Group 1 - J.P. Morgan analyst Bryan M. Smilek reiterated an Underweight rating on Nerdy Inc shares despite the company exceeding expectations in its fourth-quarter results [1] - Nerdy reported a 26% year-over-year improvement in engagement and better retention in the fourth quarter, driven by AI-driven optimizations [2] - The company raised its subscription product Average Revenue Per Member (ARPM) by 15-20%, with February ARPM tracking over $400, which is expected to foster consumer revenue growth in 2025 [2] Group 2 - On the institutional side, Nerdy adjusted its investments to align with a more stable sales cycle following uncertainties related to ESSER and N-T funding [3] - The company secured 91 paid contracts resulting in $4.6 million in bookings, extending platform access to over 5 million students across approximately 1,100 school districts [4] - Nerdy plans to integrate AI across its VTS offerings, expecting product upgrades and streamlined operations to drive institutional revenue growth in the second half of the year [5] Group 3 - The analyst expressed optimism about improved trends across consumer, institutional, and adjusted EBITDA, although visibility remains uncertain [5] - Key growth initiatives like Learning Memberships and VTS show potential for scaling and profitability, but challenges and execution risks persist [5] - Stronger execution and scalability across active members and VTS, along with positive adjusted EBITDA and free cash flow generation, could materialize in 2025 [6]

Core Insights - Nerdy reported a loss per share of $0.09, better than the consensus estimate of a loss of $0.14 per share [2] - Sales reached $48 million, exceeding the company's guidance of $44 million to $47 million and Wall Street's estimate of $45 million [2] - However, sales declined by 13% year-over-year, and gross margin fell to 66.6% from 71.3% in the previous year [3] - The net loss widened to $15.7 million compared to a loss of $9.2 million in the same quarter last year [3] - Active members decreased by about 8%, from 40,700 to 37,500 [4] Future Outlook - For the upcoming quarter, Nerdy expects sales between $45 million to $47 million, indicating a 14% decline from the previous year [5] - Adjusted EBITDA is projected to be a loss of $7 million, a significant drop from a positive EBITDA of $24,000 in the first quarter of 2024 [6]

Financial Data and Key Metrics Changes - In Q4 2024, Nerdy reported revenue of $48 million, which was above the guidance range of $44 million to $47 million, but represented a 13% decrease year-over-year from $55.1 million in Q4 2023 [29] - Gross profit for Q4 was $31.9 million, a 19% decline year-over-year, with a gross margin of 66.6% compared to 71.3% in the same period of 2023 [33] - Non-GAAP adjusted EBITDA loss was $5.5 million, better than the guidance of negative $7 million to negative $10 million, but compared to a positive adjusted EBITDA of $3 million in Q4 2023 [38][40] Business Line Data and Key Metrics Changes - Consumer Learning Membership subscription revenue was $39.2 million, accounting for 82% of total revenue, with active members at 37,500 and an average revenue per member (ARPM) of $302 [30] - The institutional business generated $6.8 million in revenue, representing 14% of total revenue, with 91 contracts executed yielding $4.6 million in bookings [31] - The strategy to introduce school districts to the platform resulted in 43% of paid contracts and 36% of total bookings value coming from school district partners in Q4 [25] Market Data and Key Metrics Changes - Consumer engagement rose 26% year-over-year in Q4, with improvements in onboarding and tutor matching leading to higher retention rates [23] - The company enabled access to the Varsity Tutors platform for an additional 600,000 students, bringing the total to 5 million students across over 1,100 school districts [31] Company Strategy and Development Direction - The company unified its consumer and institutional offerings, improved marketplace technology, and enhanced subscription offerings, focusing on AI-driven innovations to optimize the learning experience [9][10] - Plans for 2025 include further AI product enhancements, such as Tutor Copilot and advanced predictive analytics, aimed at improving engagement and operational efficiency [15][18] - The company aims to shift focus towards paid access to the Varsity Tutors platform, leveraging AI-led product enhancements to drive growth [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the Q4 performance, highlighting improvements in marketplace infrastructure and product innovations that are expected to drive retention and growth [49] - The outlook for 2025 includes expectations for a return to growth in consumer revenues, driven by product innovation and operational improvements [41] - Institutional revenue is anticipated to be flat in the first half of 2025 due to lower bookings in 2024, with growth expected to resume in the back-to-school period [88] Other Important Information - The company has zero debt and cash