown](index=14&type=section&id=Revenue%20Breakdown) This section details revenue breakdown by consumer, institutional, and other categories for the three and six months ended June 30, 2025, and 2024 Revenue Breakdown by Segment | (dollars in millions) | Three Months Ended June 30, 2025 | % | Three Months Ended June 30, 2024 | % | Change $ | Change % | | :-------------------- | :------------------------------- | : | :------------------------------- | : | :----------- | :--------- | | Consumer | $37.824 | 83% | $39.716 | 78% | $(1.892) | (5)% | | Institutional | 7.308 | 16% | 11.135 | 21% | (3.827) | (34)% | | Other | 0.131 | 1% | 0.133 | 1% | (0.002) | (2)% | | Revenue | $45.263 | 100% | $50.984 | 100% | $(5.721) | (11)% | | | Six Months Ended June 30, 2025 | % | Six Months Ended June 30, 2024 | % | Change $ | Change % | | Consumer | $75.837 | 81% | $81.318 | 77% | $(5.481) | (7)% | | Institutional | 16.688 | 18% | 23.022 | 22% | (6.334) | (28)% | | Other | 0.333 | 1% | 0.371 | 1% | (0.038) | (10)% | | Revenue | $92.858 | 100% | $104.711 | 100% | $(11.853) | (11)% | [Balance Sheets](index=15&type=section&id=Balance%20Sheets) This section presents the condensed consolidated balance sheets as of June 30, 2025, and December 31, 2024, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets | (in millions) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | **ASSETS** | | | | Current Assets | | | | Cash and cash equivalents | $36.722 | $52.541 | | Accounts receivable, net | 6.358 | 7.335 | | Other current assets | 4.559 | 4.838 | | Total Current Assets | 47.639 | 64.714 | | Fixed assets, net | 16.306 | 17.148 | | Goodwill | 5.717 | 5.717 | | Intangible assets, net | 2.232 | 2.430 | | Other assets | 1.795 | 2.498 | | Total Assets | $73.689 | $92.507 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Current Liabilities | | | | Accounts payable | $3.836 | $2.555 | | Deferred revenue | 10.355 | 15.263 | | Other current liabilities | 8.220 | 10.509 | | Total Current Liabilities | 22.411 | 28.327 | | Other liabilities | 2.538 | 3.067 | | Total Liabilities | 24.949 | 31.394 | | Stockholders' Equity | | | | Class A common stock | 0.012 | 0.012 | | Class B common stock | 0.006 | 0.006 | | Additional paid-in capital | 607.974 | 597.308 | | Accumulated deficit | (576.259) | (557.866) | | Accumulated other comprehensive income | 0.094 | 0.019 | | Total Stockholders' Equity Excluding Noncontrolling Interests | 31.827 | 39.479 | | Noncontrolling interests | 16.913 | 21.634 | | Total Stockholders' Equity | 48.740 | 61.113 | | Total Liabilities and Stockholders' Equity | $73.689 | $92.507 | [Statements of Cash Flows](index=16&type=section&id=Statements%20of%20Cash%20Flows) This section provides condensed consolidated statements of cash flows for the six months ended June 30, 2025, and 2024, detailing cash flows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows | (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------- | :----------------------------- | :----------------------------- | | **Cash Flows From Operating Activities** | | | | Net Loss | $(28.152) | $(26.413) | | Adjustments to reconcile net loss to net cash used in operating activities: | | | | Depreciation & amortization | 3.671 | 3.358 | | Amortization of intangibles | 0.310 | 0.305 | | Non-cash stock-based compensation expense | 15.126 | 22.426 | | Other | 0.069 | — | | Other changes in operating assets and liabilities: | | | | Decrease in accounts receivable, net | 0.977 | 8.153 | | Decrease (increase) in other current assets | 0.279 | (0.491) | | Decrease in other assets | 0.703 | 1.046 | | Increase (decrease) in accounts payable | 1.253 | (0.057) | | Decrease in deferred revenue | (5.276) | (9.398) | | (Decrease) increase in other current liabilities | (1.672) | 0.051 | | Decrease in other liabilities | (0.777) | (0.215) | | Net Cash Used in Operating Activities | (13.489) | (1.235) | | **Cash Flows From Investing Activities** | | | | Capital expenditures | (2.333) | (3.755) | | Net Cash Used In Investing Activities | (2.333) | (3.755) | | **Cash Flows From Financing Activities** | | | | Net Cash Used In Financing Activities | — | — | | Effect of Exchange Rate Change on Cash, Cash Equivalents, and Restricted Cash | 0.003 | 0.004 | | Net Decrease in Cash, Cash Equivalents, and Restricted Cash | (15.819) | (4.986) | | Cash, Cash equivalents, and Restricted Cash, Beginning of Year | 52.673 | 75.140 | | Cash, Cash Equivalents, and Restricted Cash, End of Period | $36.854 | $70.154 | | Supplemental Cash Flow Information | | | | Non-cash stock-based compensation included in capitalized internal use software | $0.537 | $0.939 | | Purchase of fixed assets included in accounts payable | $0.003 | $0.010 | [Reconciliation of GAAP to Non-GAAP Measures (Unaudited)](index=17&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures%20(Unaudited)) This section provides unaudited reconciliations of GAAP to non-GAAP financial measures, including sales and marketing expenses, general and administrative expenses, adjusted EBITDA, and adjusted net loss [Sales and Marketing Expenses Reconciliation](index=17&type=section&id=Sales%20and%20Marketing%20Expenses%20Reconciliation) This section provides a reconciliation of GAAP to non-GAAP sales and marketing expenses for the three and six months ended June 30, 2025, and 2024, primarily excluding non-cash stock-based compensation and restructuring costs Sales and Marketing Expenses Reconciliation to Non-GAAP | (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales and marketing expenses | $13.558 | $15.537 | $29.343 | $32.929 | | Less: Non-cash stock-based compensation expense | 0.330 | 0.674 | 0.638 | 1.173 | | Less: Restructuring costs | — | 0.193 | — | — | | Non-GAAP sales and marketing expenses | $13.228 | $14.899 | $28.476 | $31.756 | [General and Administrative Expenses Reconciliation](index=17&type=section&id=General%20and%20Administrative%20Expenses%20Reconciliation) This section provides a reconciliation of GAAP to non-GAAP general and administrative expenses for the three and six months ended June 30, 2025, and 2024, primarily excluding non-cash stock-based compensation and restructuring costs General and Administrative Expenses Reconciliation to Non-GAAP | (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | General and administrative expenses | $26.572 | $33.179 | $54.983 | $65.155 | | Less: Non-cash stock-based compensation expense | 7.208 | 14.452 | 10.676 | 21.253 | | Less: Restructuring costs | — | 0.455 | — | — | | Non-GAAP general and administrative expenses | $19.364 | $22.503 | $40.076 | $43.902 | [Adjusted EBITDA (Loss) Reconciliation](index=17&type=section&id=Adjusted%20EBITDA%20(Loss)%20Reconciliation) This section provides a reconciliation of GAAP net loss to non-GAAP adjusted EBITDA (loss) for the three and six months ended June 30, 2025, and 2024, primarily adding back interest income, income taxes, depreciation, amortization, non-cash stock-based compensation, and restructuring costs Adjusted EBITDA (Loss) Reconciliation to GAAP Net Loss | (in millions) | 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) | | Add: Interest income | (0.365) | (0.879) | (0.827) | (1.765) | | Add: Income taxes | 0.074 | 0.038 | 0.102 | 0.061 | | Add: Depreciation and amortization | 1.996 | 1.873 | 3.981 | 3.663 | | Add: Non-cash stock-based compensation expense | 7.538 | 11.314 | 15.126 | 22.426 | | Add: Restructuring costs | — | — | 0.648 | — | | Adjusted EBITDA (Loss) | $(2.758) | $(2.052) | $(9.122) | $(2.028) | [Adjusted Net Loss Reconciliation](index=17&type=section&id=Adjusted%20Net%20Loss%20Reconciliation) This section provides a reconciliation of GAAP net loss to non-GAAP adjusted net loss for the three and six months ended June 30, 2025, and 2024, primarily adding back non-cash stock-based compensation and restructuring costs Adjusted Net Loss Reconciliation to GAAP Net Loss | (in millions) | 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) | | Add: Non-cash stock-based compensation expense | 7.538 | 11.314 | 15.126 | 22.426 | | Add: Restructuring costs | — | — | 0.648 | — | | Adjusted Net Loss | $(4.463) | $(3.084) | $(12.378) | $(3.987) | [Capitalization Reconciliation (Unaudited)](index=18&type=section&id=Capitalization%20Reconciliation%20(Unaudited)) This section provides an unaudited capitalization reconciliation as of June 30, 2025, detailing Class A common stock, combined interests convertible to Class A common stock, and total outstanding shares Capitalization Summary | (in thousands) | June 30, 2025 | | :------------------------------------------ | :------------ | | Class