Nerdy Announces Second Quarter 2024 Financial Results

Rhea-AI Summary

Nerdy Inc. (NYSE: NRDY) reported Q2 2024 financial results with revenue of $51.0 million, up 4% year-over-year. Key highlights include:

- Learning Memberships revenue: $36.4 million (72% of total revenue)
- Institutional revenue: $11.1 million (21% of total revenue), up 33% YoY
- Gross margin: 65.7%, down from 69.8% in Q2 2023
- Net loss: $14.4 million
- Non-GAAP adjusted EBITDA loss: $2.1 million

Nerdy expects Q3 2024 revenue between $35-$38 million and full-year 2024 revenue of $196-$204 million. The company anticipates a return to profitable growth by year-end.

Positive

• Revenue increased 4% year-over-year to $51.0 million
• Institutional revenue grew 33% year-over-year to $11.1 million
• Active Members increased 15% year-over-year to 35,500
• Varsity Tutors for Schools executed 56 contracts, yielding $4.0 million in bookings
• Company maintains a strong liquidity position with $69.8 million in cash and no debt

Negative

• Net loss increased to $14.4 million from $5.6 million in Q2 2023
• Gross margin decreased to 65.7% from 69.8% in Q2 2023
• Non-GAAP adjusted EBITDA loss of $2.1 million compared to $1.3 million profit in Q2 2023
• Negative operating cash flow of $5.6 million, worsening from $4.5 million in Q2 2023
• Q3 2024 guidance suggests a significant revenue decline compared to Q2 2024

Insights

Financial Analyst

Nerdy's Q2 2024 results show mixed signals. While revenue grew 4% YoY to $51.0 million, in line with guidance, the company reported a net loss of $14.4 million, widening from $5.6 million in Q2 2023. The transition to Learning Memberships is progressing, now accounting for 72% of total revenue. However, gross margin declined to 65.7% from 69.8% last year, primarily due to higher tutoring session utilization and increased costs in the Institutional business.

The Institutional segment shows promise, growing 33% YoY, but investments in sales and product development are impacting profitability. With $69.8 million in cash and no debt, Nerdy has a solid financial position to fund growth initiatives. However, the company's guidance for Q3 and full-year 2024 suggests continued challenges, with expected losses in adjusted EBITDA. Investors should monitor the company's ability to achieve its goal of returning to profitable growth by year-end.

Market Research Analyst

Nerdy's Q2 results reflect the ongoing transformation in the edtech sector. The company's pivot to Learning Memberships and focus on the Institutional market demonstrate adaptability to changing consumer preferences and market dynamics. The 15% YoY growth in Active Members to 35.5K indicates growing traction for their subscription model.

However, the decrease in ARPM (Average Revenue Per Member) in the Consumer business is concerning and may signal pricing pressures or shifts in product mix. The expansion of Varsity Tutors for Schools, with 56 new contracts and $4.0 million in bookings, shows potential in the B2B education market. The company's strategy to prioritize platform access over immediate revenue gains could pay off in the long term, but it's creating near-term financial pressures. As the edtech landscape evolves post-pandemic, Nerdy's ability to balance growth and profitability will be important for its market position.

Nerdy delivers revenue of $51.0 million in the second quarter, while also enabling access to the Varsity Tutors for Schools platform for 1.1 million students; bringing the total to 3.3 million students

ST. LOUIS--(BUSINESS WIRE)-- Nerdy Inc. (NYSE: NRDY) today announced financial results for the second quarter ended June 30, 2024.

Nerdy Q2 2024 Financial Highlights (Graphic: Business Wire)

“During the second quarter, we continued to scale the winning product for every Learner, expand the number of Learners we can impact and lay the foundation to deliver profitable growth. As we enter the back-to-school selling season, we are focused on ensuring our marketplace delivers an exceptional learning experience for our customers. We believe the recent convergence of our Consumer and Institutional platform, coupled with a focus on our core value proposition in the Consumer business and the expansion of the Varsity Tutors for Schools go-to-market teams, will enable our return to durable and profitable growth as we exit the year,” said Chuck Cohn, Founder, Chairman and Chief Executive Officer of Nerdy Inc.