and cash equivalents of $52.5 million, providing ample liquidity for growth initiatives [40] - The company implemented new expert incentives to drive engagement and retention, which have already shown positive results [34] Q&A Session Summary Question: Can you help us bridge the assumptions on the active learning numbers and ARPM for Q1? - Management expressed confidence in Q4 performance and noted that tutor incentives have significantly improved engagement and retention, which they believe will positively impact Q1 [50][51] Question: What drove the pricing decision for new customers in Q1? - A 20% price increase was implemented due to added value from product enhancements and tutor incentives, which management believes are justified [53] Question: Are you starting to see returns from the localization of the sales force? - Management indicated that product enhancements and a focus on AI capabilities are expected to drive growth, despite a cautious approach to the sales force due to funding uncertainties [74] Question: How much of a benefit have you contemplated from AI tools within your fiscal 2025 outlook? - Management is optimistic about the potential of AI tools to enhance customer activation and process automation, which they believe will be self-funding over the year [80][81] Question: What factors do you think will drive growth expectations? - Management highlighted retention improvements, higher ARPM, and enhanced product offerings as key drivers for returning to growth [86]

Nerdy, Inc. (NYSE:NRDY) Q4 2024 Results Conference Call February 27, 2025 5:00 PM ET Company Participants T.J. Lynn - Associate General Counsel Chuck Cohn - Founder, Chairman and Chief Executive Officer Jason Pello - Chief Financial Officer Conference Call Participants Ross Sandler - Barclays Yi Fu Lee - Cantor Fitzgerald Ross Sandler - Barclays T.J. Lynn Good afternoon, and thank you for joining us for Nerdy's Fourth Quarter 2024 Earnings Call. With me are Chuck Cohn, Founder, Chairman and Chief Executive ...

Employee and Workforce Management - As of February 13, 2025, the company had approximately 600 full and part-time employees and 400 globally-sourced independent contractors[64] - The company emphasizes the importance of employee retention, growth, and development, offering competitive compensation and training opportunities[66] - In July 2023, the Company implemented workforce reductions to enhance operational efficiency through automation and new revenue relationships[394] - The company completed workforce reductions of approximately 17% of its total workforce in December 2022, primarily affecting variable hourly roles[395] Financial Performance - Revenue for 2024 was $190,231, a decrease of 1% from $193,399 in 2023[311] - Gross profit for 2024 was $128,394, down from $136,447 in 2023, reflecting a gross margin of approximately 67.5%[311] - Operating loss increased to $(70,108) in 2024 compared to $(57,571) in 2023[311] - Net loss for 2024 was $(67,142), slightly improved from $(67,669) in 2023[314] - Total assets decreased to $92,507 in 2024 from $124,744 in 2023, a decline of approximately 26%[316] - Cash and cash equivalents at the end of 2024 were $52,541, down from $74,824 in 2023, representing a decrease of 30%[316] - Total liabilities decreased to $31,394 in 2024 from $39,138 in 2023, a reduction of about 20%[316] - Total comprehensive loss attributable to Class A common stockholders was $(42,597) in 2024, compared to $(40,131) in 2023[314] - The total accumulated deficit increased to $515,281,000 as of December 31, 2023, compared to $475,107,000 at the end of 2022, indicating ongoing financial challenges[321] - The company reported a net loss attributable to Class A common stockholders of $42.585 million for the year ended December 31, 2024, compared to a net loss of $40.174 million in 2023[410] Revenue Recognition and Accounting Policies - The Company recognized revenue from contracts with Learners and Institutions as performance obligations are satisfied, with revenue from Learning Memberships recognized monthly[345][349] - Revenue is recognized for unredeemed payments for services over the period in which the performance obligation is satisfied, based on historical usage patterns[348][351] - The Company has adopted new accounting standards that will expand disclosures related to income taxes but will not materially impact financial statements[382] Regulatory and Compliance Issues - The company is subject to various regulatory and administrative investigations, which could have a material impact on its business and financial condition[67] - The company monitors changes to applicable regulations and designs its policies to comply with existing interpretations[72] Intellectual Property and Trademarks - The company relies on a range of intellectual property protections, including trademarks and copyrights, to safeguard its proprietary rights[74] - The company has an ongoing trademark registration program and has several registered and pending trademarks in the U.S. and foreign