Nerdy (NRDY) - 2025 Q2 - Quarterly Results

A Note to Our Shareholders 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 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] 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 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] - 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] - 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] Real-Time AI for Tutors 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] - 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] Real-Time AI for Students 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] - 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] Real-Time AI for Teachers and School Districts 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] - 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] AI Practice Hub 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] - Users can generate personalized content on demand and leverage a rich library of interactive content[20] Agentic Practice Problems 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] Multi-Session & Visual Summaries 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] - 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] Institutional Customer Program Delivers Successful Student Outcomes 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][26] - The program leveraged AI-powered student grouping, customized AI lesson plans, and AI tutoring tools to enhance tutoring effectiveness[25] - 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] In Closing 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] - The back-to-school season will significantly enhance Live+AI™ capabilities to strengthen relationships with all service audiences[28] Second Quarter Financial Highlights This section summarizes the company's financial performance in the second quarter, including revenue, membership growth, gross margin, and adjusted EBITDA Revenue Performance 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] - 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] Consumer Learning Membership Growth 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] Institutional Business Strategy 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] Gross Margin Analysis 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] - Q2 gross margin improved sequentially, benefiting from price increases implemented for new consumer customers in Q1 2025[32] Path to Profitability 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] - The company expects to achieve non-GAAP adjusted EBITDA profitability in Q4 2025[32] Adjusted EBITDA Performance 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] - Adjusted EBITDA outperformed expectations primarily due to improved gross margin and lower marketing and general and administrative expenses[35] Liquidity and Capital Resources 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 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 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] - Institutional revenue is projected to return to year-over-year growth in Q4 2025[38] 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] Financial Discussion This section provides a detailed discussion of the company's financial performance, including revenue, gross profit, operating expenses, and net loss 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] - 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] Gross Profit and Gross Margin 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] - Q2 gross margin improved sequentially, benefiting from price increases implemented for new consumer customers in Q1 2025[43] Sales and Marketing Expenses 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] General and Administrative Expenses 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] Net Loss, Non-GAAP Adjusted Net Loss, and Non-GAAP Adjusted EBITDA (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] - Adjusted EBITDA outperformed expectations primarily due to improved gross margin and lower marketing and general and administrative expenses[52] Liquidity and Capital Resources 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 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] - 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] Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including statements of operations, revenue breakdown, balance sheets, and cash flows Statements of Operations 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 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 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 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) 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 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 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 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 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) 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 This section defines and presents key operating metrics and non-GAAP financial measures, along with forward-looking statements Key Operating Metrics 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] - 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] - Active experts are defined as the number of experts who have tutored one or more sessions during a given period, including institutional business[80] 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 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] - Non-GAAP adjusted net income (loss) is defined as net income or loss, excluding non-cash stock-based compensation expense and restructuring costs[84] - 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] Forward-Looking Statements 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] - 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][94]