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]

Membership and Revenue - Active Members as of March 31, 2025, decreased to 40.5 thousand, a 12% decline year-over-year compared to 46.1 thousand in March 31, 2024[67] - Average Revenue per Member per Month (ARPM) increased to $335 as of March 31, 2025, reflecting a 14% increase year-over-year from $293 in March 31, 2024[68] - Revenue for the three months ended March 31, 2025, was $47,595 thousand, an 11% decrease from $53,727 thousand in the same period of 2024[72] Profitability and Loss - Gross Profit for the three months ended March 31, 2025, was $27,611 thousand, resulting in a gross margin of 58%, down from 68% in the prior year[72] - Operating Loss for the three months ended March 31, 2025, was $(16,585) thousand, compared to $(12,853) thousand in the same period of 2024, reflecting a higher loss margin[72] Expert and Member Metrics - Active Experts decreased to 10.8 thousand for the three months ended March 31, 2025, a 12% decline from 12.3 thousand in the same period of 2024[70] Cash Flow and Expenses - Cash and cash equivalents as of March 31, 2025, totaled $44,922 thousand, down from $52,541 thousand as of December 31, 2024[87] - Cash used in operating activities for the three months ended March 31, 2025, was $(6,444) thousand, compared to cash provided of $4,353 thousand in the same period of 2024[92] - Sales and marketing expenses for the three months ended March 31, 2025, were $15,785 thousand, a 9% decrease from $17,392 thousand in the same period of 2024[80] - General and administrative expenses for the three months ended March 31, 2025, were $28,411 thousand, down 11% from $31,976 thousand in the same period of 2024[80] - Cash used in investing activities was $1,175 thousand for the three months ended March 31, 2025, compared to $2,221 thousand for the same period in 2024, primarily for capital expenditures related to internal use software and IT equipment[93] Company Classification and Future Outlook - The company continues to be classified as an "emerging growth company" and expects to remain so until the earlier of the fifth anniversary of its initial public offering or achieving total annual gross revenue of at least $1,235,000 thousand[106] - The company is also classified as a "smaller reporting company," allowing it to provide reduced disclosure obligations[108] Financial Risks and Uncertainties - The company has a history of net losses and negative operating cash flows, which may require it to seek other sources of liquidity[102] - The company faces risks associated with acquiring and retaining customers, as well as operating and scaling its Consumer and Institutional businesses[102] - The company has not disclosed any material changes to its critical accounting policies and estimates since its 2024 Annual Report[96] - The company has not issued any forward-looking statements regarding revenue growth or operational expectations, emphasizing the uncertainty of future results[100] - The company is exposed to various risks, including intellectual property claims and regulatory uncertainties related to artificial intelligence[102] - The company’s exposure to market risk, foreign currency exchange rates, and interest rates is considered immaterial[109]

Revenue Performance - Revenue for Q1 2025 was $47.6 million, a decrease of 11% year-over-year from $53.7 million in Q1 2024, primarily due to a lower number of Learning Memberships and lower Institutional revenue[29] - Learning Membership revenue accounted for 80% of total company revenue in Q1 2025, amounting to $37.9 million[29] - Institutional revenue was $9.4 million, representing 19% of total revenue, with 90 contracts executed yielding $4.0 million in bookings[29] - Revenue for Q1 2025 was $47.6 million, down 11% from $53.7 million in Q1 2024, with Consumer revenue at $38.0 million (80% of total) and Institutional revenue at $9.4 million (19% of total)[55][57] - For Q2 2025, revenue guidance is set between $45-48 million, with full-year revenue expectations increased to $191.5-200 million[36] Membership and Customer Metrics - Active Learning Memberships reached 40.5K as of March 31, 2025, with an Average Revenue per Member per Month (ARPM) of $335, reflecting a 14% increase from $293 in the previous year[10][29] - As of March 31, 2025, Active Members decreased to 40.5 thousand, a year-over-year decline of 12% compared to 46.1 thousand in March 31, 2024[77] - The Average Revenue Per Member (ARPM) increased to $335 as of March 31, 2025, reflecting a 14% year-over-year growth from $293 in March 31, 2024[77] - The company experienced a year-over-year decline in Active Members due to lower retention in older customer cohorts, particularly those with lower frequency Learning Memberships[73] - The increase in ARPM was attributed to a shift towards higher frequency Learning Memberships and price increases implemented in Q1 2025[74] Financial Performance - Gross margin for Q1 2025 was 58.0%, down from 68.0% in Q1 2024, primarily due to increased tutor incentives and higher session utilization[29] - Gross profit for Q1 2025 was $27.6 million, a decrease of $8.9 million or 24% compared to Q1 2024, with a gross margin of 58.0% versus 68.0% in the prior year[38] - Adjusted EBITDA loss for Q1 2025 was $6.4 million, at the top end of guidance, compared to a non-GAAP adjusted EBITDA of $24 thousand in Q1 2024[29] - Net loss for Q1 2025 was $16.2 million, compared to a net loss of $12.0 million in Q1 2024, with a non-GAAP adjusted net loss of $7.9 million versus $0.9 million in the prior year[46][69] - Non-GAAP adjusted EBITDA loss for Q1 2025 was $6.4 million, at the top end of guidance, compared to a non-GAAP adjusted EBITDA of $24,000 in Q1 2024[47][68] Expenses and Cost Management - Sales and marketing expenses for Q1 2025 were $15.8 million, a decrease of $1.6 million from $17.4 million in Q1 2024, reflecting improved marketing efficiency[40][41] - General and administrative expenses for Q1 2025 were $28.4 million, down $3.6 million from $32.0 million in Q1 2024, with non-GAAP adjusted expenses at $20.7 million compared to $21.4 million in the prior year[44][65] Future Outlook and Strategic Initiatives - The company expects a return to growth in Learning Membership revenue in Q2 2025, driven by improved customer acquisition and higher ARPM[25][31] - The introduction of AI-driven tools, such as Live + AI™, aims to enhance the learning experience and improve customer engagement, contributing to future growth[16][26] - The company plans to end 2025 with no debt and an estimated cash balance of $35-40 million, ensuring ample liquidity for growth initiatives[35] - The company expects price increases for new Consumer customers to improve gross margin throughout 2025[39] - The company is focusing on product enhancements to drive growth in the Institutional space despite near-term funding uncertainties[41] Cash Position and Liquidity - As of March 31, 2025, cash and cash equivalents were $44.9 million, down from $52.5 million at the end of 2024, indicating a strong liquidity position[50][59] Risk Factors and Management Metrics - The company acknowledges various risks that could impact future results, including customer acquisition challenges and regulatory uncertainties[92] - Non-GAAP adjusted EBITDA and net income measures are utilized to evaluate the company's operating performance, excluding non-cash stock compensation and restructuring costs[78][80] - Management uses non-GAAP metrics for planning and evaluating the effectiveness of strategic initiatives, which may not be directly comparable to GAAP measures[89] - The company emphasizes the importance of forward-looking statements regarding revenue growth and operational strategies for 2025[90] - The annualized run-rate is calculated based on the number of Active Members multiplied by average revenue per Learning Membership per month, providing increased forecasting visibility[85]

