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NI

Nerdy Inc. (NRDY)·Q1 2025 Earnings Summary

Executive Summary

  • Revenue of $47.6M beat the top end of company guidance ($45–$47M), but declined 11% y/y; gross margin compressed to 58.0% (−1,000 bps y/y), and adjusted EBITDA loss was $6.4M, at the top end of guidance .
  • Consumer momentum improved: ARPM rose 14% y/y to $335, Active Members reached 40.5K, and monthly recurring Learning Membership revenue inflected positive y/y in March, supporting an expected return to Consumer revenue growth in Q2 .
  • Guidance: Q2 revenue $45–$48M; FY revenue low end raised to $191.5–$200M (from $190–$200M), FY adjusted EBITDA reaffirmed at −$8M to −$18M; management reiterated a path to adjusted EBITDA and operating cash flow positive in Q4 2025 .
  • Strategic levers: launch of Live + AI platform, tutor incentive model, ~16% headcount reduction, and AI-enabled workflow/productivity gains; cash $44.9M and no debt provide liquidity to execute .

What Went Well and What Went Wrong

  • What Went Well

    • Revenue beat the top end of guidance; adjusted EBITDA loss was better than the midpoint as cost actions and marketing efficiency helped offset gross margin pressure .
    • Consumer unit economics improved: ARPM rose to $335 (+14% y/y), Active Members were 40.5K, and MRR turned positive y/y in March; “Our first-quarter results underscore the power of our Live + AI platform…” — Chuck Cohn, CEO .
    • Execution on AI/productivity: Live + AI released; AI session summaries broadly rolled out; headcount cut by ~16%, with management highlighting operating leverage benefits from AI .

  • What Went Wrong

    • Topline declined 11% y/y and gross margin fell to 58.0% (from 68.0% a year ago) due to timing between tutor incentives and February price increases, plus higher tutoring utilization .
    • Institutional revenue fell to $9.4M (−21% y/y), with management citing cautious federal/state funding; bookings were $4.0M on 90 contracts .
    • Profitability pressure: net loss widened to $16.2M (vs. $12.0M y/y); adjusted EBITDA turned to −$6.4M (vs. ~$0 in Q1’24) on lower revenue and gross margin .

Financial Results

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$53.7 $37.5 $48.0 $47.6
Gross Margin %68.0% 70.5% 66.6% 58.0%
Net Loss ($USD Millions)$(12.0) $(25.0) $(15.7) $(16.2)
Diluted EPS ($)$(0.07) $(0.13) —$(0.09)
Adjusted EBITDA ($USD Millions)~$0.0 $(14.0) $(5.5) $(6.4)

Segment revenue mix (chronological for trend):

Segment Revenue ($USD Millions)Q1 2024Q3 2024Q1 2025
Consumer$41.602 $31.919 $38.013
Institutional$11.887 $5.429 $9.380
Other$0.238 $0.182 $0.202

KPIs (end of period unless noted):

KPIQ1 2024Q3 2024Q4 2024Q1 2025
Active Members (K)46.1 39.7 37.5 40.5
ARPM ($)$293 $302 $302 $335
Annualized Run-Rate Learning Membership Revenue ($M)——~$136 $162.6