jurisdictions[75] Market Presence and Consumer Awareness - The company believes its online learning platform is more efficient, convenient, effective, and affordable compared to offline solutions, which is a significant factor in driving consumer adoption[61] - The company has scaled to millions of users, but many consumers and institutions in the U.S. remain unaware of the online solutions offered[63] - Nerdy Inc. has expanded its offerings to include Varsity Tutors for Schools, enhancing its market presence in institutional education[324] Cash Flow and Liquidity - Net cash used in operating activities was $(15,603) in 2024, compared to $(7,560) in 2023, indicating increased cash outflow[319] - Cash and cash equivalents decreased to $52.541 million in 2024 from $74.824 million in 2023[414] Stock and Equity - The number of Class A common stock shares increased to 106,416 as of December 31, 2023, up from 95,296 shares at the end of 2022, indicating growth in equity financing[321] - The weighted-average shares of Class A common stock for basic and diluted loss per share increased to 111,695 in 2024 from 97,157 in 2023[410] Expenses and Cost Management - Marketing expenses for the years ended December 31, 2024, 2023, and 2022 were $39,593, $43,043, and $45,113 respectively, indicating a decrease of 8.5% from 2023 to 2024[370] - The cost of revenue increased to $61.837 million in 2024 from $56.952 million in 2023, while employee-related expenses rose to $94.937 million from $85.756 million[458] Restructuring and Legal Matters - Total expected restructuring charges amount to $2.32 billion, with cumulative restructuring charges incurred to date also at $2.32 billion[397] - The Company expensed $1,700 million related to a legal settlement in 2023, which is included in general and administrative expenses[438]

Financial Performance - In Q4 2024, the company reported revenue of $48.0 million, exceeding guidance of $44 to $47 million, but down 13% year-over-year from $55.1 million in Q4 2023[24]. - The adjusted EBITDA loss was $5.5 million, better than the guidance range of negative $7.0 million to negative $10.0 million, compared to a non-GAAP adjusted EBITDA of $3.0 million in Q4 2023[24]. - The net loss for Q4 2024 was $15.7 million, compared to a net loss of $9.2 million in Q4 2023[40]. - Non-GAAP adjusted net loss for Q4 2024 was $7.0 million, a significant decline from non-GAAP adjusted net earnings of $2.2 million in Q4 2023[40]. - Revenue for Q4 2024 was $47.99 million, a decrease of 12.9% from $55.08 million in Q4 2023[49]. - Net loss for the year ended December 31, 2024, was $67,142 thousand, a slight improvement from a net loss of $67,669 thousand in 2023[56]. - Non-GAAP adjusted EBITDA loss for the year ended December 31, 2024, was $21,472 thousand, compared to a loss of $2,480 thousand in 2023[62]. - Non-GAAP adjusted net loss for the year ended December 31, 2024, was $26,053 thousand, compared to a loss of $5,984 thousand in 2023[64]. Revenue Breakdown - Consumer Learning Memberships generated $39.2 million in revenue, accounting for 82% of total revenue, with 37.5K Active Members as of December 31, 2024[24]. - Institutional revenue was $6.8 million, representing 14% of total revenue, with 91 contracts executed yielding $4.6 million in bookings[24]. - Consumer revenue for Q4 2024 was $40.99 million, down 6% from $43.53 million in Q4 2023[51]. - Institutional revenue for Q4 2024 was $6.83 million, a decline of 40% from $11.34 million in Q4 2023[51]. Expenses - Sales and marketing expenses for Q4 2024 were $18.4 million, a decrease of 2.1% from $18.8 million in Q4 2023[34]. - For the year ended December 31, 2024, sales and marketing expenses increased to $71.6 million, up 4.5% from $68.5 million in 2023[34]. - General and administrative expenses for Q4 2024 were $29.9 million, a decrease of 2.6% from $30.7 million in Q4 2023[38]. - General and administrative expenses for the year ended December 31, 2024, were $126,879 thousand, slightly up from $125,570 thousand in 2023[60]. Cash and Liquidity - The company has $52.5 million in cash with no debt, providing ample liquidity to fund business operations and growth initiatives[24]. - As of December 31, 2024, cash and cash equivalents were $52.5 million, down from $74.8 million at the end of 2023[54]. - Cash, cash equivalents, and restricted cash at the end of 2024 were $52,673 thousand, down from $75,140 thousand at the end of 2023[56]. - Cash used in operating activities increased to $15,603 thousand in 2024 from $7,560 thousand in 2023[56]. Membership and User Metrics - Active Members as of December 31, 2024, decreased by 8% year-over-year to 37.5 thousand, compared to 40.7 thousand in 2023[71]. - Active Experts increased by 17% year-over-year to 20.2 thousand in 2024, up from 17.2 thousand in 2023[71]. Future Outlook - The company expects first quarter 2025 revenue in the range of $45-47 million and full year revenue between $190-200 million[30]. - Full year adjusted EBITDA is projected to be negative $8 million to negative $18 