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Nerdy Inc. (NRDY)·Q3 2025 Earnings Summary

Executive Summary

  • Revenue of $37.0M was within guidance ($37–$40M), down 1% YoY; sequential decline reflects seasonality and missed back-to-school peak due to product launch delays .
  • Non-GAAP Adjusted EBITDA loss of $10.2M beat guidance (−$11M to −$13M), with a 960 bps YoY margin improvement driven by cost controls and AI-enabled efficiencies; management reiterated near-term path to profitability on an adjusted EBITDA basis. Bold beat .
  • Consumer Learning Memberships remain the core: $33.0M revenue (89% of total), ARPM $374 (+24% YoY), Active Members 34.3K (down YoY); Institutional revenue $3.7M, bookings $6.8M (−20% YoY) impacted by federal/state funding delays .
  • Guidance reset: Q4 revenue $45–$47M; Q4 adjusted EBITDA loss −$2M to breakeven; FY 2025 revenue cut to $175–$177M and adjusted EBITDA loss widened to −$19M to −$21M vs prior ranges; liquidity enhanced via $50M term loan with $20M drawn, expected year-end cash $45–$48M .
  • Stock reaction catalysts: evidence of Q4 inflection (sequential revenue and margin improvement), delivery on Live Learning Platform 2.0 performance/retention claims, and visibility on institutional funding normalization .

What Went Well and What Went Wrong

What Went Well

  • Adjusted EBITDA beat and cost discipline: Q3 adjusted EBITDA loss −$10.2M vs guidance −$11M to −$13M; 960 bps YoY margin improvement from lower marketing, variable staffing, and G&A cost control .
    Quote: “We drove nearly 1,000 basis points of improvement in adjusted EBITDA margins year-over-year” — Chuck Cohn .
  • Sequential gross margin expansion: GM improved ~140 bps vs Q2, aided by price increases for new customers and mix shift to higher-frequency memberships; management expects this to continue into Q4 .
  • Product/AI execution: Live Learning Platform 2.0 reduced audio/video error rates by ~50% and cut cost per session ~40%; AI vetting automated ~80% of tutor applicant review, reducing replacement rates and boosting match quality .

What Went Wrong

  • Back-to-school miss and product delays: Starting point “behind…targeting,” with delayed launches pushing the anticipated growth/profitability inflection by a quarter; disparate legacy systems caused a disconnected UX .
  • Active Members down YoY: 34.3K as of 9/30/25, impacted by operational challenges; re-acceleration depends on new student/tutor experiences and COO-led execution .
  • Institutional headwinds: Revenue $3.7M; bookings $6.8M (−20% YoY) due to funding delays impacting contracting and program start dates .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$47.595 $45.263 $37.019
Gross Margin (%)58.0% 61.5% 62.9%
Gross Profit ($USD Millions)$27.611 $27.842 $23.296
Net Loss ($USD Millions)$(16.151) $(12.001) $(18.756)
Diluted EPS ($USD)$(0.09) $(0.07) $(0.10)
Adjusted EBITDA (Non-GAAP, $USD Millions)$(6.364) $(2.700) $(10.204)
Segment Revenue ($USD Thousands)Q1 2025Q2 2025Q3 2025
Consumer$38,013 $37,824 $33,166
Institutional$9,380 $7,308 $3,688
Other$202 $131 $165
Total$47,595 $45,263 $37,019
KPIsQ1 2025Q2 2025Q3 2025
Active Members (Thousands)40.5 30.6 34.3
ARPM ($USD)$335 $348 $374
Active Experts (Thousands)10.8 9.7 8.1
Varsity Tutors for Schools Bookings ($USD Millions)$4.0 $4.9 $6.8