A Common Stock | 121.027 | | Combined Interests that can be converted into shares of Class A Common Stock | 64.395 | | Total outstanding share count | 185.422 | [Key Operating Metrics and Non-GAAP Financial Measures](index=19&type=section&id=Key%20Operating%20Metrics%20and%20Non-GAAP%20Financial%20Measures) This section defines and presents key operating metrics and non-GAAP financial measures, along with forward-looking statements [Key Operating Metrics](index=19&type=section&id=Key%20Operating%20Metrics) This section defines and provides data for key operating metrics, including active members, ARPM, and active experts - Active members are defined as the number of learners with a paid active learning membership at the end of the reporting period, excluding institutional business[78](index=78&type=chunk) - ARPM is defined as the average consumer learning membership subscription revenue per member per month at the end of the reporting period, excluding institutional business[79](index=79&type=chunk) - Active experts are defined as the number of experts who have tutored one or more sessions during a given period, including institutional business[80](index=80&type=chunk) Key Operating Metrics Summary | Metric | June 30, 2025 | YoY change | March 31, 2025 | YoY change | December 31, 2024 | YoY change | September 30, 2024 | YoY change | June 30, 2024 | YoY change | March 31, 2024 | YoY change | | :-------------------- | :------------ | :--------- | :------------- | :--------- | :---------------- | :--------- | :----------------- | :--------- | :------------ | :--------- | :------------- | :--------- | | Active Members (thousands) | 30.6 | (14)% | 40.5 | (12)% | 37.5 | (8)% | 39.7 | 1% | 35.5 | 15% | 46.1 | 40% | | ARPM (dollars) | $348 | 24% | $335 | 14% | $302 | (2)% | $302 | (13)% | $281 | (20)% | $293 | (19)% | | Active Experts (thousands) | 9.7 | (16)% | - | - | - | - | - | - | 11.6 | - | - | - | [Non-GAAP Financial Measures Definitions](index=20&type=section&id=Non-GAAP%20Financial%20Measures%20Definitions) This section defines non-GAAP sales and marketing expenses, non-GAAP general and administrative expenses, non-GAAP adjusted net income (loss), and non-GAAP adjusted EBITDA (loss) - Non-GAAP sales and marketing expenses exclude non-cash stock-based compensation expense and restructuring costs[83](index=83&type=chunk) - Non-GAAP adjusted net income (loss) is defined as net income or loss, excluding non-cash stock-based compensation expense and restructuring costs[84](index=84&type=chunk) - Non-GAAP adjusted EBITDA (loss) is defined as net income or loss, excluding net interest income (expense), taxes, depreciation and amortization expense, non-cash stock-based compensation expense, and restructuring costs[84](index=84&type=chunk) [Forward-Looking Statements](index=21&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements regarding the company's future strategic focus, revenue growth, AI-powered productivity, institutional business growth, liquidity, and 2025 quarterly and full-year outlook - All statements that are not historical facts should be considered forward-looking statements, including but not limited to statements about strategic focus, revenue growth, AI-powered productivity, institutional business growth, cash sufficiency, and the 2025 quarterly and full-year outlook[92](index=92&type=chunk) - Forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expectations, and the company undertakes no obligation to update these statements[93](index=93&type=chunk)[94](index=94&type=chunk)

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 Impact - 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 stock price movements [4]. Recent Performance and Projections - For the fiscal year ending December 2025, Nerdy is expected to earn -$0.33 per share, reflecting a 13.2% change from the previous year [8]. - Over the past three months, the Zacks Consensus Estimate for Nerdy has increased by 20.8%, indicating a positive trend in earnings expectations [8]. Zacks Rating System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with only the top 20% receiving a 'Strong Buy' or 'Buy' rating [9][10]. - The upgrade of Nerdy to a Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, suggesting potential for market-beating returns in the near term [10].