million, with expectations of returning to positive adjusted EBITDA and cash flow in Q4 2025[30][29]. - The company anticipates continued improvements in sales and marketing leverage and growth in its Institutional business for 2025[85]. Risks and Challenges - The company faces significant risks that could cause actual results to differ materially from forward-looking statements, including evolving offerings and historical net losses[87]. - There are concerns regarding the ability to acquire and retain customers, as well as to scale up both Consumer and Institutional businesses[87]. - The company has a history of negative operating cash flows, which may necessitate seeking additional sources of liquidity[87]. - Risks associated with intellectual property claims could impact the company's operations and financial results[87]. - The classification of certain contractors as independent may pose additional risks to the company's business model[87]. - The company is exposed to litigation, regulatory, and reputational risks, particularly due to the involvement of minors in its learning programs[87]. - Cyber-related incidents and their potential impacts on business operations are a significant concern for the company[87]. - The development and use of artificial intelligence present regulatory uncertainties that could affect the company's future[87]. - The company acknowledges the possibility of adverse effects from economic, business, and competitive factors[87]. - Managing rapid growth poses additional risks that the company must navigate[87]. Product Development - The company introduced AI-driven products, including AI Lesson Plan and Practice Problem Generators, aimed at enhancing the learning experience and reducing operational costs[6][9]. - The company successfully expanded its platform to over 5 million students across more than 1,100 school districts, with 43% of paid contracts and 36% of total bookings value coming from these partnerships in Q4[16][24].

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Financial Data and Key Metrics Changes - Revenue for Q3 2024 was $37.5 million, a decrease of 7% year-over-year, primarily due to lower Average Revenue Per Member (ARPM) in the Consumer business [22][24] - Gross profit was $26.5 million, down 9% year-over-year, with a gross margin of 70.5%, compared to 72.4% in the same period last year [26] - Non-GAAP adjusted EBITDA loss was $14 million, which was better than the guidance range of negative $17 million to negative $19 million, but worse than the loss of $8.2 million in the same period last year [29][30] Business Line Data and Key Metrics Changes - Consumer Learning Memberships generated $31.4 million in subscription revenue, representing 84% of total revenue, with active members increasing by 1% year-over-year to 39,700 [23] - Institutional business revenue was $5.4 million, a decrease of 3% year-over-year, accounting for 14% of total revenue [24] - 32% of paid contracts and 22% of total bookings value in Q3 came from school district partners who initially partnered via free access to the platform and later converted to paid offerings [16][24] Market Data and Key Metrics Changes - The company enabled access to the Varsity Tutors for Schools platform for an additional 1.1 million students, bringing the total to 4.4 million students across nearly 900 school districts [14] - Student engagement with the platform was stronger than expected as students returned to school, indicating a growing need for support beyond traditional classroom settings [15][44] Company Strategy and Development Direction - The company is focusing on scaling its product offerings and enhancing the onboarding experience to improve customer retention and lifetime value [6][10] - Investments were made in the Varsity Tutors for Schools go-to-market organization and platform infrastructure to drive market penetration and bookings growth [12][25] - The strategy of providing free access to the platform is aimed at building relationships with school districts and positioning for sustainable long-term growth in the K-12 market [16][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand for live tutoring, citing growing recognition of high-dosage tutoring as an effective learning acceleration method [21] - The company expects revenue for Q4 2024 to be in the range of $44 million to $47 million, with full-year revenue guidance of $186 million to $189 million [31] - Adjusted EBITDA for Q4 is expected to be in the range of negative $7 million to negative $10 million, with a full-year expectation of negative $23 million to negative $26 million [32] Other Important Information - The company has a strong balance sheet with cash and cash equivalents of $65 million and no debt, providing ample liquidity for growth initiatives [30] - Sales and marketing expenses increased to $20.3 million, driven by investments in the Institutional sales organization, while consumer sales and marketing efficiency gains led to a decrease in customer acquisition costs [27][28] Q&A