NRDY — Nerdy, Inc.

Summary of Nerdy's Q1 2026 Earnings Call

1. Key Financial Results and Metrics:

• Revenue: $48.7 million, exceeding guidance of $46 million to $48 million, and up 2% year-over-year.
• Non-GAAP Adjusted EBITDA: Positive $1.0 million, significantly improved from a loss of $6.4 million in Q1 2025.
• Adjusted EBITDA Margin: Expanded by over 1,500 basis points year-over-year, marking the third consecutive quarter of margin improvement.
• Gross Margin: 66.2%, up 820 basis points from 58.0% in Q1 2025.
• Active Members: 36,900, down 9% year-over-year, but the rate of decline has narrowed for three consecutive quarters.
• Average Revenue per Month (ARPM): $374, up 12% year-over-year.
• Cash Position: Ended the quarter with $44.7 million in cash and cash equivalents.

2. Strategic Updates and Business Highlights:

• Product Development: Transitioned to an AI-native code base, resulting in unprecedented product velocity and the launch of the new Learner Experience (V3).
• AI Concierge (Maya): Integrated into the V3 platform, enhancing user engagement and support.
• New Offerings: Launched mobile app, Tutor Gallery, Games, and On-Demand Courses, aimed at increasing user engagement and retention.
• Institutional Market Expansion: Plans to leverage V3 for broader institutional offerings beyond K-12 tutoring.

3. Forward Guidance and Outlook:

• Q2 2026 Revenue Guidance: Expected to be between $42 million and $44 million.
• Full Year 2026 Revenue Guidance: Anticipated in the range of $180 million to $190 million.
• Adjusted EBITDA Guidance: Q2 expected to be negative $2 million to breakeven; full year expected to be approximately breakeven.
• Active Member Growth: Expected to return to positive growth by the end of 2026, driven by improved retention and product enhancements.

4. Bad News, Challenges, or Points of Concern:

• Active Member Decline: Although the rate of decline is narrowing, active members decreased by 9% year-over-year.
• Institutional Revenue: Institutional revenue decreased by 1% year-over-year, with bookings for Varsity Tutors for Schools significantly lower than the previous year.
• Seasonal Weakness: Q2 and Q3 are typically weaker quarters, which may impact revenue and member growth.
• Price Increase Impact: The upcoming lapsing of price increases may moderate ARPM growth in the coming quarters.

5. Notable Q&A Insights:

• Retention and Cohort Performance: Management expressed confidence in returning to active member growth, citing improved retention metrics from new cohorts on the V3 platform.
• Migration Timeline: The company aims to migrate all existing customers to the V3 platform by the end of the current quarter, with expectations of realizing financial benefits over time.
• Churn Trends: Improvements in churn rates were noted, with positive early signals from new customer cohorts, although still early in the year.
• Long-term Growth Strategy: The focus remains on enhancing product offerings and leveraging AI to improve operational efficiency and customer retention.

This earnings call reflects Nerdy's strategic pivot towards AI-driven product development and operational efficiency, while also highlighting ongoing challenges in member growth and institutional revenue.