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ4 2025N/A$45–$47M Introduced
Adjusted EBITDA (Non-GAAP)Q4 2025N/A−$2M to breakeven Introduced
RevenueFY 2025$191.5–$200M (Q1) ; $191–$197M (Q2) $175–$177M (Q3) Lowered
Adjusted EBITDA (Non-GAAP)FY 2025−$8M to −$18M (Q1) ; −$13M to −$17M (Q2) −$19M to −$21M (Q3) Lowered
Year-End CashFY 2025$35–$40M, no debt (Q1) ; $30–$35M, no debt (Q2) $45–$48M incl. $20M term loan (Q3) Raised (with debt)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
AI/Technology InitiativesLive+AI platform, AI session summaries, Tutor Copilot; ARPM path to >$370 by year-end (Q1) ; sequential GM expansion (Q2) Live Learning Platform 2.0 launched; ~50% fewer AV errors, ~40% cost/session savings; AI vetting automates 80% tutor review Strengthening execution velocity
Product Velocity/ReplatformingAccelerating AI-native development; practice resources overhaul (Q2) CEO-led rebuild to AI-native stack; target ~100% traffic on new code bases by end-Nov; decouple legacy back-end by year-end Rapid modernization; expected retention gains
Institutional (MTSS/RTI) & FundingBookings +21% YoY in Q2; cautious funding environment Bookings $6.8M (−20% YoY); funding delays continue; new end-to-end schools experience aligns to MTSS/RTI Near-term headwinds; product realignment
Operational ExecutionHeadcount −16% (Q1); AI-enabled process automation COO hired; ~27% YoY headcount reduction; centralized ops; >10% conversion lift via AI sales tooling Improved leverage and sales efficiency
Retention & Membership MixHigher frequency memberships driving engagement (Q1/Q2) First-month retention up YoY; integrated Practice Hub, discovery focus; gamification coming Positive cohort indicators

Management Commentary

  • “We are now targeting having nearly 100% of our traffic on new code bases written by AI by the end of November… already unlocking customer-facing innovation at a pace we’ve never seen before.” — Chuck Cohn .
  • “Our 2.0 Live Learning Platform… achieved a reduction of ~50% in audio-video error rates and nearly 40% cost savings per session.” — Chuck Cohn .
  • “Non-GAAP Adjusted EBITDA loss of $10.2 million… beat our guidance of −$11.0 million to −$13.0 million.” — Jason Pello .
  • “Headcount was down by approximately 27% year-over-year… AI-enabled productivity improvements… allow us to do more with less.” — Chuck Cohn .
  • “For the fourth quarter of 2025, we expect revenue in the range of $45–$47 million… adjusted EBITDA loss in the range of $2 million to breakeven.” — Jason Pello .

Q&A Highlights

  • Execution/COO: New COO centralizes product/engineering/ops to collapse decision-making and raise velocity; early improvements in conversion and retention are evident .
  • ROI from Platform 2.0: Reliability and cost per session improvements should translate to lower customer service costs and higher retention; interactive, personalized UX to drive delight .
  • Institutional funding: District-level funding delays continue; Live+AI offerings and MTSS/RTI-aligned end-to-end experience expected to improve sell-through as districts formalize AI guidance .
  • KPIs into Q4: ARPM strong ($374 in Q3); management targets ~32K Active Members by year-end with higher-value cohorts (Active MRR up 7% at Q3-end) .
  • Liquidity/path to profitability: $50M term loan ($20M drawn) enhances flexibility; management aims for adjusted EBITDA breakeven in Q4 and profitable growth in 2026 .

Estimates Context

  • S&P Global consensus estimates for Q3 2025 were unavailable at time of writing; comparisons anchor to company guidance and reported actuals.
  • Implication: Following FY guidance cuts (revenue to $175–$177M; adjusted EBITDA loss to −$19M to −$21M), Street models likely need to adjust down revenue and EBITDA and incorporate term loan impacts on cash/loss trajectory .
  • Note: Values retrieved from S&P Global were unavailable; where estimates are referenced, we default to company guidance .

Key Takeaways for Investors

  • Near-term trade: Q4 set-up is for sequential revenue and margin improvement; delivery against $45–$47M revenue and ~breakeven adjusted EBITDA could be a positive catalyst .
  • Watch ARPM vs Active Members: Pricing/mix is lifting ARPM (to $374), but member count remains pressured; re-acceleration hinges on integrated UX, discovery/gamification, and COO-led execution .
  • Margin trajectory: Despite YoY GM pressure from Expert incentives, sequential expansion continues; further gains likely as higher-frequency mix and AI-optimized incentives scale .
  • Institutional recovery: Funding delays weigh on bookings (−20% YoY), but MTSS/RTI-aligned product and district AI adoption should support medium-term growth normalization .
  • Liquidity runway: $32.7M cash plus $50M term loan capacity ($20M drawn) reduces equity dilution risk; year-end cash guided to $45–$48M supports execution into 2026 .
  • Execution risk: Back-to-school product delays pushed the growth/EBITDA inflection by a quarter; successful replatforming to AI-native stack is pivotal for retention and growth .
  • Medium-term thesis: If Q4 profitability arrives and Live+AI improves retention/cohort economics, operating leverage in 2026 plus institutional stabilization could drive re-rating, contingent on sustained product velocity and funding backdrop .

Citations: All factual statements and table values are sourced from company filings and earnings materials as cited above.