Please visit the Nerdy investor relations website https://www.nerdy.com/investors to view the Nerdy Q2 Shareholder Letter on the Quarterly Results Page.

Financial and Operating Highlights

• Revenue In Line with Expectations – In the second quarter, Nerdy delivered revenue of $51.0 million, in the middle of our guidance range of $50-52 million, and represented an increase of 4% year-over-year from $48.8 million during the same period in 2023. Revenue growth in the current year period was driven by the continued scaling of our Consumer and Institutional businesses, partially offset by lower ARPM in our Consumer business. Additionally, revenue for the three months ended June 30, 2023 included legacy Package revenue of $4.9 million that did not recur in the current year period due to the completion of the transition to Learning Memberships in our Consumer business.
• Learning Memberships – Revenue recognized in the second quarter from Learning Memberships was $36.4 million (up 2% from Q2 2023) and represented 72% of total Company revenue. Active Members of 35.5K as of June 30, 2024 were up 15% year-over-year.
• Institutional – In the second quarter, Institutional delivered revenue of $11.1 million, an increase of 33% year-over-year, and represented 21% of total revenue. Varsity Tutors for Schools executed 56 contracts, yielding $4.0 million of bookings. Bookings numbers reflect a focus on increasing access to Varsity Tutors for School’s platform, and hiring and onboarding sales personnel in service of and optimizing for the back-to-school buying period and the longer-term market opportunity within Institutional.
• Gross Margin – Gross margin was 65.7% for the three months ended June 30, 2024, compared to a gross margin of 69.8% during the comparable period in 2023. The decrease in gross margin was primarily due to higher utilization of tutoring sessions across our new access-based products, coupled with higher tutor substitution costs within our Institutional business in a seasonally high period in the school year.
• Adjusted EBITDA Loss at the Top End of Guidance Range – Net loss was $14.4 million in the second quarter versus a net loss of $5.6 million during the same period in 2023. Excluding non-cash stock compensation expenses and mark-to-market derivative adjustments, which were treated as adjustments for non-GAAP measures, non-GAAP adjusted net loss was ($3.1) million for the second quarter of 2024 compared to non-GAAP adjusted net earnings of $0.4 million in the second quarter of 2023. We reported a non-GAAP adjusted EBITDA loss of $2.1 million, at the top end of our guidance of negative $2.0 million to negative $4.0 million in non-GAAP adjusted EBITDA. This compares to non-GAAP adjusted EBITDA of $1.3 million in the same period one year ago. Non-GAAP adjusted EBITDA and non-GAAP adjusted EBITDA margin improvements relative to guidance were primarily driven by marketing spend and operating efficiency gains. Compared to last year, Non-GAAP adjusted EBITDA and non-GAAP adjusted EBITDA margin were lower primarily due to investments in the Varsity Tutors for Schools sales and government relations organizations, and product development to drive innovation and support our continued growth.
• Operating Cash Flow and Liquidity – Negative operating cash flow was $5.6 million in the second quarter of 2024 compared to negative operating cash flow of $4.5 million in the same period last year. Operating leverage stemming from our access-based subscription revenue business models were more than offset by investments in the Varsity Tutors for Schools sales and government relations organizations and product development to drive innovation and support our continued growth. With no debt and $69.8 million of cash on our balance sheet, we believe we have ample liquidity to fund the business and pursue growth initiatives.
• Third Quarter and Full Year 2024 Outlook – We are providing third quarter and updating full year revenue and adjusted EBITDA guidance.
  • Revenue Guidance: For the third quarter of 2024, we expect revenue in a range of $35 to $38 million. For the full year, we expect revenue in a range of $196-$204 million.
  • Non-GAAP Adjusted EBITDA Guidance: For the third quarter of 2024, we expect adjusted EBITDA in a range of negative $19 million to negative $17 million. For the full year, we expect adjusted EBITDA in a range of negative $21 million to negative $19 million. Consistent with prior guidance we expect a return to durable and profitable growth as we exit the year.