Session Summary Question: Visibility into stability in the consumer side of the business and engagement strategies - Management noted that retention among higher frequency tutoring customers improved, and product enhancements have led to better engagement and retention metrics [35][38] Question: Decline in Institutional revenue and monetization progress - Management attributed the decline to challenges with a new sales team and an overly focused strategy on the ESSER deadline, but expressed optimism about long-term growth through platform access strategies [40][42][44] Question: Expectations for active member growth versus ARPM dynamics in Q4 - Management expects to end the year with about 36,000 active members and ARPM to improve to around $310, driven by a focus on higher frequency customers [47]

Company Performance - Nerdy Inc. reported a quarterly loss of $0.14 per share, better than the Zacks Consensus Estimate of a loss of $0.23, and compared to a loss of $0.13 per share a year ago, indicating an earnings surprise of 39.13% [1] - The company posted revenues of $37.53 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 2.47%, although this is a decline from year-ago revenues of $40.3 million [2] - Over the last four quarters, Nerdy has surpassed consensus EPS estimates four times and topped consensus revenue estimates three times [2] Stock Performance - Nerdy shares have declined approximately 74.3% since the beginning of the year, contrasting with the S&P 500's gain of 24.3% [3] - The current consensus EPS estimate for the upcoming quarter is -$0.09 on revenues of $57.06 million, and for the current fiscal year, it is -$0.48 on revenues of $198.39 million [7] Industry Outlook - The Schools industry, to which Nerdy belongs, is currently ranked in the top 12% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% of industries [8] - The performance of Nerdy may be influenced by the overall outlook for the industry, as empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions [5][8]

Membership Growth - Active Members increased to 39.7 thousand as of September 30, 2024, reflecting a year-over-year growth of 1%[55] - Active Experts rose to 9.5 thousand for the three months ended September 30, 2024, marking a 6% increase compared to the same period in 2023[56] Revenue Performance - Revenue for the three months ended September 30, 2024, was $37,530 thousand, a decrease of 7% from $40,296 thousand in the prior year[57] - Revenue for the nine months ended September 30, 2024, was $142,241 thousand, an increase of 3% from $138,315 thousand in the prior year[59] - Institutional revenue for the nine months ended September 30, 2024, increased by 27% to $28,451 thousand from $22,474 thousand in the previous year[59] Profitability Metrics - Gross profit for the three months ended September 30, 2024, was $26,453 thousand, down 9% from $29,188 thousand in the same period last year[61] - The gross margin for the three months ended September 30, 2024, was 70%, compared to 72% for the same period in 2023[61] - Operating loss for the three months ended September 30, 2024, was $(25,724) thousand, compared to $(25,553) thousand in the same period last year[57] - Net loss attributable to Class A common stockholders for the three months ended September 30, 2024, was $(15,900) thousand, a 42% increase from $(12,290) thousand in the prior year[57] Expense Management - Sales and marketing expenses for the three months ended September 30, 2024, increased by $1,221 thousand, or 7%, excluding stock-based compensation[64] - General and administrative expenses for the three months ended September 30, 2024, decreased by $3,646 thousand, or 10%, compared to the same period in 2023[65] - Product and development costs for the three months ended September 30, 2024, increased by $1,188 thousand, or 12%[65] Cash Flow and Liquidity - Cash used in operating activities for the nine months ended September 30, 2024, increased by $1,773 thousand compared to the same period in 2023[72] - Cash used in investing activities for the nine months ended September 30, 2024, was $5,700 thousand, an increase from $3,923 thousand in the same period in 2023[73] - As of September 30, 2024, the company had cash and cash equivalents totaling $65,002 thousand, down from $74,824 thousand as of December 31, 2023[68] - The company expects its cash on hand to be sufficient to satisfy future cash requirements within the next twelve months[69] Market Risks and Future Outlook - The company incurred cumulative losses from operations and may incur additional losses in the future[68] - The company had no debt obligations as of September 30, 2024[69] - The company expects improvements in gross margin due to recent enhancements in marketplace infrastructure systems[61] - The company's exposure to market risk, including foreign currency exchange rates and interest rates, is considered immaterial[82] - Interest income for the three months ended September 30, 2024, was $768 thousand, a decrease from $844 thousand in the same period in 2023[67]