Notes: Learning Membership revenue in Q1’25 was $37.9M (80% of total) . Gross profit was $27.6M in Q1’25 (−24% y/y) . Cash was $44.9M; no debt .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ2 2025—$45–$48M New
RevenueFY 2025$190–$200M $191.5–$200M Raised low end
Adjusted EBITDAQ2 2025—−$3M to −$6M New
Adjusted EBITDAFY 2025−$8M to −$18M −$8M to −$18M Maintained
Year-end CashFY 2025$35–$40M $35–$40M Maintained
Profitability MilestoneQ4 2025Adj. EBITDA & cash flow positive outlook Reiterated adj. EBITDA & operating cash flow positive Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
AI/Technology initiativesQ3: matching, onboarding, platform convergence . Q4: AI session summaries, lesson plan/practice generators, Tutor Copilot .Live + AI platform rollout; AI session insights broadly deployed; strong parent/teacher feedback .Accelerating AI deployment
Pricing/ARPMQ3: ARPM under pressure on low-frequency mix . Q4: ~20% price increase for new customers; ARPM $302 at YE .ARPM $335; CFO outlines path to $345 (Q2), $360 (Q3), $370 (Q4) .Improving ARPM trajectory
Gross marginQ4: GM 66.6%; guided sequential improvement with new pricing .GM 58.0% on incentives/utilization; mgmt expects sequential improvement through 2025 .Near-term pressure, improving through 2025
Institutional funding/strategyQ3: bookings below expectations; access-to-paid conversion strategy . Q4: moderated investment; cautious funding outlook .Q1 bookings $4.0M on 90 contracts; pipeline healthy but cautious on funding; push to Live + AI paid tier .Cautious but stabilizing
Headcount/AI productivityQ4: productivity programs; ~15% reduction planned and ~$6M savings .~16% headcount reduction executed; AI-enabled leverage emphasized .Operating leverage improving
Regulatory/policy backdrop—CEO cites Executive Order advancing AI in K–12, aligning with Live + AI Supportive framework emerging

Management Commentary

  • “Our first-quarter results underscore the power of our Live + AI platform and our disciplined focus on high-quality, recurring revenue.” — Chuck Cohn, Founder & CEO .
  • “As we move throughout the year… we expect to deliver sequential quarterly improvements to gross margin and end the year with ARPM above $370 on a consolidated basis.” — Chuck Cohn .
  • “Non-GAAP adjusted EBITDA loss of $6.4 million… at the top end of our guidance… driven by marketing efficiency improvements… and AI-enabled productivity and operating leverage improvements.” — Jason Pello, CFO .
  • “As of March 31, active members and ARPM were 40,500 and $335, respectively… annualized run rate of approximately $163 million from Learning Memberships at quarter end.” — Jason Pello .

Q&A Highlights

  • Institutional conversion and pipeline: ~1,200 districts and ~5M students on platform; push to upgrade from free access to paid Live + AI tier; pipeline exceeding expectations but discounted for funding uncertainty .
  • AI feature impact: AI session summaries viewed as a “killer feature” with auto-tagging and click-to-moment playback; >95% positive feedback; expected to boost engagement/retention .
  • Gross margin cadence: timing gap from tutor incentives vs. February price increases; sequential GM improvement expected through 2025; path back to >70% margins by 2026 .
  • ARPM pathway: CFO guided quarter-end ARPM targets of ~$345 (Q2), ~$360 (Q3), and ~$370 (Q4) .
  • AI-enabled efficiency: roughly halfway through internal AI journey; automation in matching and customer service; supports scaling without commensurate headcount .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 2025, Q2 2025, and near-term quarters was unavailable in the data feed at time of analysis; as a result, we benchmarked results and outlook against company guidance rather than consensus. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Near-term trade-off: deliberate gross margin compression from tutor incentives to lift engagement/retention is beginning to show up in better ARPM, activation, and MRR — a set-up for improving unit economics through 2025 .
  • ARPM is the core KPI to watch; management laid out explicit quarterly targets toward ≥$370 by year-end, a potential stock catalyst if achieved or exceeded .
  • FY revenue low-end raise and reiterated FY adjusted EBITDA range, plus Q4 profitability milestone, signal confidence amid Institutional caution — execution on Consumer momentum is key to de-risking the year .
  • Live + AI adoption across Consumer and K–12 (with policy tailwinds) strengthens differentiation; watch conversion rates from free access to paid Live + AI platform and bookings velocity into back-to-school .
  • Liquidity is adequate (no debt; $44.9M cash) to fund the pivot to profitable growth; sequential GM improvement should be evident from Q2 onward if pricing mix shifts as planned .
  • Trading setup: upside if ARPM and GM cadence track guidance and Consumer growth re-accelerates; downside if Institutional funding headwinds intensify or if incentive-driven GM recovery lags .