Company Performance - Nerdy Inc. (NRDY) has returned 1.2% year-to-date, outperforming the average loss of 5.3% in the Consumer Discretionary sector [4] - The Zacks Consensus Estimate for NRDY's full-year earnings has increased by 0.4% over the past quarter, indicating improved analyst sentiment and earnings outlook [3] Industry Comparison - Nerdy Inc. belongs to the Schools industry, which includes 17 companies and is currently ranked 68 in the Zacks Industry Rank; this industry has seen an average loss of 3% this year, showing that NRDY is performing better [5] - In contrast, PIGEON CORP (PGENY), another stock in the Consumer Discretionary sector, has a year-to-date return of 48.4% and belongs to the Consumer Products - Discretionary industry, which is ranked 216 and has declined by 9.8% this year [4][6] Sector Ranking - The Consumer Discretionary group, which includes Nerdy Inc., is currently ranked 14 within the Zacks Sector Rank, which evaluates the strength of 16 individual sector groups [2] - The Zacks Rank system, which Nerdy Inc. currently holds at 2 (Buy), emphasizes earnings estimates and revisions, suggesting potential for outperformance in the near term [3]

Group 1 - Nerdy Inc. has shown a year-to-date performance of approximately 1.2%, outperforming the average return of -1.5% for the Consumer Discretionary sector [4] - The company currently holds a Zacks Rank of 2 (Buy), indicating a positive outlook based on earnings estimates and revisions [3] - Over the past 90 days, the Zacks Consensus Estimate for Nerdy Inc.'s full-year earnings has increased by 12%, reflecting stronger analyst sentiment [3] Group 2 - Nerdy Inc. is part of the Schools industry, which consists of 18 companies and is currently ranked 28 in the Zacks Industry Rank [5] - The average return for the Schools industry so far this year is 2.7%, suggesting that Nerdy Inc. is slightly underperforming its industry [5] - In comparison, Ralph Lauren, another Consumer Discretionary stock, has a year-to-date return of 2.2% and also holds a Zacks Rank of 2 (Buy) [4][6]

Core Insights - Nerdy (NYSE: NRDY) experienced a significant late-year stock rally, achieving triple-digit growth, but is now facing challenges as the market stabilizes and lacks strong driving forces [1] - The emergence of technologies like Generative AI and the ongoing effects of the post-pandemic environment are creating new hurdles for the EdTech sector [1] Company Analysis - Nerdy is categorized as a pure-play in the EdTech industry, which is currently experiencing a slowdown after an initial surge [1] - The stock's impressive performance has been overshadowed by the decline of the Musk-Trump rally, indicating a shift in market sentiment [1] Industry Trends - The EdTech industry is grappling with the integration of advanced technologies such as Generative AI, which may disrupt traditional educational models [1] - The post-pandemic landscape continues to influence market dynamics, presenting both challenges and opportunities for companies within the sector [1]

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]