Nerdy, Inc. Q3 FY2025 earnings call

• Faced challenges in back-to-school season with product launch delays and operational issues due to technical debt. Started replatforming using AI-native approaches, targeting 100% traffic on new code bases by end of November. 2.0 version of Live Learning Platform launched with 50% audio/video error reduction and 40% cost savings per session. Rolled out unified student and tutor experiences. AI-driven wins include better site conversion, reduced tutor replacement rate. Strengthened operational leadership with new COO and 13 senior leaders. Continued path to profitability with 960 basis points improvement in non-GAAP adjusted EBITDA margin.

Third quarter revenue was $37 million, within the guidance range of $37 million to $40 million, a 1% year-over-year decrease from $37.5 million. Consumer revenue was $33 million, representing 89% of total company revenue, with Learning membership revenue up 5% year-over-year. Institutional revenue was $3.7 million, 10% of total. Gross margin improved sequentially by approximately 140 basis points. Headcount was down by ~27% year-over-year. Non-GAAP adjusted EBITDA margin improved 960 basis points year-over-year.

Fourth quarter revenue guidance: $45 million to $47 million. Full year revenue guidance: $175 million to $177 million. Fourth quarter non-GAAP adjusted EBITDA loss guidance: $2 million to breakeven. Full year non-GAAP adjusted EBITDA loss guidance: $19 million to $21 million. Expect to end the year with $45 million to $48 million in cash, including $20 million from new term loan.

• Technical debt from growing systems slowed product velocity and led to product delays. Funding delays in Institutional business due to federal and state funding issues impacting tutoring contracting and program start dates.

Q: How will the new management structure impact speed of execution and KPIs?

A: Centralizing control and simplifying structures will link product engineering and operations, leading to faster product velocity, impacting engagement metrics, revenue, and cost removal.

Q: What's the confidence in not having continued drag from missing back-to-school peak?

A: By end of month, nearly 100% traffic on new code bases, sequential improvements in metrics like MRR, and positive trends as school year progresses.

Q: Details on funding delays and benefits of new Varsity Tutors for Schools experience?

A: Funding delays due to government/state funding issues. New Varsity Tutors for Schools experience aligns with school intervention frameworks, unifies AI offerings, and provides proactive intervention opportunities.

Q: How will Live Learning Platform translate to revenue growth and cost savings?

A: Lower marginal costs per session, improved reliability boosting retention, reduced customer service costs, and more interactive experience driving retention.

Q: First 100-day plan with COO and senior executives and plan to increase Active Members?

A: Focus on product velocity, collapsing decision-making, improving funnel predictability, efficiency, and reliability, with recent team helping drive EBITDA margin improvement.