Webcast and Earnings Conference Call

Nerdy’s management will host a conference call to discuss its financial results on Thursday, August 8, 2024 at 5:00 p.m. Eastern Time. Interested parties in the U.S. may listen to the call by dialing 1-833-470-1428. International callers can dial 1-404-975-4839. The Access Code is 448060.

A live webcast of the call will also be available on Nerdy’s investor relations website at https://www.nerdy.com/investors. A replay of the webcast will be available on Nerdy’s website for one year following the event and a telephonic replay of the call will be available until August 15, 2024 by dialing 1-866-813-9403 from the U.S. or 1-929-458-6194 from all other locations, and entering the Access Code: 460825.

About Nerdy Inc.

Nerdy (NYSE: NRDY) is a leading platform for live online learning, with a mission to transform the way people learn through technology. The Company’s purpose-built proprietary platform leverages technology, including AI, to connect learners of all ages to experts, delivering superior value on both sides of the network. Nerdy’s comprehensive learning destination provides learning experiences across thousands of subjects and multiple formats—including Learning Memberships, one-on-one instruction, small group tutoring, large format classes, and adaptive assessments. Nerdy’s flagship business, Varsity Tutors, is one of the nation’s largest platforms for live online tutoring and classes. Its solutions are available directly to students and consumers, as well as through schools and other institutions. Learn more about Nerdy at https://www.nerdy.com.

Forward-looking Statements

All statements contained herein that do not relate to matters of historical fact should be considered forward-looking statements, including, without limitation, statements regarding our strategic priorities, including those related to enhancing the Learning Membership experience and on our expansion of freemium strategies; our anticipated return to durable and profitable growth as we exit the year; and our anticipated third quarter and full year 2024 outlook; as well as statements that include the words “expect,” “plan,” “believe,” “project,” and “may,” and similar statements of a future or forward-looking nature.

The information included herein and in any oral statements made in connection herewith may include “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions, or strategies regarding the future, including our expectations with respect to: the guidance with respect to our financial performance; continued improvements in sales and marketing leverage; the growth of our Institutional business; simplifying our operations model while growing our business; and the sufficiency of our cash to fund future operations. Additionally, any statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “approximately,” “believes,” “contemplates,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “outlook,” “plans,” “possible,” “potential,” “predicts,” “projects,” “should,” “seeks,” “will,” “would,” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements made herein relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements.

There are a significant number of factors that could cause actual results to differ materially from statements made herein or in connection herewith, including but not limited to, our limited operating history, which makes it difficult to predict our future financial and operating results; our history of net losses; risks associated with our ability to acquire and retain customers, operate, and scale up our Consumer and Institutional businesses; risks associated with our intellectual property, including claims that we infringe on a third-party’s intellectual property rights; risks associated with our classification of some individuals and entities we contract with as independent contractors; risks associated with the liquidity and trading of our securities; risks associated with payments that we may be required to make under the tax receivable agreement; litigation, regulatory and reputational risks arising from the fact that many of our Learners are minors; changes in applicable law or regulation; the possibility of cyber-related incidents and their related impacts on our business and results of operations; risks associated with the development and use of artificial intelligence and related regulatory uncertainty; the possibility that we may be adversely affected by other economic, business, and/or competitive factors; and risks associated with managing our rapid growth. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, risks detailed in our filings with the SEC, including our Annual Report on Form 10-K filed on February 27, 2024, as well as other filings that we may make from time to time with the SEC.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240808497404/en/

Investor Relations

investors@nerdy.com

Source: Nerdy Inc.

FAQ

What was Nerdy's revenue for Q2 2024?

Nerdy reported revenue of $51.0 million for Q2 2024, representing a 4% increase year-over-year.

How much did Nerdy's Institutional revenue grow in Q2 2024?

Nerdy's Institutional revenue grew 33% year-over-year to $11.1 million in Q2 2024.

What is Nerdy's revenue guidance for Q3 2024?

Nerdy expects revenue between $35 to $38 million for Q3 2024.

How many active members did Nerdy (NRDY) have as of June 30, 2024?

Nerdy had 35,500 active members as of June 30, 2024, which was a 15% increase year-over-year.

What was Nerdy's (NRDY) net loss for Q2 2024?

Nerdy reported a net loss of $14.4 million for Q2 2024.