Core Insights - Nerdy Inc. reported a quarterly loss of $0.09 per share, better than the Zacks Consensus Estimate of a loss of $0.14, representing an earnings surprise of 35.71% [1] - The company generated revenues of $47.6 million for the quarter ended March 2025, exceeding the Zacks Consensus Estimate by 3.24%, but down from $53.73 million year-over-year [2] - The stock has increased approximately 2.5% since the beginning of the year, contrasting with a -4.3% decline in the S&P 500 [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is -$0.10 on revenues of $46.65 million, and for the current fiscal year, it is -$0.42 on revenues of $192.53 million [7] - The estimate revisions trend for Nerdy is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [6] Industry Context - The Schools industry, to which Nerdy belongs, is currently in the top 30% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8] - Lincoln Educational Services Corporation, another company in the same industry, is expected to report a quarterly earnings decline of 33.3% with revenues projected at $113.84 million, up 10.1% year-over-year [9][10]

Financial Data and Key Metrics Changes - The company reported revenue of $47.6 million for Q1 2025, a decrease of 11% year over year from $53.7 million in Q1 2024, but above the guidance range of $45 million to $47 million [14][15] - Average revenue per member per month (ARPAM) increased to $335, representing a 14% improvement year over year [4][15] - Gross profit was $27.6 million, down 24% year over year, with a gross margin of 58%, compared to 68% in the same period of 2024 [16][17] Business Line Data and Key Metrics Changes - Learning membership subscription revenue was $37.9 million, accounting for 80% of total revenue, with active members at 40,500 [15] - The institutional business generated $9.4 million, representing 19% of total revenue, with 90 contracts yielding $4 million in bookings [16] Market Data and Key Metrics Changes - The company experienced a positive inflection in monthly recurring learning membership revenue year over year in March 2025, indicating a shift towards higher frequency learning memberships [15][75] - The institutional side showed a cautious but optimistic outlook, with a bookings pipeline exceeding expectations despite a cautious funding environment [30][31] Company Strategy and Development Direction - The company is focused on product innovation and operational improvements to return to growth and profitability, with a strategy to enhance learning memberships and improve customer retention [4][10] - The introduction of AI capabilities, such as AI session summaries and Tutor Copilot, aims to enhance the learning experience and deepen customer engagement [7][8] - The company plans to end 2025 with ARPAM above $370 and expects to become adjusted EBITDA and operating cash flow positive in Q4 2025 [11][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to control its destiny, with healthy demand for tutoring services and positive customer interactions [40][41] - The macroeconomic environment has not negatively impacted the company, and management remains optimistic about future growth driven by product enhancements and AI integration [40][41] Other Important Information - The company reduced headcount by approximately 16% since December 31, 2024, as part of its efficiency initiatives [11][20] - Cash and cash equivalents stood at $44.9 million with zero debt, providing ample liquidity for growth initiatives [21] Q&A Session Summary Question: Update on Varsity Tutors for Schools and bookings pipeline - Management highlighted strong progress in product innovation and execution, with positive interest in AI capabilities from school districts, leading to significant bookings and upsell opportunities [26][30] Question: Confidence in the macro environment - Management stated that they have not connected macroeconomic factors to business performance, with healthy demand for tutoring services and customer interactions [40][41] Question: Most exciting AI products for engagement and retention - AI session summaries were identified as a key feature driving engagement, providing actionable insights for students and parents [48][50] Question: Impact of AI on operational efficiency - Management noted that they are halfway through their journey of applying AI to operations, with significant improvements in matching algorithms and customer service automation [54][56] Question: Monthly recurring revenue dynamics in March - The company reported a positive inflection in monthly recurring revenue in March, driven by improved customer onboarding and higher frequency offerings [75]

Financial Data and Key Metrics Changes - The company reported revenue of $47.6 million for Q1 2025, a decrease of 11% year over year from $53.7 million in Q1 2024, but above the guidance range of $45 million to $47 million [14][15] - Average revenue per member per month (ARPAM) increased to $335, representing a 14% improvement year over year [4][15] - Gross profit was $27.6 million, down 24% year over year, with a gross margin of 58%, compared to 68% in the same period of 2024 [16][17] Business Line Data and Key Metrics Changes - Learning membership subscription revenue was $37.9 million, accounting for 80% of total revenue, with active members at 40,500 [15] - The institutional business generated $9.4 million, representing 19% of total revenue, with 90 contracts executed yielding $4 million in bookings [16] Market Data and Key Metrics Changes - The company experienced a positive inflection in monthly recurring learning membership revenue year over year in March 2025, indicating a shift towards higher frequency learning memberships [15][16] - The institutional business is seeing cautious funding environments but remains optimistic about future bookings due to AI enhancements [29][31] Company Strategy and Development Direction - The company is focused on product innovation and operational improvements to return to growth and profitability, with a strategy to enhance learning memberships and improve customer retention [4][10] - The introduction of AI capabilities, such as AI session summaries and Tutor Copilot, aims to enhance the learning experience and deepen customer engagement [7][10] - The company plans to end 2025 with ARPAM above $370, driven by price increases and a shift towards new consumer customers [11][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to control its destiny, with healthy demand for tutoring services and positive customer interactions [41][42] - The company anticipates sequential quarterly improvements in revenue growth rates and gross margin, aiming to achieve adjusted EBITDA and operating cash flow positivity by Q4 2025 [12][23] Other Important Information - The company has zero debt and cash and cash equivalents of $44.9 million as of March 31, 2025, providing ample liquidity for growth initiatives [21] - The company reduced headcount by approximately 16% since December 31, 2024, as part of its efficiency initiatives [20][21] Q&A Session Summary Question: Update on Varsity Tutors for Schools and bookings pipeline - Management noted strong progress in product innovation and execution, with positive interest in AI capabilities from school districts, leading to significant bookings and upsell [29][30][31] Question: Macro environment impact on Nerdy - Management stated that they have not connected macroeconomic factors to business performance, indicating a healthy demand for tutoring services [41][42] Question: Most exciting AI products for engagement and retention - Management highlighted AI session summaries as a game-changing feature, providing actionable insights for students and parents [49][51] Question: Gross margin impact from investments and pricing - Management explained that lower gross margins in Q1 were due to investments in tutor incentives, with expectations for sequential improvements as new pricing takes effect [66][71] Question: Monthly recurring revenue dynamics in March - Management confirmed that the consumer membership business shifted from a headwind to a tailwind in March, with expectations for continued improvement throughout the year [77][78]

Financial Data and Key Metrics Changes - The company reported revenue of $47.6 million for Q1 2025, a decrease of 11% year over year from $53.7 million in Q1 2024, but above the guidance range of $45 million to $47 million [12][13] - Average revenue per member per month (ARPAM) increased to $335, representing a 14% improvement year over year [4][13] - Monthly recurring learning membership revenue showed positive year-over-year inflection in March 2025, indicating a recovery in revenue quality strategy [4][13] Business Line Data and Key Metrics Changes - Learning membership subscription revenue was $37.9 million, accounting for 80% of total revenue, with active members at 40,500 [13] - The institutional business generated $9.4 million, representing 19% of total revenue, with 90 contracts yielding $4 million in bookings [14] Market Data and Key Metrics Changes - The company experienced higher retention rates in newer consumer cohorts due to improved user experience and expert incentives [13] - The institutional segment is facing a cautious funding environment, but interest in AI applications for education is increasing [26][40] Company Strategy and Development Direction - The company is focusing on product innovation and operational improvements to return to growth and profitability, with a particular emphasis on AI integration in learning experiences [4][11] - The strategy includes increasing consumer pricing and enhancing the onboarding experience to improve retention and engagement [10][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to control its destiny despite macroeconomic uncertainties, noting healthy customer interactions and demand for tutoring services [39] - The company expects to achieve adjusted EBITDA and operating cash flow positivity by Q4 2025, with a projected ARPAM above $370 by year-end [21][75] Other Important Information - Gross profit for Q1 2025 was $27.6 million, with a gross margin of 58%, down from 68% in the same period last year, primarily due to investments in tutor incentives [14][15] - The company has zero debt and cash and cash equivalents of $44.9 million as of March 31, 2025, providing ample liquidity for growth initiatives [19] Q&A Session Summary Question: Update on Varsity Tutors for Schools and bookings pipeline - Management highlighted strong progress in product innovation and execution, with positive signals from school districts regarding the new Live plus AI paid platform [25][28] Question: Macro impact on Nerdy compared to other ad tech firms - Management stated that they have not connected macroeconomic factors to business performance, indicating a healthy demand for tutoring services [39] Question: Which AI products are expected to drive engagement and retention? - AI session summaries have been highlighted as a significant feature that enhances engagement and provides valuable insights to parents and students [47][49] Question: Timing gap between investments and price increases affecting gross margins - Management acknowledged that lower gross margins in Q1 were due to investments in tutor incentives, but expects sequential improvements as the mix shifts towards new customers [63][64] Question: Monthly recurring revenue dynamics in March - Management noted that March saw a positive inflection in monthly recurring revenue, driven by improved customer onboarding and product enhancements [72][74]